<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

                 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2003

                                       OR

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

           FOR THE TRANSITION PERIOD FROM ___________ TO _____________

                        COMMISSION FILE NUMBER 000-25674

                        SKILLSOFT PUBLIC LIMITED COMPANY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          REPUBLIC OF IRELAND                                        N/A
    (STATE OR OTHER JURISDICTION OF                           (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NO.)

       107 NORTHEASTERN BOULEVARD                                   03062
         NASHUA, NEW HAMPSHIRE                                   (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 324-3000

                                 Not Applicable
   (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
                                    REPORT)

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

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

On December 1, 2003, the registrant had outstanding 100,988,796 Ordinary Shares
(issued or issuable in exchange for the registrant's outstanding American
Depository Shares).

<PAGE>

                                  SKILLSOFT PLC

                                    FORM 10-Q
                     FOR THE QUARTER ENDED OCTOBER 31, 2003
                                      INDEX

<TABLE>
<CAPTION>
                                                                                   PAGE NO.
<S>                                                                                <C>
PART I  - FINANCIAL INFORMATION
Item 1.       Condensed Consolidated Financial Statements:                              3
              Condensed Consolidated Balance Sheets as of October 31, 2003 and
              January 31, 2003                                                          3
              Condensed Consolidated Statements of Operations for the Three and
              Nine Months Ended October 31, 2003 and 2002                               4
              Condensed Consolidated Statements of Cash Flows for the Nine Months
              Ended October 31, 2003 and 2002                                           5
              Notes to Condensed Consolidated Financial Statements                      6
Item 2.         Management's Discussion and Analysis of Financial Condition and
              Results of Operations                                                    15
Item 3.       Quantitative and Qualitative Disclosure about Market Risk                32
Item 4.       Controls and Procedures                                                  32
PART II - OTHER INFORMATION
Item 1.       Legal Proceedings                                                        34
Item 2.       Changes in Securities and Use of Proceeds                                35
Item 3.       Defaults Upon Senior Securities                                          36
Item 4.       Submission of Matters to a Vote of Security Holders                      36
Item 5.       Other Information                                                        37
Item 6.       Exhibits and Reports on Form 8-K                                         37
SIGNATURES
CERTIFICATIONS
</TABLE>

                                       2

<PAGE>

                                     PART I

ITEM 1. - FINANCIAL STATEMENTS

                         SKILLSOFT PLC AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
            (UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                   OCTOBER 31,    JANUARY 31,
                                                                      2003           2003
<S>                                                               <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents                                      $     34,036   $     45,990
   Short-term investments                                               25,217         79,041
   Restricted cash                                                      25,000              -
   Accounts receivable, net                                             46,160         66,892
   Prepaid expenses and other current assets                            21,222         19,401
                                                                  ------------   ------------
Total current assets                                                   151,635        211,324
Property and equipment, net                                              7,427         11,964
Goodwill                                                               127,196        119,427
Acquired intangible assets, net                                         28,320         34,290
Other assets                                                               692          1,132
                                                                  ------------   ------------
                                                                  $    315,270   $    378,137
                                                                  ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                               $      8,235   $     10,672
   Accrued expenses                                                     80,852         59,821
   Deferred revenue                                                    107,229        109,009
                                                                  ------------   ------------
Total current liabilities                                              196,316        179,502
Long term liabilities                                                   10,263          7,548
Stockholders' equity:
      Ordinary Shares, E0.11 par value: 250,000,000 shares
      authorized at October 31, 2003 and January 31, 2003,
      respectively; 99,993,573 and 99,598,146 shares issued and
      outstanding at October 31, 2003 and
      January 31, 2003, respectively                                    10,906         10,737
      Additional paid-in capital                                       535,722        530,929
      Accumulated deficit                                             (435,304)      (347,642)
      Deferred compensation                                             (2,981)        (4,345)
      Notes receivable from stockholders                                    --            (58)
      Accumulated other comprehensive income                               348          1,466
                                                                  ------------   ------------
Total stockholders' equity                                             108,691        191,087
                                                                  ------------   ------------
                                                                  $    315,270   $    378,137
                                                                  ============   ============
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       3

<PAGE>

                         SKILLSOFT PLC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                              OCTOBER 31,                         OCTOBER 31,
                                                   --------------------------------    --------------------------------
                                                        2003              2002              2003              2002
                                                   --------------    --------------    --------------    --------------
<S>                                                <C>               <C>               <C>               <C>
Revenue                                            $       49,992    $       29,336    $      138,714    $       58,556
Cost of revenue                                             4,557             4,739            14,234             6,560
                                                   --------------    --------------    --------------    --------------
            Gross profit                                   45,435            24,597           124,480            51,996
Operating expenses:
   Research and development                                15,171             7,702            40,603            14,886
   Selling and marketing                                   20,830            16,320            67,404            31,584
   General and administrative                               6,946             7,578            20,031            11,179
   Legal settlements                                       16,000                --            62,250                --
   Amortization of intangible assets                        2,574             1,825             7,498             1,987
   Amortization of stock-based compensation (1)               676               438             1,637             1,138
   Restructuring and other non-recurring charges            5,287             6,607            16,825             6,607
                                                   --------------    --------------    --------------    --------------
Total operating expenses                                   67,484            40,470           216,248            67,381
                                                   --------------    --------------    --------------    --------------
Operating loss                                            (22,049)          (15,873)          (91,768)          (15,385)
   Other income, net                                          251                (1)              272              (128)
   Interest income, net                                        87               504               680             1,462
   Gain on sale of investments, net                            --                --             3,682                --
                                                   --------------    --------------    --------------    --------------
Loss before provision for income taxes                    (21,711)          (15,370)          (87,134)          (14,051)
   Provision for income taxes                                 150                --               528                --
                                                   --------------    --------------    --------------    --------------
   Net loss                                        $      (21,861)   $      (15,370)   $      (87,662)   $      (14,051)
                                                   ==============    ==============    ==============    ==============
Net loss per share (Note 10):
   Basic and diluted                               $        (0.22)   $        (0.20)   $        (0.88)   $        (0.27)
                                                   ==============    ==============    ==============    ==============
   Basic and diluted weighted average common
   shares outstanding                                  99,993,573        76,193,237        99,745,570        52,816,127
                                                   ==============    ==============    ==============    ==============
</TABLE>

(1) The following summarizes the departmental allocation of the stock-based
compensation

<TABLE>
<CAPTION>
                              THREE MONTHS ENDED    NINE MONTHS ENDED
                                  OCTOBER 31,          OCTOBER 31,
                              -------------------   ------------------
                                2003       2002      2003       2002
                              -------    --------   -------    -------
<S>                           <C>        <C>        <C>        <C>
Cost of revenue               $     2    $      1   $     4    $     3
Research and development          115         112       354        292
Selling and marketing             355         175       691        527
General and administrative        204         150       588        316
                              -------    --------   -------    -------
                              $   676    $    438   $ 1,637    $ 1,138
                              =======    ========   =======    =======
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       4
<PAGE>

                         SKILLSOFT PLC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED
                                                                         OCTOBER 31,
                                                                ----------------------------
                                                                    2003            2002
                                                                ------------    ------------
<S>                                                             <C>             <C>
Cash flows from operating activities:
  Net loss                                                        $  (87,662)     $ (14,051)
Adjustments to reconcile net loss to net
cash used in operating activities -
     Stock-based compensation                                          1,637          1,138
     Depreciation and amortization                                     6,948          3,399
     Amortization of intangible assets                                 7,498          1,987
     Provision for bad debts                                             266             --
     Accretion of short term investments                                 (61)            --
     Realized gain on sale of investments                             (3,612)            --
Changes in current assets and liabilities:
     Accounts receivable, net                                         20,995         (3,838)
     Prepaid expenses and other current assets                        (3,667)         2,058
     Other assets                                                         11             --
     Accounts payable                                                 (2,480)         5,671
     Accrued expenses                                                 20,832        (19,851)
     Deferred revenue                                                 (2,431)         4,961
                                                                  ----------      ---------
        Net cash used in operating activities                        (41,726)       (18,526)
Cash flows from investing activities:
     Merger of SkillSoft and SmartForce, net of cash acquired             --         49,333
     Purchases of property and equipment                              (2,253)        (5,124)
     Purchases of investments                                        (74,127)       (11,540)
     Maturity  and sale of investments                               130,177         11,453
     Other assets                                                         85         (2,661)
     Purchase of business, net of cash acquired                       (5,000)            --
     Restricted cash                                                 (25,000)            --
                                                                  ----------      ---------
        Net cash provided by investing activities                     23,882         41,461
Cash flows from financing activities:
     Proceeds from exercise of stock options and
     employee stock purchase plan                                      4,689            771
     Payment on notes receivable                                          58            280
                                                                  ----------      ---------
        Net cash provided by financing activities                      4,747          1,051
Effect of exchange rate changes on cash and cash
Equivalents                                                            1,143            (41)
                                                                  ----------      ---------
Net increase (decrease) in cash and cash equivalents                 (11,954)        23,945
Cash and cash equivalents, beginning of period                        45,990         25,185
                                                                  ----------      ---------
Cash and cash equivalents, end of period                          $   34,036      $  49,130
                                                                  ==========      =========
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

                                       5

<PAGE>

                         SKILLSOFT PLC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. THE COMPANY

SkillSoft PLC, formerly known as SmartForce PLC (the Company or SkillSoft), was
incorporated in Ireland on August 8, 1989. The Company is a provider of
web-based training resources that cover a variety of professional,
effectiveness, business and information technology topics. On September 6, 2002,
the Company completed its merger with SkillSoft Corporation (the Merger). Due to
a number of factors, including composition of the board of directors, management
team, and concentrated shareholder interest, all of which had SkillSoft
Corporation being in a control or majority position, the Merger was accounted
for as a reverse acquisition, with SkillSoft Corporation as the accounting
acquirer. Accordingly, the historical financial statements of SkillSoft
Corporation are the historical financial statements of the combined company, and
the assets and liabilities of the Company are accounted for as required under
the purchase method of accounting. The results of operations and cash flow of
the former SmartForce PLC, the acquired entity for accounting purposes, are
included in the financial statements of the combined company from September 6,
2002, the date on which the Merger was consummated. In connection with the
Merger, the Company changed its name to SkillSoft PLC and its fiscal year end to
January 31 (the fiscal year end of SkillSoft Corporation) from December 31 (the
Company's historical fiscal year end).

2. BASIS OF PRESENTATION

The accompanying, unaudited condensed consolidated financial statements included
herein have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission (the SEC). Certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles in the United States
have been condensed or omitted pursuant to such SEC rules and regulations.
Nevertheless, the management of the Company believes that the disclosures herein
are adequate to make the information presented not misleading. In the opinion of
management, the condensed consolidated financial statements reflect all material
adjustments (consisting only of those of a normal and recurring nature) which
are necessary to present fairly the consolidated financial position of the
Company as of October 31, 2003, the results of its operations for the three and
nine months ended October 31, 2003 and 2002 and its cash flows for the nine
months ended October 31, 2003 and 2002. These condensed consolidated financial
statements and notes thereto should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 2003, as amended. The results
of operations for the interim period are not necessarily indicative of the
results of operations to be expected for the full year.

3. CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND INVESTMENTS

The Company considers all highly liquid investments with original maturities of
90 days or less at the time of purchase to be cash equivalents. At October 31,
2003 and January 31, 2003, cash equivalents consisted mainly of commercial
paper, short-term notes and money market funds. The Company considers the cash
held in certificates of deposit with a commercial bank to secure its line of
credit to be restricted cash. The Company accounts for its investments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS No. 115).
Under SFAS No. 115, securities that the Company does not intend to hold to
maturity are reported at market value, and are classified as available-for-sale.
At October 31, 2003, the Company's investments had an average maturity of
approximately 62 days. These investments are classified as current assets in the
accompanying consolidated balance sheets as they mature within one year.

4. REVENUE RECOGNITION

The Company generates revenue from the license of products and services and from
providing hosting/application service provider (ASP) services.

The Company follows the provisions of the American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue
Recognition, as amended by SOP 98-4 and SOP 98-9 to account for revenue derived
pursuant to license agreements under which customers license the Company's
products and services. The pricing for the Company's courses varies based upon
the number of course titles or the courseware bundle licensed by a customer, the
number of users within the customer's organization and the length of the license
agreement (generally one, two or three years). License agreements permit
customers to exchange course titles, generally on the contract anniversary date.
Additional product features, such as hosting and on-line mentoring services, are
separately licensed for an additional fee.

                                       6

<PAGE>

Generally, the pricing for the Company's multi-modal learning (MML) licenses
varies based on the choice of MML, the content offering selected by the
customer, the number of users within the customer's organization and the length
of the license agreement. A MML license provides customers access to a full
range of learning products which could include courseware, Referenceware,
simulations, mentoring and prescriptive assessment.

A Referenceware license gives users access to the full library within one or
more collections (ITPro, BusinessPro, FinancePro and OfficeEssentials) from
Books24x7.com, Inc. (Books). Generally, the pricing for the Company's
Referenceware licenses varies based on the collections specified by a customer,
the number of users within the customer's organization and the length of the
license agreement.

The Company generally bills the annual license fee for the first year of a
multi-year agreement in advance. The Company recognizes revenue with respect to
courseware licenses either at the time of delivery of products or over the term
of the contract, depending on the products included in the license and specific
contract terms. In the event that the customer specifies all licensed courses to
be delivered at the outset and those courses are available and delivered on or
before the contract start date, the Company recognizes license revenue for the
first year of the contract upon execution of the contract and delivery of the
courses. The Company generally bills license fees for subsequent years of
multi-year license arrangements on the anniversary date of the agreement, and if
the customer exchanges courses and receives the exchanged courses by the renewal
date, revenue is recognized in the manner described above.

In some circumstances, the Company offers payment terms of up to six months from
the initial shipment date or anniversary date for multi-year agreements to its
customers. To the extent that a customer is given extended payment terms,
revenue is recognized as cash becomes due, assuming all of the other elements of
revenue recognition have been satisfied.

The Company recognizes revenue ratably over the license period if the number of
courses that a customer has access to is not clearly defined, available, or
selected at the inception of the contract, or if the contract has additional
undelivered elements for which the Company does not have vendor specific
objective evidence (VSOE) of the fair value of the various elements. This may
occur if the customer does not specify all licensed courses at the outset, the
customer chooses to wait for future licensed courses on a when and if available
basis, the customer is given exchange privileges that are exercisable other than
on the contract anniversaries, or the customer licenses all courses currently
available and to be developed during the term of the arrangement. Nearly all the
Company's contractual arrangements result in the recognition of revenue ratably
over the license period.

The Company also derives revenue from extranet hosting/ASP services and online
mentoring services. The Company recognizes revenue related to extranet
hosting/ASP services and online mentoring services on a straight-line basis over
the period in which the service agreements are provided to the extent the
Company has VSOE for those services. If the Company does not have VSOE for these
services, revenue from the entire arrangement, including any implementation
fees, is recognized on a straight-line basis over the period in which the
services are provided. For multi-element agreements where the Company provides
these services, VSOE is the basis used to allocate the total fee to the elements
of the arrangement.

The Company recognizes revenue on Referenceware and MML licenses ratably over
the term of the agreement, which matches the period the future products or
services are delivered.

The Company generally commences the recognition of revenue from resellers when
both the final sale to the end user has occurred and the Company has received
payment from the reseller. With respect to reseller agreements with minimum
commitments, the Company recognizes revenue related to the portion of the
minimum commitment that exceeds the end user sales at the expiration of the
commitment period.

The Company provides professional services, including instructor led training,
customized content, websites, and implementation services. The Company
recognizes service revenue as the services are performed.

The cost of satisfying any post contract support (PCS), which essentially
represents a warranty obligation, is accrued at the time license revenue is
recognized, as PCS fees are included in the annual license fee. The estimated
cost of providing PCS during the agreements is insignificant and the Company
does not offer it separately. The accrued PCS costs are included in deferred
revenue in the accompanying consolidated balance sheets.

The Company records deferred revenue when either cash is received or amounts
have been billed in advance of products or services provided. Deferred revenue
includes the unrecognized portion of revenue associated with license fees for
which the Company has

                                       7

<PAGE>

received payment or for which amounts have been billed and are currently due for
payment in 180 days or less. In addition, deferred revenue includes amounts
which have been billed and not collected for which revenue is being recognized
ratably over the license period. In addition, the Company acquired approximately
$47 million of deferred revenue in connection with the Merger based upon the
cost to fulfill the remaining contractual and performance obligations plus a
normal operating profit on fulfilling such obligations. As of October 31, 2003,
$2.7 million of deferred revenue relates to the remaining balance of acquired
deferred revenue.

5. ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for its stock-based employee compensation plans under the
recognition and measurement principles of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," (APB No. 25) and related
Interpretations under APB No. 25. The Company provides pro forma disclosures
only of the compensation expense determined under the fair value provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123).

SFAS No. 123 requires the measurement of the fair value of stock options to
employees to be included in the statements of operations or disclosed in the
notes to financial statements. The Company elected the disclosure-only
alternative under SFAS No. 123, which requires disclosure of the pro forma
effects on earnings as if the fair-value-based method of accounting under SFAS
No. 123 had been adopted, as well as certain other information. In accordance
with SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure" (SFAS No. 148), the Company has computed the pro forma disclosures
required under SFAS No. 123 for options granted using the Black-Scholes
option-pricing model prescribed by SFAS No. 123. The weighted average
information and assumptions used for the grants is as follows

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                                            OCTOBER 31,                     OCTOBER 31,
                                                 ------------------------------    ---------------------------
                                                      2003             2002            2003           2002
                                                 -------------     ------------    ------------    -----------
<S>                                              <C>               <C>             <C>             <C>
Risk-free interest rates                          3.74% - 3.96%    3.50% - 3.88%   2.84% - 3.96%   3.50%-5.14%
Expected dividend yield                                --               --              --             --
Volatility factor                                      89%              101%           98%            102%
Expected lives                                      7 years           7 years        7 years         7 years
Weighted average fair value of options granted    $       5.53      $      3.46    $       3.19    $      3.80
Weighted average remaining contractual life of
options outstanding                                7.80 years        8.55 years     7.80 years      8.55 years
</TABLE>

Had compensation expense for its plans been determined consistent with SFAS No.
123, the Company's net loss and basic and diluted net loss per share would have
been increased to the following pro forma amounts (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED          NINE MONTHS ENDED
                                                        OCTOBER 31,                 OCTOBER 31,
                                                  ------------------------    ------------------------
                                                     2003          2002          2003          2002
                                                  ----------    ----------    ----------    ----------
<S>                                               <C>           <C>           <C>           <C>
Net loss --
   As reported                                    $(  21,861)   $(  15,370)   $(  87,662)    $ (14,051)
   Add: Stock-based compensation expense
   recognized under APB No. 25                           676           438         1,637         1,138
   Less: Total stock-based compensation expense
   Determined under fair value based method for
   all awards                                         (1,558)      (20,776)       (8,037)      (51,541)
                                                  ----------    ----------    ----------    ----------
     Pro forma                                    $(  22,743)   $(  35,708)   $(  94,062)   $(  64,454)
                                                  ==========    ==========    ==========    ==========
Basic and diluted net loss per share --
   As reported                                    $(    0.22)   $(    0.20)   $(    0.88)   $(    0.27)
                                                  ==========    ==========    ==========    ==========
   Pro forma                                      $(    0.23)   $(    0.47)   $(    0.94)   $(    1.22)
                                                  ==========    ==========    ==========    ==========
</TABLE>

Because additional option grants are expected to be made in future periods, the
above pro forma disclosures may not be representative of pro forma effects on
results for future periods.

6. BUSINESS COMBINATIONS

SKILLSOFT CORPORATION

On September 6, 2002, the Company completed the Merger with SkillSoft
Corporation, a leading provider of e-Learning courseware and Referenceware for
business and IT professionals. As a result of the Merger, each issued and
outstanding share of common stock,

                                       8

<PAGE>
par value $0.001 per share, of SkillSoft Corporation (the SkillSoft Common
Stock) was automatically converted into the right to receive 2.3674 (the
Exchange Ratio) validly issued and fully paid ordinary shares, nominal value
E0.11 per share, of the Company, with each ordinary share represented by an
American Depository Share of the Company (ADS). The Company also assumed each
outstanding option to purchase SkillSoft Common Stock, which had been granted
under SkillSoft Corporation's existing stock option plans, under the same
exchange ratio. As discussed in Note 1, the Company determined SkillSoft
Corporation to be the acquirer for accounting purposes. Therefore, the
calculation of the stock consideration is calculated based on SmartForce
ordinary shares and options outstanding. Consequently, this transaction resulted
in the issuance of approximately 57.4 million ordinary shares (represented by
ADSs) of the Company with a fair value of approximately $317.4 million, the
assumption of options to purchase approximately 15.7 million ordinary shares
(represented by ADSs) with a Black-Scholes fair value of approximately $38.9
million, and estimated direct transaction costs of $15.4 million. The number of
ordinary shares issued and options assumed was fixed in the agreement related to
the Merger and was not subject to change prior to closing. The fair value of the
Company's ADSs was derived using a market price per ADS of $5.53, which was
based on an average of the closing prices for a range of six trading days around
the announcement date (June 10, 2002) of the acquisition. The Company paid a
premium to obtain a broader distribution channel and a stronger presence in the
e-Learning sector. Immediately following the Merger, the former stockholders of
SkillSoft Corporation owned approximately 42% of the outstanding ordinary shares
(represented by ADS's) of the Company.

Subsequent to the Merger, certain accounting matters were identified relating to
the historical financial statements of SmartForce PLC (which, following the
Merger, are no longer the Company's historical financial statements - see Note
1). On November 19, 2002, the Company announced its intent to restate the
SmartForce PLC historical financial statements for 1999, 2000, 2001 and the
first two quarters of 2002. The aforementioned analysis has been completed, and
the impact of revisions to the purchase price and its allocation did not have a
material impact on the Company's consolidated financial position or results of
operations.

GOTRAIN CORP.

In June 2003, the Company acquired the assets of GoTrain Corp. (GoTrain), an
e-Learning business, for approximately $5.0 million in cash, which was paid
during the quarter ended July 31, 2003. This acquisition resulted in allocations
of purchase price to goodwill and intangible assets of $3.7 million and $1.5
million, respectively. Intangible assets allocated were the internally developed
software, which is comprised of content valued at $498,000 that will be
amortized over a period of 4 years and the platform valued at $512,000 that will
be amortized over a period of 2 years. Intangible assets also include customer
contracts valued at $518,000, which will be amortized over 4 years.

7. RESTRUCTURING AND OTHER NON-RECURRING CHARGES

MERGER AND EXIT COSTS

In connection with the Merger, the Company's management approved and initiated
plans prior to December 31, 2002 to restructure the operations of pre-Merger
SmartForce PLC to eliminate redundant facilities and headcount, reduce cost
structure, and better align the Company's operating expenses with existing
economic conditions. Consequently, the Company recorded $30.3 million of costs
relating to exiting activities of pre-Merger SmartForce PLC, such as severance
and related benefits, costs to vacate leased facilities and other pre-Merger
liabilities. These costs were accounted for under Emerging Issues Task Force
(EITF) 95-3, "Recognition of Liabilities in Connection with Purchase Business
Combinations." These costs were recognized as a liability assumed in the
purchase business combination and included in the allocation of the purchase
price, and have increased goodwill.

The reductions in employee headcount totaled approximately 632 employees from
the administrative, sales, marketing and development functions, and amounted to
a charge of approximately $14.5 million. Approximately $11.5 million was paid
out against the exit plan accrual through October 31, 2003, and the remaining
amount of $890,000, net of an adjustment of $2.1 million, is expected to be paid
by January 2004.

In connection with the exit plan, the Company decided to abandon or downsize
certain leased facilities. For the year ended January 31, 2003, facilities
consolidation charges of $12.7 million, consisting of sublease losses, broker
commissions and other facility costs, were recorded in connection with the
downsizing and closing of sites. As of October 31, 2003, 11 sites had been
vacated and 4 sites had been downsized and actions related to the remaining
identified sites are scheduled to occur by the end of fiscal 2004. To determine
the sublease loss, which is the loss after the Company's cost recovery efforts
from subleasing the building, certain assumptions were made related to the (1)
time period over which the property will remain vacant, (2) sublease terms and
(3) sublease rates. The lease loss is an estimate under SFAS No. 5 "Accounting
for Contingencies" and represents the low end of the range and will be adjusted
in the future upon triggering events including a change in estimate of time to
sublease, actual sublease rates, etc. The Company has estimated that

                                       9

<PAGE>

the high end of the lease loss could be $16.4 million if operating lease rental
rates continue to decrease in these markets or should it take longer than
expected to find a suitable tenant to sublease the facility.

In the quarter ended October 31, 2003, the Company revised certain of its
estimates made in connection with the original purchase price allocation
pertaining to unoccupied facilities under lease as a result of the Merger. This
adjustment to the exit plan accrual falls within the one year purchase price
allocation period prescribed by SFAS No. 141 "Business Combinations" (SFAS No.
141). The Company has determined that an additional accrual of $2.9 million,
which is included in long-term liabilities, for assumed lease obligations based
on current market conditions and contractual limitation is necessary.

During the nine month period ended October 31, 2003, activity in the Company's
merger and exit costs, which are included in accrued expenses (see Note 15) and
long-term liabilities, was as follows (in thousands):

<TABLE>
<CAPTION>
                                 EMPLOYEE
                               SEVERANCE AND    CLOSEDOWN OF
                               RELATED COSTS     FACILITIES      OTHER         TOTAL
                               -------------    ------------   ----------    ----------
<S>                            <C>              <C>            <C>           <C>
Merger and exit accrual
January 31, 2003                $    5,967       $   11,383    $    1,209    $   18,559
Payments made during the
three month period ended
April 30, 2003                      (2,039)          (1,085)          (83)       (3,207)
Adjustments to accrual              (2,125)                                      (2,125)
                                ----------       ----------    ----------    ----------
Merger and exit
accrual  April 30, 2003              1,803           10,298         1,126        13,227
Payments made during the
three month period ended
July 31, 2003                         (618)            (647)         (107)       (1,372)
Adjustment to accrual                  (63)             309          (946)         (700)
                                ----------       ----------    ----------    ----------
Merger and exit
accrual  July 31, 2003               1,122            9,960            73        11,155
Payments made during the
three month period ended
October 31, 2003                      (232)          (1,076)          (19)       (1,327)
Adjustment to accrual                   --            2,944           (15)        2,929
                                ----------       ----------    ----------    ----------
Merger and exit accrual
 October 31, 2003               $      890       $   11,828    $       39    $   12,757
                                ==========       ==========    ==========    ==========
</TABLE>

The Company anticipates that the remainder of the merger and exit accrual will
be paid out by October 2011 as follows (in thousands):

<TABLE>
<S>                               <C>
Year ended January 31, 2004       $   1,323
Year ended January 31, 2005           5,121
Year ended January 31, 2006           2,044
Year ended January 31, 2007             629
Year ended January 31, 2008             610
Thereafter                            3,030
                                  ---------
Total                             $  12,757
                                  =========
</TABLE>

RESTRUCTURING AND OTHER NON-RECURRING CHARGES

The Company recorded a $14.2 million restructuring charge for the year ended
January 31, 2003, which was included in the statement of operations.
Approximately $10.2 million of this charge represents the compensation cost of
terminated SmartForce PLC employees for services rendered from the date of the
Merger through such employees' termination dates and certain other non-recurring
compensation costs to terminated and continuing employees of the Company. Also
included in the $14.2 million charge are certain other non-recurring costs
incurred by SkillSoft Corporation as a result of the Merger. These costs
primarily consist of employee severance and related costs and contractual
obligations. Payments made under these obligations during fiscal year 2003 and
the nine month period ended October 31, 2003 aggregated approximately $9.4
million and $2.6 million, respectively.

                                       10

<PAGE>

During the nine months ended October 31, 2003, the Company recorded an
additional $1.8 million of restructuring and non-recurring charges related to
further restructuring of the pre-Merger SmartForce PLC operations. These
restructuring costs included additional compensation to pre-Merger SmartForce
PLC employees as well as additional non-recurring costs as a result of the
Merger. During the nine month period ended October 31, 2003, activity in the
Company's restructuring provision related to the Merger was as follows (in
thousands):

<TABLE>
<CAPTION>
                                           EMPLOYEE SEVERANCE   CONTRACTUAL
                                            AND RELATED COSTS   OBLIGATIONS       TOTAL
                                           ------------------   ------------    ----------
<S>                                        <C>                  <C>             <C>
Restructuring  provision
 January 31, 2003                             $    1,129         $    1,556     $    2,685
Payments made during the quarter ended
April 30, 2003                                    (1,479)              (735)        (2,214)
Restructuring charge for the quarter
ended April 30, 2003                                 604                589          1,193
                                              ----------         ----------     ----------
Restructuring provision April 30, 2003               254              1,410          1,664
Payments made during the quarter ended
July 31, 2003                                       (577)            (1,367)        (1,944)
Restructuring charge for quarter ended
July 31, 2003                                        323                 41            364
                                              ----------         ----------     ----------
Restructuring provision July 31, 2003                 --                 84             84
Payments made during the quarter ended
October 31, 2003                                    (274)                --           (274)
Restructuring charge for quarter ended
October 31, 2003                                     274                 --            274
                                              ----------         ----------     ----------
Restructuring provision October 31, 2003      $       --         $       84     $       84
                                              ==========         ==========     ==========
</TABLE>

The Company anticipates that the remainder of the restructuring accrual will be
paid out by January 2004.

The restructuring charges for the three and nine months ended October 31, 2003
would have been allocated as follows had the Company recorded the expense within
the functional department of the restructured activities (in thousands):

<TABLE>
<CAPTION>
                              THREE MONTHS ENDED    NINE MONTHS ENDED
                               OCTOBER 31, 2003     OCTOBER 31, 2003
                              ------------------    -----------------
<S>                           <C>                   <C>
Cost of sales                     $     --              $     --
Research and development                39                   126
Sales and marketing                    218                   635
General and administrative              17                 1,070
                                  --------              --------
Total                             $    274              $  1,831
                                  ========              ========
</TABLE>

For the three and nine months ended October 31, 2003, the Company recorded
approximately $5.0 million and $15.0 million, respectively, in expenses related
to the restatement of the historical SmartForce PLC financial statements. These
expenses consisted primarily of professional fees, including legal, accounting
and consulting fees. The majority of these expenses were paid as incurred in the
period. The Company expects to incur additional costs related to the restatement
of the historical SmartForce PLC financial statements, which will be expensed as
incurred.

8. GOODWILL AND INTANGIBLE ASSETS

On February 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets." As a result, the Company annually evaluates goodwill for
impairment. The Company also evaluates goodwill whenever events and changes in
circumstances suggest that the carrying amount may not be recoverable from
estimated future cash flows.

Goodwill and intangible assets are as follows (in thousands):

<TABLE>
<CAPTION>
                                     OCTOBER 31, 2003                       JANUARY 31, 2003
                           ------------------------------------   ------------------------------------
                             GROSS                      NET         GROSS                       NET
                           CARRYING     ACCUMULATED   CARRYING    CARRYING     ACCUMULATED   CARRYING
                            AMOUNT     AMORTIZATION    AMOUNT      AMOUNT     AMORTIZATION    AMOUNT
                           ---------   ------------   ---------   ---------   ------------   ---------
<S>                        <C>           <C>          <C>         <C>         <C>            <C>
Internally developed
software/courseware        $  26,610     $ 7,873      $  18,737   $  25,600     $ 2,822      $  22,778
Customer contracts            13,018       4,335          8,683      12,500       1,888         10,612
</TABLE>

                                       11

<PAGE>

<TABLE>
<S>                        <C>           <C>          <C>         <C>           <C>          <C>
Trademarks and trade name        900          --            900         900          --            900
                           ---------     -------      ---------   ---------     -------      ---------
                              40,528      12,208         28,320      39,000       4,710         34,290
Goodwill                     127,196          --        127,196     119,427          --        119,427
                           ---------     -------      ---------   ---------     -------      ---------
                           $ 167,724     $12,208      $ 155,516   $ 158,427     $ 4,710      $ 153,717
                           =========     =======      =========   =========     =======      =========
</TABLE>

The change in goodwill at October 31, 2003 from the amount recorded at January
31, 2003 was due to the settlement of certain liabilities at amounts less than
initially recorded and collections of accounts receivable in excess of the
estimated realizable value at the purchase date. In addition, the Company
revised certain of its estimates made in connection with the original purchase
price allocation pertaining to unoccupied facilities under lease as a result of
the Merger. This adjustment to the exit plan accrual falls within the one year
purchase price allocation period prescribed by SFAS No. 141. The Company has
determined that an additional accrual of $2.9 million for assumed lease
obligations based on current market conditions and contractual obligations is
necessary.

Amortization expense for the three and nine months ended October 31, 2003 and
the fiscal year ended January 31, 2003 is as follows (in thousands):

<TABLE>
<CAPTION>
                       THREE MONTHS ENDED   NINE MONTHS ENDED   FISCAL YEAR ENDED
                        OCTOBER 31, 2003    OCTOBER 31, 2003    JANUARY 31, 2003
                       ------------------   -----------------   -----------------
<S>                    <C>                  <C>                 <C>
Internally developed
software/courseware         $  1,740            $  5,051            $   2,805
Customer contracts               834               2,447                1,878
                            --------            --------            ---------
                            $  2,574            $  7,498            $   4,683
                            ========            ========            =========
</TABLE>

Amortization expense for the next five fiscal years is expected to be as follows
(in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR   AMORTIZATION EXPENSE
-----------   --------------------
<S>           <C>
      2004        $   10,073
      2005             9,574
      2006             8,592
      2007             5,345
      2008             1,321
Thereafter                12
</TABLE>

The Company will be conducting its annual impairment test of goodwill in the
fourth quarter of the fiscal year ending January 31, 2004.

9. COMPREHENSIVE INCOME (LOSS)

SFAS No. 130, "Reporting Comprehensive Income", requires disclosure of all
components of comprehensive income (loss) on an annual and interim basis.
Comprehensive income (loss) is defined as the change in equity of a business
enterprise during a period resulting from transactions, other events and
circumstances related to non-owner sources. The components of comprehensive
income (loss) for the three and nine months ended October 31, 2003 and 2002 are
as follows:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED           NINE MONTHS ENDED
                                                        OCTOBER 31,                 OCTOBER 31,
                                                 ------------------------    ------------------------
                                                    2003          2002          2003          2002
                                                 ----------    ----------    ---------     ----------
<S>                                              <C>           <C>           <C>           <C>
Comprehensive loss:
   Net loss                                      $(21,861)     $(15,370)     $(87,662)     $(14,051)
Other comprehensive loss -
   Foreign currency adjustment                         30           (97)          581          (141)
   Unrealized holding gains during the period          76            --           285            --
   Less: reclassification adjustment for gains
   included in net income                              --            --        (1,984)           --
                                                 --------      --------      --------      --------
Comprehensive loss                               $(21,755)     $(15,467)     $(88,780)     $(14,192)
                                                 ========      ========      ========      ========
</TABLE>

10. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share was computed using the weighted average number
of shares outstanding during the period. Diluted net income (loss) per share was
computed by giving effect to all dilutive, potential shares outstanding. Basic
and diluted net loss per share for both the three and nine months ended October
31, 2003 are the same as outstanding options, and unvested restricted shares,

                                       12

<PAGE>

which aggregated 24,514,810, are antidilutive as the Company has recorded a net
loss for the periods. Given the Company was in a loss position for the three and
nine months ended October 31, 2003, the dilutive shares outstanding of 6,582,445
and 3,138,511, respectively, were excluded from the calculation of weighted
average shares outstanding. As a result of the reverse acquisition, historical
SkillSoft Corporation shares have been restated into SmartForce ADSs using the
exchange ratio of one SkillSoft Corporation share per 2.3674 SmartForce ADSs.
Historical SkillSoft Corporation shares for all periods presented have been
adjusted to reflect this exchange ratio. The weighted average number of shares
outstanding used to compute basic net loss per share and diluted net loss per
share is as follows:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED      NINE MONTHS ENDED
                                                             OCTOBER 31,            OCTOBER 31,
                                                       ----------------------  ----------------------
                                                         2003         2002        2003        2002
                                                       ----------  ----------  ----------  ----------
<S>                                                    <C>         <C>         <C>         <C>
Basic and diluted weighted average shares outstanding  99,993,573  76,193,237  99,745,570  52,816,127
</TABLE>

11. INCOME TAXES

The Company operates as a holding company with operating subsidiaries in several
countries, and each subsidiary is taxed based on the laws of the jurisdiction in
which it operates.

The Company has significant net operating loss (NOL) carryforwards, which are
subject to potential limitations based upon change in control provisions of
Section 382 of the Internal Revenue Code, as amended.

The provision for income taxes in the three and nine month periods ended October
31, 2003 of $150,000 and $528,000, respectively, relates to income generated in
foreign countries, which cannot be offset through NOL carryforwards.

12. COMMITMENTS AND CONTINGENCIES

See Part II - Item 1, entitled "Legal Proceedings", for a description of
material litigation involving the Company.

13. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE

The Company follows the provisions of SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131
established standards for reporting information regarding operating segments in
annual financial statements and requires selected information for those segments
to be presented in interim financial reports issued to shareholders. SFAS No.
131 also established standards for related disclosures about products and
services and geographic areas. Operating segments are identified as components
of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or
decision-making group, in making decisions of how to allocate resources and
assessperformance. The Company's chief operating decision makers, as defined
under SFAS No. 131, are the Chief Executive Officer and the Chief Financial
Officer. Prior to the Merger, the Company had viewed its operations and managed
its business as principally one operating segment. Subsequent to the Merger, the
Company has viewed its operations and manages its business as principally two
operating segments -- multi-modal learning and retail certification.

Revenue for the three and nine months ended October 31, 2003 for the multi-modal
learning and retail certification segments was approximately $46.0 million and
$3.9 million and $129.2 million and $9.5 million, respectively. The net income
and (loss) for the three and nine months ended October 31, 2003 for the
multi-modal learning and retail certification segments was approximately ($22.0)
million and $100,000 and ($85.4) million and ($2.3) million, respectively.

The Company attributes revenues to different geographical areas on the basis of
the location of the customer. Revenues by geographical area for the three and
nine month periods ended October 31,2003 were as follows (in thousands):

<TABLE>
<CAPTION>
                             THREE MONTHS ENDED          NINE MONTHS ENDED
                                 OCTOBER 31,                OCTOBER 31,
                          -----------------------    -----------------------
                             2003         2002          2003          2002
                          ----------   ----------    ----------   ----------
<S>                       <C>          <C>           <C>          <C>
Revenue:
  United States           $   40,591   $   23,623    $  112,587   $   48,188
  United Kingdom               2,066        2,634         7,261        5,564
  Canada                       1,955        1,047         4,574        1,598
  Europe, excluding UK         3,662        1,209        10,694        1,209
  Australia/New Zealand        1,454          754         3,021        1,928
</TABLE>

                                       13

<PAGE>

<TABLE>
<S>                       <C>          <C>           <C>          <C>
  Other                          264           69           577           69
                          ----------   ----------    ----------   ----------
    Total revenue         $   49,992   $   29,336    $  138,714   $   58,556
                          ==========   ==========    ==========   ==========
</TABLE>

Long-lived tangible assets at international facilities are not significant.
There have been no material changes in total assets of either the multi-modal
learning or retail certification segments from the amount reported at January
31, 2003.

14. OTHER MATTERS

In the six months ended July 31, 2003, the Company reached an agreement with IP
Learn relating to an alleged infringement of certain patent related matters.
Under the terms of the agreement, the Company made a cash payment and is
required to issue ordinary shares (which will be represented by restricted ADSs)
to IP Learn. The Company has recorded an expense of $2,250,000, which is net of
expected insurance proceeds, in general and administrative expenses as of April
30, 2003. The cash payment due by the Company under this agreement was paid in
the quarter ended July 31, 2003 and the shares to be issued under the agreement
were issued in the quarter ended October 31, 2003

On July 31, 2003, the Company entered into a settlement agreement, which will
result in a final dismissal and termination of the NETg litigation discussed in
Part II - Item 1. Under the terms of the settlement agreement, the Company has
agreed to pay a total of $44,000,000 in two equal installments of $22,000,000.
The Company made the first payment of $22,000,000 on July 25, 2003. The second
payment of $22,000,000 is due July 21, 2004 and is included in accrued expenses
at October 31, 2003. The Company has expensed this settlement in the three
months ended July 31, 2003.

On December 1, 2003, the Company agreed to settle the securities class action
lawsuit filed against it, one of its subsidiaries and certain of its former and
current officers and directors in 1998. The lawsuit, which was filed in the
United States District Court for the Northern District of California, asserted
violations of the federal securities laws. Under the terms of the settlement, we
will make a $10 million cash payment within 30 days of December 1, 2003 and an
additional $6 million payment in mid-2004. Our insurance carriers will pay an
additional $16 million for total settlement payments of $32 million. The
settlement is subject to court approval and there is no assurance that the court
will approve the settlement. These amounts have been accrued for and expensed in
the three months ended October 31, 2003.

15. ACCRUED EXPENSES

Accrued expenses in the accompanying condensed combined balance sheets consist
of the following (in thousands):

<TABLE>
<CAPTION>
                                   OCTOBER 31, 2003    JANUARY 31, 2003
                                   ----------------    ----------------
<S>                                <C>                 <C>
Accrued compensation and benefits      $  13,414           $  16,655
Professional fees                          7,833              10,121
Accrued merger related costs               3,972              12,304
Accrued accounts payable                   2,083               8,300
Accrued litigation settlements            38,000                  --
Other                                     15,550              12,441
                                       ---------           ---------
    Total Accrued Expenses             $  80,852           $  59,821
                                       =========           =========
</TABLE>

16. LINE OF CREDIT

On June 24, 2003, the Company executed a $25 million one-year, secured line of
credit from a bank. Under the terms of the line of credit, the facility is to be
initially secured by $25 million in cash held in a certificate of deposit, plus
a first security interest in all domestic business assets. The cash held in the
certificate of deposit is to be released on a quarterly basis beginning the
quarter following the achievement of two consecutive minimum levels of operating
income. All borrowings under the line of credit bear interest at the lesser of
the bank's prime rate or the 30 or 60-day LIBOR rate plus 2.75%. In addition,
the line of credit contains certain financial and non-financial covenants. At
October 31, 2003 the Company is in compliance with all financial and non -
financial covenants. As of October 31, 2003 there were no borrowings on the line
of credit.

17. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No.
145, "Rescission of Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections" (SFAS No. 145). Under SFAS No. 145, gains and
losses on extinguishments of debt are to be classified as income or loss from
continuing operations rather than extraordinary items. The Company was required
to

                                       14

<PAGE>

adopt SFAS No. 145 in the first quarter of the fiscal year ended January 31,
2004 and the adoption of this statement did not have a material impact on its
financial condition or results of operations.

In July 2002, the FASB issued Statement of SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS No. 146). The statement
requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to
exit or disposal plan. Costs covered by SFAS No. 146 include lease termination
costs and certain employee severance costs that are associated with a
restructuring, branch closing, or other exit disposal activity. This statement
is effective for exit or disposal activities initiated after December 31, 2002.
SFAS No. 146 may affect the timing of the Company's recognition of future exit
or disposal costs, if any.

In November 2002, the FASB issued Interpretation No. 45 (FIN No. 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires a guarantor
to record certain guarantees at fair value and to make significant new
disclosures, even when the likelihood of making any payments under the guarantee
is remote. The interpretation and its disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The interpretation's initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The guarantor's previous accounting for
guarantees issued prior to December 31, 2002 should not be revised or restated
due to the adoption of this interpretation. The adoption of FIN No. 45 did not
have a material impact on the Company's financial condition or results of
operations.

In January 2003, the FASB issued Interpretation No. 46 (FIN No. 46),
"Consolidation of Variable Interest Entities," which requires the consolidation
of a variable interest entity, as defined, by its primary beneficiary. Primary
beneficiaries are those companies that are subject to a majority of the risk of
loss or entitled to receive a majority of the entity's residual returns, or
both. In determining whether it is the primary beneficiary of a variable
interest entity, an entity with a variable interest shall treat variable
interests in that same entity held by its related parties as its own interests.
The Company is currently evaluating the existence of variable interest entities,
if any, and the impact of adopting the interpretation on the consolidated
financial statements.

In January 2003, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," (SFAS No. 148) an amendment of SFAS No.
123, which provides alternative methods of transition for a voluntary change to
fair value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in annual financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The Company has elected to continue to account for
stock-based compensation under APB No. 25, and related Interpretations under
Interpretation No. 44 (FIN No. 44) "Accounting for Certain Transactions
Involving stock Compensation, an Interpretation of APB No. 25" and elect the
disclosure-only alternative under SFAS No. 123 and the enhanced disclosures as
required by SFAS No. 148.

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

Any statement in this Quarterly Report on Form 10-Q about our future
expectations, plans and prospects, including statements containing the words
"believes," "anticipates," "plans," "expects," "will" and similar expressions,
constitute forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those indicated by such forward-looking statements as a result of various
important factors, including those set forth in this Item 2 under the heading
"Future Operating Results".

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and notes
appearing elsewhere in this Quarterly Report on Form 10-Q.

OVERVIEW

We are the result of the merger of SmartForce PLC (SmartForce or SmartForce PLC)
and SkillSoft Corporation. The new combined SkillSoft PLC is a global leader in
corporate e-Learning and brings together SmartForce's leading portfolio of IT
e-Learning content with SkillSoft Corporation's extensive suite of business
skills e-Learning courseware, as well as its information technology (IT) and
business Referenceware libraries.

The merger of SmartForce PLC and SkillSoft Corporation (the Merger) closed on
September 6, 2002. For accounting purposes, the Merger was accounted for as a
reverse acquisition, with SkillSoft Corporation as the accounting acquirer. The
historical financial statements of SkillSoft Corporation have become our
historical financial statements, and the results of operations of SkillSoft PLC
(formerly known as SmartForce PLC) are included in our results of operations
only from September 6, 2002. For accounting purposes,

                                       15

<PAGE>

the purchase price was approximately $371.7 million, which consisted of the
value of stock and options issued, and transaction and merger costs. The excess
purchase price over the net tangible assets was primarily allocated to goodwill,
content and customer base.

A primary reason for the increase in our revenue and operating expenses from the
three and nine months ended October 31, 2002 to the three and nine months ended
October 31, 2003 is the inclusion of the operating results of SkillSoft PLC. We
operate as two reporting segments: multi-modal learning and retail
certification. These reporting units are not discussed separately as the impact
on the comparison of financial results from period to period is not significant.

We are a leading global provider of comprehensive, multi-modal e-Learning
content and software products for business and IT professionals. Multi-modal
learning (MML) solutions offer powerful tools to support and enhance the speed
and effectiveness of both formal and informal learning processes. MML solutions
integrate our in-depth courseware, learning management platform technology and
support services to meet our customers' learning needs.

We derive revenue primarily pursuant to license agreements under which customers
license our products and services. The pricing for our courses varies based upon
the number of course titles or the courseware bundle licensed by a customer, the
number of users within the customer's organization and the length of the license
agreement (generally one, two or three years). Our license agreements permit
customers to exchange course titles, generally on the contract anniversary date.
Additional product features, such as hosting and on-line mentoring services, are
separately licensed for an additional fee.

Generally, the pricing for our MML licenses varies based on the choice of MML,
content offering selected by the customer, the number of users within the
customer's organization and the length of the license agreement. Our MML license
provides customers access to a full range of learning products that could
include courseware, Referenceware, simulations, mentoring and prescriptive
assessment.

A Referenceware license from our subsidiary Books24x7.com, Inc. (Books) gives
users access to the full library within one or more collections (ITPro,
BusinessPro, FinancePro and OfficeEssentials). Generally, the pricing for our
Referenceware licenses varies based on the collections specified by a customer,
the number of users within the customer's organization and the length of the
license agreement.

We offer discounts from our ordinary pricing, and purchasers of licenses for
larger numbers of courses, for larger user bases or for longer periods generally
receive discounts. Generally, customers may amend their license agreements, for
an additional fee, to gain access to additional courses or product lines and/or
to increase the size of the user base. We also derive revenue from hosting fees
for clients that use our solutions on an application service provider (ASP)
basis, on-line mentoring services and professional services. In selected
circumstances, we derive revenue on a pay-for-use basis under which some
customers are charged based on the number of courses accessed by users. Revenue
derived from pay-for-use contracts has been minimal to date.

We generally bill the annual license fee for the first year of a multi-year
agreement in advance. We recognize revenue with respect to courseware licenses
either at the time of delivery of products or over the term of the contract,
depending on products included in the license and specific contract terms. In
the event that the customer specifies all licensed courses to be delivered at
the outset and those courses are available and delivered on or before the
contract start date, we recognize license revenue for the first year of the
contract upon execution of the contract and delivery of the courses. We
generally bill license fees for subsequent years of multi-year license
arrangements on the anniversary date of the agreement, and if the customer
exchanges courses and receives the exchanged courses by the renewal date,
revenue is recognized in the manner described above.

In some circumstances, we offer payment terms of up to six months from the
initial shipment date or anniversary date for multi-year agreements to our
customers. To the extent that a customer is given extended payment terms,
revenue is recognized as cash becomes due, assuming all of the other elements of
revenue recognition have been satisfied.

We recognize revenue ratably over the license period if the number of courses
that a customer has access to is not clearly defined, available, or selected at
the inception of the contract, or if the contract has additional undelivered
elements for which we do not have vendor specific objective evidence (VSOE) of
the fair value of the various elements. This may occur if the customer does not
specify all licensed courses at the outset, the customer chooses to wait for
future licensed courses on a when and if available basis, the customer is given
exchange privileges that are exercisable other than on the contract
anniversaries, or the customer licenses all courses currently available and to
be developed during the term of the arrangement. Nearly all of our contractual
arrangements result in the recognition of revenue ratably over the license
period.

                                       16

<PAGE>

We also derive revenue from extranet hosting/ASP services and online mentoring
services. We recognize revenue related to extranet hosting/ASP services and
online mentoring services on a straight-line basis over the period in which the
service agreements are provided to the extent we have VSOE for those services.
If we do not have VSOE for these services, revenue from the entire arrangement,
including any implementation fees, is recognized on a straight-line basis over
the period in which the services are provided. For multi-element agreements
where we provide these services, VSOE is the basis used to allocate the total
fee to the elements of the arrangement.

We recognize revenue on Referenceware and MML licenses ratably over the term of
the agreement, which matches the period the future products or services are
delivered.

We generally commence the recognition of revenue from resellers when both the
final sale to the end user has occurred and we have received payment from the
reseller. With respect to reseller agreements with minimum commitments, we
recognize revenue related to the portion of the minimum commitment that exceeds
end user sales at the expiration of the commitment period.

We provide professional services, including instructor led training, customized
content, websites and implementation services. We recognize professional service
revenue as the services are performed. The cost of satisfying any post contract
support (PCS), which essentially represents a warranty obligation, is accrued at
the time license revenue is recognized, as PCS fees are included in the annual
license fee. The estimated cost of providing PCS during the agreements is
insignificant and we do not offer it separately. The accrued PCS costs are
included in deferred revenue in the accompanying consolidated balance sheets.

We record deferred revenue when either cash is received or amounts have been
billed in advance of products or services provided. Deferred revenue includes
the unrecognized portion of revenue associated with license fees for which we
have received payment or for which amounts have been billed and are currently
due for payment in 180 days or less. In addition, deferred revenue includes
amounts, which have been billed and not collected, for which revenue is being
recognized ratably over the license period. In addition, in connection with the
Merger, we acquired approximately $47 million of deferred revenue which was
valued based upon the estimated cost to fulfill the remaining contractual and
performance obligations plus a normal operating profit on fulfilling such
obligations.

Cost of revenue includes the cost of materials (such as storage media),
packaging, shipping and handling, CD duplication, the cost of online mentoring
and hosting services, royalties and certain infrastructure and occupancy
expenses. We generally recognize these costs as incurred. Research and
development expenses consist primarily of salaries and benefits, certain
infrastructure and occupancy expenses, fees to consultants and course content
development fees. We account for software development costs in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," which
requires the capitalization of certain computer software development costs
incurred after technological feasibility is established. To date, development
costs after establishment of technological feasibility have been immaterial, and
we have expensed all software development costs as incurred. Selling and
marketing expenses consist primarily of salaries, commissions and benefits,
advertising and promotion, travel and certain infrastructure and occupancy
expenses. General and administrative expenses consist primarily of salaries and
benefits, consulting and service expenses, legal expenses, other public company
costs and certain infrastructure and occupancy expenses.

Deferred compensation consists of two components: (1) the value of unvested
options assumed in the Books acquisition and the Merger, and (2) the aggregate
difference between the exercise or sale price of share options granted or
restricted shares sold during the year ended January 31, 2000 and the fair
market value of the common stock as determined for accounting purposes. The
deferred compensation is amortized over the vesting period of the underlying
share option or shares.

Amortization of intangibles represents the amortization of intangibles, such as
customer value and content, from the Books acquisition, the GoTrain acquisition,
and the Merger.

Restructuring and other non-recurring charges primarily consist of compensation
cost of severed SmartForce employees for services rendered from the date of the
Merger through October 31, 2003 and prior to such employees' termination dates
and certain other non-recurring compensation costs to terminated and continuing
employees. Additionally, these charges include expenses associated with the
restatement of SmartForce's financial statements for 1999, 2000, 2001 and the
first two quarters of 2002. See Note 6 of the Notes to the Condensed
Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

                                       17

<PAGE>

Our significant accounting policies are more fully described in Note 2 of the
Notes to the Consolidated Financial Statements in our Annual Report on Form
10-K. However, we believe the accounting policies described below are
particularly important to the portrayal and understanding of our financial
position and results of operations and require application of significant
judgment by our management. In applying these policies, management uses its
judgment in making certain assumptions and estimates.

    REVENUE RECOGNITION

We recognize revenue in accordance with American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) No. 97-2 "Software Revenue
Recognition," as amended by SOP No. 98-4 and SOP No. 98-9. Additionally, for
agreements under which we are selling licenses and services, we recognize
revenue under Emerging Issues Task Force (EITF) 00-3 "Application of AICPA
Statement of Position 97-2 to Arrangements That Include the Right to Use
Software Stored on Another's Hardware" and Staff Accounting Bulletin No. 101
"Revenue Recognition." These statements require that four basic criteria must be
satisfied before revenue can be recognized:

     -   Persuasive evidence of an arrangement between us and a third party
         exists;

     -   Delivery of our product has occurred;

     -   The sales price for the product is fixed or determinable; and

     -   Collection of the sales price is probable.

Our management uses its judgment concerning the satisfaction of these criteria,
particularly the criteria relating to the determination of when delivery has
occurred and the criteria relating to the collectibility of the receivables
relating to such sales. Should changes and conditions cause management to
determine that these criteria are not met for certain future transactions,
revenue recognized for any period could be adversely affected. However, this is
mitigated by the fact that nearly all of our revenue is recognized ratably over
the term of the respective license. Please see the discussion under the
"Overview" section of this Item 2 concerning how we recognize revenue.

    IMPAIRMENT OF GOODWILL

We review the carrying value of goodwill periodically based upon the expected
future and discounted operating cash flows of our business. Our cash flow
estimates are based on historical results adjusted to reflect our best estimate
of future markets and operating conditions. Actual results may differ materially
from these estimates. The timing and size of impairment charges involves the
application of management's judgment and could significantly affect our
operating results. As a result of the Merger, one of our largest assets is
goodwill. In response to several factors in the fourth quarter of fiscal 2003,
we re-evaluated the fair value of the goodwill established in connection with
the Merger and the Books acquisition and recorded an impairment charge of
approximately $250.1 million.

    LEGAL CONTINGENCIES

We are currently involved in certain legal proceedings. In connection with these
legal proceedings, which we discuss in Part II -- Item 1, our management
periodically reviews estimates of potential costs to be incurred by us in
connection with the adjudication or settlement, if any, of these proceedings.
These estimates are developed in consultation with our outside counsel and are
based on an analysis of potential litigation outcomes and settlement strategies.
In accordance with SFAS No. 5, "Accounting for Contingencies", loss
contingencies are accrued if, in the opinion of our management, an adverse
outcome is probable and such outcome can be reasonably estimated. We do not
currently have a basis for concluding that these proceedings will have a
material adverse effect on our financial position; however, it is possible that
future results for any particular quarter or annual period may be materially
adversely affected by changes in our assumptions or the effectiveness of our
strategies relating to these proceedings.

RESULTS OF OPERATIONS

THREE MONTHS ENDED OCTOBER 31, 2003 VERSUS THREE MONTHS ENDED OCTOBER 31, 2002

Revenue increased $20.7 million, or 70%, to $50.0 million in the three months
ended October 31, 2003 from $29.3 million in the three months ended October 31,
2002. This increase was due in part to the addition of revenue from SmartForce's
historical customer base

                                       18

<PAGE>

as well as revenue generated from new business. As combined company revenue is
included after the closing of the Merger on September 6, 2002, the three months
ended October 31, 2002 does not include a full quarter of combined Company
revenue.

Cost of revenue decreased $182,000, or 4%, to $4.6 million in the three months
ended October 31, 2003 from $4.7 million in the three months ended October 31,
2002. Cost of revenue as a percentage of total revenue was 9% for the three
months ended October 31, 2003 compared to 16% for the three months ended October
31, 2002. These decreases were primarily due to cost efficiencies achieved as a
result of the Merger and a lower mix of revenue from royalty-bearing product
lines.

Research and development expenses increased $7.5 million, or 97%, to $15.2
million in the three months ended October 31, 2003 from $7.7 million in the
three months ended October 31, 2002. Research and development expenses as a
percentage of total revenue increased to 30% in the three months ended October
31, 2003 from 26% in the three months ended October 31, 2002. These increases
were primarily due to the addition of SmartForce's development organization and
the ongoing efforts of modifying the SmartForce content to be compliant with
SkillSoft standards and practices. We believe our outsourcing strategy for some
of our courses provides us significant flexibility to control these costs and we
expect that such costs will decrease as a percentage of revenue. In addition, we
incurred $3.0 million in incremental research and development costs in the three
months ended October 31, 2003, which are costs related to our initiative for
content offerings and improvements and platform improvements. We anticipate
these incremental costs will continue through the end of fiscal year 2004.

Selling and marketing expenses increased $4.5 million, or 28%, to $20.8 million
in the three months ended October 31, 2003 from $16.3 million in the three
months ended October 31, 2002. Selling and marketing expenses as a percentage of
total revenue decreased to 42% in the three months ended October 31, 2003 from
56% in the three months ended October 31, 2002. Selling and marketing expenses
increased due to the addition of SmartForce's sales and marketing organization
and related costs. We believe that a significant investment in selling and
marketing to expand our distribution channels worldwide is required to remain
competitive, and we therefore expect selling and marketing expenses to increase
in amount but decrease as a percentage of revenue.

General and administrative expenses decreased $632,000, or 8%, to $6.9 million
in the three months ended October 31, 2003 from $7.6 million in the three months
ended October 31, 2002. General and administrative expenses as a percentage of
total revenue decreased to 14% in the three months ended October 31, 2003 from
26% in the three months ended October 31, 2002. General and administrative
expenses decreased primarily as a result of efficiencies and synergies achieved
following the Merger. We anticipate that general and administrative expenses
savings achieved in recent periods as a result of the Merger in absolute dollars
will increase due to the increased costs of operations being faced by public
companies and Sarbanes-Oxley compliance. We are currently evaluating the
Sarbanes-Oxley costs and their potential impact on future operations.

Litigation settlement expenses were $16.0 million in the three months ended
October 31, 2003. This related to the settlement of the 1998 securities class
action litigation. Please see "Legal Proceedings" in Part II - Item 1.

Amortization of intangible assets was $2.6 million in the three months ended
October 31, 2003 and $1.8 million in the three months ended October 31, 2002.
The primary reason for the increase was the additional amortization related to
intangibles acquired in both the Merger and the acquisition of GoTrain Corp.
(GoTrain), an e-Learning business, in June 2003.

Stock-based compensation expense increased to $676,000 in the three months ended
October 31, 2003 from $438,000 in the three months ended October 31, 2002. The
expense relates to amortization of deferred compensation resulting from granting
of stock options to employees at exercise prices below the fair market value of
the stock and the sale of restricted common stock with sales prices below the
fair market value of the stock. The stock options granted and restricted stock
sold at prices below fair market value of the stock were granted by SkillSoft
Corporation prior to its initial public offering and by Books prior to its
acquisition by SkillSoft Corporation in December 2001. In addition, we recorded
a one time deferred compensation charge of $273,000 in the three months ended
October 31, 2003. This charge was due to the extension of certain option
agreements until the Registration Statement on Form S-8 covering such option
agreements, which was suspended as a result of our delay in filing a Form 8-K/A
containing the historical SmartForce financial statements, was again available
for use.

Restructuring and other non-recurring charges were $5.3 million in the three
months ended October 31, 2003 and $6.6 million in the three months ended October
31, 2002. See Note 7 to the consolidated financial statements for a description
of these charges.

Interest income, net decreased to $87,000 in the three months ended October 31,
2003 from $504,000 in the three months ended October 31, 2002. This decrease was
primarily due to less funds available for investment and lower interest rates on
our cash and cash equivalents and investments.

                                       19

<PAGE>

NINE MONTHS ENDED OCTOBER 31, 2003 VERSUS NINE MONTHS ENDED OCTOBER 31, 2002

Revenue increased $80.2 million, or 137%, to $138.7 million in the nine months
ended October 31, 2003 from $58.6 million in the nine months ended October 31,
2002. This increase was due in part to the addition of revenue from SmartForce's
historical customer base as well as revenue generated from new business.

Cost of revenue increased $7.7 million, or 117%, to $14.2 million in the nine
months ended October 31, 2003 from $6.6 million in the nine months ended October
31, 2002. This increase was primarily due to increased costs of supporting the
SmartForce hosting business, royalty fees associated with SmartForce's IT
product line and, to a lesser extent, our Referenceware product line. Cost of
revenue as a percentage of total revenue was 10% for the nine months ended
October 31, 2003 compared to 11% for the nine months ended October 31, 2002.
This decrease was primarily due to cost efficiencies achieved as a result of the
Merger and a lower mix of revenue from royalty-bearing product lines.

Research and development expenses increased $25.7 million, or 173%, to $40.6
million in the nine months ended October 31, 2003 from $14.9 million in the nine
months ended October 31, 2002. Research and development expenses as a percentage
of total revenue increased to 29% in the nine months ended October 31, 2003 from
25% in the nine months ended October 31, 2002. These increases were primarily
due to the addition of SmartForce's development organization and the ongoing
efforts of modifying the SmartForce content to be compliant with SkillSoft
standards and practices. In addition, we incurred $3.0 million in incremental
research and development costs, which are costs related to our initiative for
content offerings and improvements and platform improvements.

Selling and marketing expenses increased $35.8 million, or 113%, to $67.4
million in the nine months ended October 31, 2003 from $31.6 million in the nine
months ended October 31, 2002. Selling and marketing expenses as a percentage of
total revenue decreased 49% in the nine months ended October 31, 2003 from 54%
in the nine months ended October 31, 2002. Selling and marketing expenses
increased in absolute dollars due to the addition of SmartForce's sales and
marketing organization and related costs.

General and administrative expenses increased $8.9 million, or 79%, to $20.0
million in the nine months ended October 31, 2003 from $11.2 million in the nine
months ended October 31, 2002. General and administrative expenses as a
percentage of total revenue decreased to 15% in the nine months ended October
31, 2003 from 19% in the nine months ended October 31, 2002. General and
administrative expenses increased in absolute dollars primarily as a result of
the Merger. We anticipate that general and administrative costs will increase
due to costs in connection with complying with Sarbanes-Oxley legal
requirements. Currently we are evaluating these costs and their potential impact
on future operations.

Litigation settlement expense was $62.3 million in the nine months ended October
31, 2003. Litigation settlement expenses were comprised of $44.0 million related
to the settlement with NETg, $2.3 million related to the settlement with IP
Learn, and $16.0 million related to the settlement of the 1998 securities class
action suit. Please see "Legal Proceedings" in Part II - Item 1.

Amortization of intangible assets was $7.5 million in the nine months ended
October 31, 2003 and $2.0 million during the nine months ended October 31, 2002.
The primary reason for the increase was the additional amortization related to
intangibles acquired in both the Merger and the acquisition of GoTrain.

Stock-based compensation expense increased to $1.6 million in the nine months
ended October 31, 2003 from $1.1 in the nine months ended October 31, 2002. The
expense primarily relates to the amortization of deferred compensation resulting
from the granting of stock options to employees at exercise prices below the
fair market value of the stock and the sale of restricted common stock with
sales prices below the fair market value of the stock. The stock options granted
and the restricted stock sold at prices below fair market value of the stock
were granted by SkillSoft Corporation prior to its initial public offering and
by Books prior to its acquisition by SkillSoft Corporation in December 2001. In
addition, we recorded a one time deferred compensation charge of $273,000 in the
three months ended October 31, 2003. This charge was due to the extension of
certain option agreements until the Registration Statement on Form S-8 covering
such option agreements, which was suspended as a result of our delay in filing a
Form 8-K/A containing the historical SmartForce financial statements, was again
available for use.

Restructuring and other non-recurring charges were $16.8 million in the nine
months ended October 31, 2003 and $6.6 million in the nine months ended October
31, 2002. The charges in the nine months ended October 31, 2003 include an
additional $1.8 million related to further restructuring of the pre-Merger
SmartForce PLC operations and $15.0 million related to the restatement of the
historical SmartForce PLC financial statements.

                                       20

<PAGE>

Interest income, net, decreased to $680,000 in the nine months ended October 31,
2003 from $1.5 million in the nine months ended October 31, 2002. This decrease
was primarily due to less funds available for investment and lower interest
rates on our cash and cash equivalents and investments.

Gain on sale of investments, net, was $3.7 million for the nine months ended
October 31, 2003. This was primarily related to a gain of $3.6 million from the
sale of an equity investment.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 2003, our principal source of liquidity was our cash and cash
equivalents and short-term investments, which totaled $59.3 million. This
compares to $125.0 million at January 31, 2003. In addition we have $25.0
million in restricted cash securing our line of credit, against which no
borrowings are outstanding.

Net cash used in operating activities was $41.7 million and $18.5 million for
the nine months ended October 31, 2003 and 2002, respectively. Our net cash used
for the nine months ended October 31, 2003 reflects primarily our net loss of
$87.7 million, partially offset by a decrease of $21.0 million in accounts
receivable as a result of increased collections, and an increase of $20.8
million in accrued expenses as a result of litigation settlements.

Net cash provided by investing activities was $23.9 million and $41.5 million
for the nine months ended October 31, 2003 and 2002, respectively. Maturity and
sales of investments, net of purchases (short and long-term), generated a net
cash inflow of approximately $56.1 million in the nine months ended October 31,
2003. This was offset by the designation of $25.0 million as restricted cash to
secure a line of credit and $5.0 million used to purchase GoTrain.

Net cash provided by financing activities was $4.7 million and $1.1 million for
the nine months ended October 31, 2003 and 2002, respectively. For the nine
months ended October 31, 2003, these proceeds related to the exercise of stock
options and purchases under our 1995 Employee Stock Purchase Plan, as well as
payments on notes receivable related to restricted stock.

Working capital was approximately ($44.7) million and $31.8 million as of
October 31, 2003 and January 31, 2003, respectively. The decrease in working
capital in the nine months ended October 31, 2003 was primarily due to the $22.0
million cash payment to NETg and the accrual of the final $22.0 million payment
to NETg, which is scheduled to occur in the second quarter of fiscal year 2005.
In addition, working capital decreased due to the accrual of our contribution of
$16.0 million related to the settlement of the 1998 securities class action
lawsuit, for which $10.0 million is scheduled to be disbursed in the three
months ended January 31, 2004 and $6.0 million in mid 2004. Total assets were
approximately $315.3 million and $378.1 million as of October 31, 2003 and
January 31, 2003, respectively. As of October 31, 2003, goodwill and separately
identifiable intangible assets were $127.2 million and $28.3 million,
respectively.

On June 24, 2003, we executed a $25 million one-year, secured line of credit
from a bank. Under the terms of the line of credit, the facility is to be
initially secured by $25 million in cash held in a certificate of deposit in the
amount of the line, plus a first security interest in all domestic business
assets. The cash held in the certificate of deposit is to be released on a
quarterly basis beginning the quarter following the achievement of two
consecutive minimum levels of operating income. All borrowings under the line of
credit bear interest at the lesser of the bank's prime rate or the 30 or 60-day
LIBOR rate plus 2.75%. As of October 31, 2003 there were no amounts outstanding
under the line of credit.

As of January 31, 2003, we had worldwide net operating loss carryforwards, which
are subject to potential limitations based upon change in control provisions of
Section 382 of the Internal Revenue Code, of approximately $359 million for
income tax purposes available to reduce future taxable income, if any.

We lease certain of our facilities and certain equipment and furniture under
operating lease agreements that expire at various dates through 2023. Future
minimum lease payments, net of estimated rentals, under these agreements are as
follow (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR ENDING JANUARY 31:      FACILITIES     OTHER        TOTAL
<S>                                 <C>           <C>         <C>
             2004                   $   6,051     $  1,695    $    7,746
             2005                       5,291          814         6,105
             2006                       4,098           77         4,175
             2007                       3,344           12         3,356
             2008                       3,199            2         3,201
</TABLE>

                                       21

<PAGE>

<TABLE>
<S>                                 <C>           <C>         <C>
       Thereafter                      11,366           --        11,366
                                    ---------     --------    ----------
            TOTAL                   $  33,349     $  2,600    $   35,949
                                    =========     ========    ==========
</TABLE>

We have entered into long-term agreements with third parties to provide content
and subject matter expertise. In connection with these agreements, our minimum
obligations are approximately $5.8 million and $2.3 million for the fiscal years
ending January 31, 2004 and 2005, respectively.

We expect to continue to experience significant growth in capital expenditures
and operating expenses, particularly sales and marketing and product development
expenses, for the foreseeable future in order to execute our business plan. To
the extent that the execution of our business plan results in increased sales,
we expect to experience corresponding increases in deferred revenue and prepaid
expenses. Approximately $1.3 million of the $30.3 million exit plan accrual
established to restructure the operations of pre-Merger SmartForce PLC is
expected to be paid by January 2004, and the remaining value of approximately
$11.5 million is expected to be disbursed through October 2011. We reached a
litigation settlement agreement in July 2003, which requires a future cash
payment of approximately $22.0 million. We also reached a litigation settlement
agreement in December 2003, which requires future cash payments of approximately
$16.0 million. We expect that the principal sources of funding for our operating
expenses, capital expenditures and other liquidity needs will be a combination
of our available cash equivalents and marketable securities (which totaled $59.3
million as of October 31, 2003) and funds generated from operations. We believe
our current funds and expected cash flows from operating activities will be
sufficient to fund our operations for at least the next 12 months. However,
there are a number of factors that may negatively impact our available sources
of funds including unfavorable outcomes or settlements of pending litigation.
The amount of cash generated from operations will be dependent upon the
successful execution of our business plan and worldwide economic conditions. In
addition, our cash needs may increase due to factors such as unanticipated
developments in our business or significant acquisitions.

FUTURE OPERATING RESULTS

    RISKS RELATED TO LEGAL PROCEEDINGS

IN CONNECTION WITH OUR RESTATEMENT OF THE HISTORICAL FINANCIAL STATEMENTS OF
SMARTFORCE, CLASS ACTION LAWSUITS HAVE BEEN FILED AGAINST US AND ADDITIONAL
LAWSUITS MAY BE FILED, AND WE ARE THE SUBJECT OF A FORMAL ORDER OF PRIVATE
INVESTIGATION ENTERED BY THE SEC.

While preparing the closing balance sheet of SmartForce as at September 6, 2002,
the date on which we closed our merger with SkillSoft Corporation, certain
accounting matters were identified relating to the historical financial
statements of SmartForce (which, following the Merger, are no longer our
historical financial statements -- see Note 1 of the Notes to the Consolidated
Financial Statements). On November 19, 2002, we announced our intent to restate
the SmartForce financial statements for 1999, 2000, 2001 and the first two
quarters of 2002. Following this announcement, several lawsuits claiming to be
class actions were commenced against us and certain of our current and former
directors and officers, by or on behalf of persons claiming to be our
shareholders and persons claiming to have purchased or otherwise acquired our
securities at specified periods beginning as early as October 19, 1999 and
continuing after September 6, 2002. These lawsuits have been consolidated. On
October 31, 2003, plaintiffs filed two amended complaints in the consolidated
lawsuit, one on behalf of a purported class of purchasers of our ADSs between
April 27, 1999 through November 18, 2002, and another on behalf of a purported
class of SkillSoft Corporation shareholders who acquired our ADSs in connection
with the merger. Additional lawsuits may be filed against us. Regardless of the
outcome of the consolidated action, it is likely that we will incur substantial
defense costs and that such action will cause a diversion of our management's
time and attention. If we do not prevail in the case we could be required to pay
substantial damages or settlement costs, which could have a material adverse
effect on our financial condition or results of operation. We are unable at this
time to assess the validity of the claims or estimate the possible range of
damages that might be incurred as a result of the consolidated lawsuit. We have
not yet established any financial reserves relating to this lawsuit. We believe
that we have meritorious defenses to this action and intend to defend ourselves
vigorously.

We are the subject of a formal order of private investigation entered by the
SEC. We are cooperating with the SEC in connection with this investigation. We
will likely incur substantial costs in connection with the SEC investigation,
which could cause a diversion of management time and attention. In addition, we
could be subject to substantial penalties, fines or regulatory sanctions, which
could adversely affect our business.

                                       22

<PAGE>

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.

Third parties have in the past and could in the future claim that our current or
future products infringe their intellectual property rights. Any claim, with or
without merit, could result in costly litigation or require us to reengineer or
cease sales of our products or services, any of which could have a material
adverse effect on our business. Infringement claims could also result in an
injunction in the use of our products or require us to enter into royalty or
licensing agreements. Licensing agreements, if required, may not be available on
terms acceptable to the combined company or at all.

From time to time we learn of parties that claim broad intellectual property
rights in the e-Learning area that might implicate our offerings. These parties
or others could initiate actions against us in the future.

WE ARE SUBJECT TO OTHER PENDING LEGAL PROCEEDINGS AND WE MAY BECOME SUBJECT TO
ADDITIONAL LEGAL PROCEEDINGS. ADVERSE DETERMINATIONS IN THESE PROCEEDINGS COULD
MATERIALLY HARM OUR BUSINESS.

Since the end of the third quarter of 1998, a class action lawsuit has been
pending in the United States District Court for the Northern District of
California against us, one of our subsidiaries, SmartForce USA, which has merged
with and into our subsidiary, SkillSoft Corporation and certain of our former
and current officers and directors, alleging violation of the federal securities
laws. It has been alleged in this lawsuit that we misrepresented or omitted to
state material facts regarding our business and financial condition and
prospects in order to artificially inflate and maintain the price of our ADSs,
and misrepresented or omitted to state material facts in our registration
statement and prospectus issued in connection with our merger with Forefront.

In December 2003, we reached a settlement of this litigation. Under the terms of
the settlement, we will make a $10 million cash payment within 30 days and an
additional $6 million payment in mid-2004. Our insurance carriers will pay an
additional $16 million for total settlement payments of $32 million. The
settlement is subject to court approval and there is no assurance that the court
will approve the settlement.

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

WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS' USE OF OUR PRODUCTS AND SERVICES.

Many of the business interactions supported by our products and services are
critical to our customers' businesses. Any failure in a customer's business
interaction or other collaborative activity caused or allegedly caused in the
future by our products and services could result in a claim for substantial
damages against us, regardless of our responsibility for the failure. Although
we maintain general liability insurance, including coverage for errors and
omissions, there can be no assurance that existing coverage will continue to be
available on reasonable terms or will be available in amounts sufficient to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim.

WE COULD BE SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM
THIRD PARTIES OVER WHOM WE EXERT LIMITED CONTROL.

It is possible that we could become subject to legal actions based upon claims
that our course content infringes the rights of others or is erroneous. Any such
claims, with or without merit, could subject us to costly litigation and the
diversion of our financial resources and management personnel. The risk of such
claims is exacerbated by the fact that our course content is provided by third
parties over whom we exert limited control. Further, if those claims are
successful, we may be required to alter the content, pay financial damages or
obtain content from others.

    RISKS RELATED TO THE MERGER BETWEEN SKILLSOFT CORPORATION AND SMARTFORCE

WE MAY NOT BE SUCCESSFUL IN COMPLETING FINAL ASPECTS OF THE INTEGRATION RELATED
TO THE BUSINESSES OPERATED BY SKILLSOFT CORPORATION AND SMARTFORCE PRIOR TO THE
MERGER AND, AS A RESULT, MAY NOT REALIZE BENEFITS FROM THE MERGER.

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<PAGE>

We have substantially completed many of the key aspects of the integration of
the businesses operated by SkillSoft Corporation and SmartForce prior to the
Merger, which was consummated on September 6, 2002. However, the ultimate
successful integration of the two businesses will require, among other things,
the following:

     -   completion of the integration of the two companies' products and
         services, information and software systems and other operations;

     -   coordination of ongoing and future research and development efforts and
         marketing activities;

     -   retention of existing customers of both companies and attraction of
         additional customers;

     -   retention of strategic partners of each company and attraction of new
         strategic partners;

     -   developing and maintaining uniform standards, controls, procedures and
         policies;

     -   identifying and eliminating redundant and underperforming operations
         and assets;

     -   effectively leveraging our indirect sales presence;

     -   capitalizing on cross-selling opportunities;

     -   the successful migration of the companies' platforms;

     -   minimization of disruption of each company's ongoing business and
         distraction of its management;

     -   limiting expenses related to integration; and

     -   improving its internal control environment due to challenges in the
         integration.

We may not succeed in addressing these risks or any other problems encountered
in connection with the Merger. The diversion of the attention of management and
any difficulties encountered in the process of combining the companies could
cause the disruption of, or a loss of momentum in, the activities of our
business or could cause the impairment of relationships with customers and
business partners. Further, the process of combining the two companies'
businesses could negatively affect employee morale and our ability to retain
some key employees, and could cause customers to cancel existing license
agreements or choose not to purchase new products from us. In addition, we
intend to develop new products and services that combine both companies' assets.
Difficulties in combining the technology, products and service offerings of the
two companies could result in disruption of customer service and longer sales
cycles and product implementations, which could cause existing customers to
reduce or cease doing business with us altogether, and could cause revenue and
operating income to fluctuate and fail to meet expectations.

CERTAIN ASPECTS OF THE MERGER COULD HARM OUR FINANCIAL RESULTS.

In connection with the Merger, certain aspects of the integration of the two
companies moving forward could harm our financial results. For example, we have
made certain changes in contracting practices, which will have attendant
accounting implications. For example, prior to the Merger, SmartForce recorded
license revenues with respect to contracts that provide for perpetual licenses
to software at the time that it sold the perpetual licenses. Since the Merger,
we have been delivering perpetual licenses as part of a bundled offering
including services. As a result, the revenue from both the perpetual licenses
and services will be recognized as revenues as the services are delivered over
time. This means that rather than recognizing substantial license revenue at the
time of the execution of these contracts, we will now recognize license revenue
ratably over the term of these contracts. In addition, due to purchase
accounting in connection with the Merger, a portion of the SmartForce deferred
revenue as of September 6, 2002 was reclassified to goodwill and will therefore
not be recognized as revenue.

As a result of the integration, we may not obtain some revenue we otherwise
might have obtained. For example, although the products and customer bases of
the two companies are complementary and should provide us with numerous cross
selling opportunities, we do expect some degree of commercial overlap that could
negatively impact revenue. Also, we intend to de-emphasize customer service

                                       24

<PAGE>

revenue activities to focus on higher margin segments of the business, which we
expect will result in lost revenue. In addition, volume discounting of mutual
customers now combined as a result of the Merger may result in lower revenues.

If the benefits of the Merger do not exceed the associated costs, including
costs associated with integrating the two companies, lost or deferred revenues
and dilution of our shareholders resulting from the issuance of our ADSs in
connection with the Merger, our financial results, including earnings per share,
could be materially harmed.

IF WE ARE UNABLE TO TAKE ADVANTAGE OF OPPORTUNITIES TO MARKET AND SELL THE
PRODUCTS AND SERVICES OF THE TWO COMPANIES TO EACH OTHER'S TRADITIONAL
CUSTOMERS, DISTRIBUTION CHANNELS AND BUSINESS PARTNERS, WE MAY NOT REALIZE SOME
OF THE EXPECTED BENEFITS OF THE MERGER.

Prior to the Merger, we and SkillSoft Corporation each maintained separate and
distinct customer bases, distribution channels and business partners specific to
our respective businesses. Following the Merger, we are attempting to take
advantage of the customer bases and distribution channels of the formerly
separate businesses in order to promote and sell the products and services of
one company to the traditional customers and business partners of the other
company. The products and services of the two companies are highly technical and
the salespersons of one company may not be successful in marketing the products
and services of the other company. In the event that the traditional customers
and business partners of either company are not receptive to the products and
services of the other, we may not realize some of the expected benefits of the
merger, and our business may be harmed.

WE HAVE IDENTIFIED SIGNIFICANT DEFICIENCIES IN OUR DISCLOSURE CONTROLS AND
PROCEDURES AND INTERNAL CONTROLS.

During the process of integrating the business processes, human resources,
disclosure controls and procedures and internal controls of SmartForce PLC and
SkillSoft Corporation following the Merger, significant deficiencies in
disclosure controls and procedures and internal controls were identified
predominantly with respect to financial reporting at non-U.S. subsidiaries of
the former SmartForce PLC and our ability to process the consolidated financial
closing cycle. Our independent auditors have informed us that they believe we
have material weaknesses and reportable conditions in internal controls in
certain of these areas. These deficiencies have resulted in a significant strain
to the internal resources and on the infrastructure of the finance organization
and adversely impacted both the year-end and quarter-end financial closing
process. While permanent resources and account process improvements have been
and will continue to be added and implemented to improve the non-U.S. finance
operations, the financial closing process and the overall internal control
environment, additional changes to the disclosure controls and procedures and
internal controls will be on-going.

WE ARE OPERATING UNDER A NEW NAME, WHICH MAY ADVERSELY AFFECT OUR BUSINESS.

Following the consummation of the Merger, we changed our name from SmartForce
PLC to SkillSoft PLC. The adoption of this new name may prevent us from taking
advantage of certain goodwill existing customers and strategic partners
associate with our former name. Further, we expect to incur an expense in
effecting the name change and in marketing efforts to promote brand recognition
of the new name.

    RISKS RELATED TO THE OPERATION OF OUR BUSINESS

WE AND SKILLSOFT CORPORATION HAVE EXPERIENCED NET LOSSES IN THE PAST, AND WE MAY
BE UNABLE TO ACHIEVE OR MAINTAIN PROFITABILITY.

SmartForce incurred substantial net losses both recently and in the past,
including net losses of $43.8 million in the three months ended June 30, 2002
and $6.3 million in the three months ended March 31, 2002. SkillSoft Corporation
incurred substantial net losses in every fiscal quarter prior to its fiscal
quarter ended January 31, 2002. In addition, the combined company recorded a net
loss of $284 million for the fiscal year ended January 31, 2003 and $87.7
million for the nine months ended October 31, 2003. We expect to incur
significant expenses in connection with the completion of the migration to a
unified platform and the continued expansion of this combined business, and, as
a result, the business will need to generate significant revenues to achieve and
maintain profitability. We cannot guarantee whether our combined business will
achieve or sustain profitability in any future period.

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.

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<PAGE>

We have in the past experienced fluctuations in our quarterly operating results,
and we anticipate that these fluctuations will continue. As a result, we believe
that our quarterly revenue, expenses and operating results are likely to vary
significantly in the future. If in some future quarters our results of
operations are below the expectations of public market analysts and investors,
this could have a severe adverse effect on the market price of our ADSs.

Our operating results have historically fluctuated, and our operating results
may in the future continue to fluctuate, as a result of factors, which include:

     -   the size and timing of new/renewal agreements and upgrades;

     -   royalty rates;

     -   the announcement, introduction and acceptance of new products, product
         enhancements and technologies by us and our competitors;

     -   the mix of sales between our field sales force, our other direct sales
         channels and our telesales channels;

     -   general conditions in the U.S. or the international economy;

     -   the loss of significant customers;

     -   delays in availability of new products;

     -   product or service quality problems;

     -   seasonality - due to the budget and purchasing cycles of our customers,
         we expect our revenue and operating results will generally be strongest
         in the second half of our fiscal year and weakest in the first half of
         our fiscal year;

     -   the spending patterns of our customers;

     -   litigation costs and expenses, including the costs related to the
         restatement of the SmartForce financial statements;

     -   non-recurring charges related to acquisitions;

     -   growing competition that may result in price reductions; and

     -   currency fluctuations.

Most of our expenses, such as rent and most employee compensation, do not vary
directly with revenue and are difficult to adjust in the short-term. As a
result, if revenue for a particular quarter is below our expectations, we could
not proportionately reduce operating expenses for that quarter. Any such revenue
shortfall would, therefore, have a disproportionate effect on our expected
operating results for that quarter.

DEMAND FOR OUR PRODUCTS AND SERVICES MAY BE ESPECIALLY SUSCEPTIBLE TO ADVERSE
ECONOMIC CONDITIONS.

Our business and financial performance may be damaged by adverse financial
conditions affecting our target customers or by a general weakening of the
economy. Companies may not view training products and services as critical to
the success of their businesses. If these companies experience disappointing
operating results, whether as a result of adverse economic conditions,
competitive issues or other factors, they may decrease or forego education and
training expenditures before limiting their other expenditures or in conjunction
with lowering other expenses.

WE RELY ON A LIMITED NUMBER OF THIRD PARTIES TO PROVIDE US WITH EDUCATIONAL
CONTENT FOR OUR COURSES AND REFERENCEWARE, AND OUR ALLIANCES WITH THESE THIRD
PARTIES MAY BE TERMINATED OR FAIL TO MEET OUR REQUIREMENTS.

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<PAGE>

We rely on a limited number of independent third parties to provide us with the
educational content for a majority of our courses based on learning objectives
and specific instructional design templates that we provide to them. We do not
have exclusive arrangements or long-term contracts with any of these content
providers. If one or more of our third party content providers were to stop
working with us, we would have to rely on other parties to develop our course
content. In addition, these providers may fail to develop new courses or
existing courses on a timely basis. We cannot predict whether new content or
enhancements would be available from reliable alternative sources on reasonable
terms. In addition, Books relies on third party publishers to provide all of the
content incorporated into its Referenceware products. If one or more of these
publishers were to terminate their license with us, we may not be able to find
substitute publishers for such content. In addition, we may be forced to pay
increased royalties to these publishers to continue our licenses with them.

In the event that we are unable to maintain or expand our current development
alliances or enter into new development alliances, our operating results and
financial condition could be materially adversely affected. Furthermore, we will
be required to pay royalties to some of our development partners on products
developed with them, which could reduce our gross margins. We expect that cost
of revenues may fluctuate from period to period in the future based upon many
factors, including the revenue mix and the timing of expenses associated with
development alliances. In addition, the collaborative nature of the development
process under these alliances may result in longer development times and less
control over the timing of product introductions than for e-Learning offerings
developed solely by us. Our strategic alliance partners may from time to time
renegotiate the terms of their agreements with us, which could result in changes
to the royalty or other arrangements, adversely affecting our results of
operations.

The independent third party strategic partners we rely on for educational
content and product marketing may compete with us, harming our results of
operations. Our agreements with these third parties generally do not restrict
them from developing courses on similar topics for our competitors or from
competing directly with us. As a result, our competitors may be able to
duplicate some of our course content and gain a competitive advantage.

WE RELY ON STRATEGIC ALLIANCES FOR MARKETING, WHICH ALLIANCES ARE NOT EXCLUSIVE,
MAY BE TERMINATED OR MAY FAIL TO MEET OUR REQUIREMENTS IN THE FUTURE.

We have developed strategic alliances to market many of our products. However,
these relationships are not exclusive, and our marketing partners could market
other products in preference to, and in competition with, those developed by us.
In addition, we may be unable to continue to market future products through
these alliances or may be unable to negotiate additional alliances in the future
on acceptable terms, if at all. The marketing efforts of our strategic partners
may also disrupt our direct sales efforts.

OUR SUCCESS DEPENDS ON OUR ABILITY TO MEET THE NEEDS OF THE RAPIDLY CHANGING
MARKET.

The market for education and training software is characterized by rapidly
changing technology, evolving industry standards, changes in customer
requirements and preferences and frequent introductions of new products and
services embodying new technologies. New methods of providing interactive
education in a technology-based format are being developed and offered in the
marketplace, including intranet and Internet offerings. In addition, multimedia
and other product functionality features are being added to educational
software. Our future success will depend upon the extent to which we are able to
develop and implement products which address these emerging market requirements
on a cost effective and timely basis. Product development is risky because it is
difficult to foresee developments in technology, coordinate technical personnel
and identify and eliminate design flaws. Any significant delay in releasing new
products could have a material adverse effect on the ultimate success of our
products and could reduce sales of predecessor products. We may not be
successful in introducing new products on a timely basis. In addition, new
products introduced by us may fail to achieve a significant degree of market
acceptance or, once accepted, may fail to sustain viability in the market for
any significant period. If we are unsuccessful in addressing the changing needs
of the marketplace due to resource, technological or other constraints, or in
anticipating and responding adequately to changes in customers' software
technology and preferences, our business and results of operations would be
materially adversely affected.

THE E-LEARNING MARKET IS A DEVELOPING MARKET, AND OUR BUSINESS WILL SUFFER IF
E-LEARNING IS NOT WIDELY ACCEPTED.

The market for e-Learning is a new and emerging market. Corporate training and
education have historically been conducted primarily through classroom
instruction and have traditionally been performed by a company's internal
personnel. Many companies have invested heavily in their current training
solutions. Although technology-based training applications have been available
for several years, they currently account for only a small portion of the
overall training market.

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<PAGE>

Accordingly, our future success will depend upon the extent to which companies
adopt technology-based solutions for their training activities, and the extent
to which companies utilize the services or purchase products of third-party
providers. Many companies that have already invested substantial resources in
traditional methods of corporate training may be reluctant to adopt a new
strategy that may compete with their existing investments. Even if companies
implement technology-based training or e-Learning solutions, they may still
choose to design, develop, deliver or manage all or part of their education and
training internally. If technology-based learning does not become widespread, or
if companies do not use the products and services of third parties to develop,
deliver or manage their training needs, then our products and service may not
achieve commercial success.

THE SUCCESS OF OUR E-LEARNING STRATEGY DEPENDS ON THE RELIABILITY AND CONSISTENT
PERFORMANCE OF OUR INFORMATION SYSTEMS AND INTERNET INFRASTRUCTURE.

The success of our e-Learning strategy is highly dependent on the consistent
performance of our information systems and Internet infrastructure. If our Web
site fails for any reason or if it experiences any unscheduled downtimes, even
for only a short period, our business and reputation could be materially harmed.
We have in the past experienced performance problems and unscheduled downtime,
and these problems could recur. We currently rely on third parties for proper
functioning of computer infrastructure, delivery of our e-Learning applications
and the performance of our destination site. Our systems and operations could be
damaged or interrupted by fire, flood, power loss, telecommunications failure,
break-ins, earthquake, financial patterns of hosting providers and similar
events. Any system failures could adversely affect customer usage of our
solutions and user traffic results in any future quarters, which could adversely
affect our revenues and operating results and harm our reputation with corporate
customers, subscribers and commerce partners. Accordingly, the satisfactory
performance, reliability and availability of our Web site and computer
infrastructure is critical to our reputation and ability to attract and retain
corporate customers, subscribers and commerce partners. We cannot accurately
project the rate or timing of any increases in traffic to our Web site and,
therefore, the integration and timing of any upgrades or enhancements required
to facilitate any significant traffic increase to the Web site are uncertain. We
have in the past experienced difficulties in upgrading our Web site
infrastructure to handle increased traffic, and these difficulties could recur.
The failure to expand and upgrade our Web site or any system error, failure or
extended down time could materially harm our business, reputation, financial
condition or results of operations.

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.

Many of our customer's users access our e-Learning solutions over the Internet
or through our customers' internal networks. Any factors that adversely affect
Internet usage could disrupt the ability of those users to access our e-Learning
solutions, which would adversely affect customer satisfaction and therefore our
business.

For example, our ability to increase the effectiveness and scope of our services
to customers is ultimately limited by the speed and reliability of both the
Internet and our customers' internal networks. Consequently, the emergence and
growth of the market for our products and services depends upon the improvements
being made to the entire Internet as well as to its individual customers'
networking infrastructures to alleviate overloading and congestion. If these
improvements are not made, and the quality of networks degrades, the ability of
our customers to use our products and services will be hindered and our revenues
may suffer.

Additionally, a requirement for the continued growth of accessing e-Learning
solutions over the Internet is the secure transmission of confidential
information over public networks. Failure to prevent security breaches into our
products or our customers' networks, or well-publicized security breaches
affecting the Internet in general could significantly harm our growth and
revenue. Advances in computer capabilities, new discoveries in the field of
cryptography or other developments may result in a compromise of technology we
use to protect content and transactions, our products or our customers'
proprietary information in our databases. Anyone who is able to circumvent our
security measures could misappropriate proprietary and confidential information
or could cause interruptions in our operations. We may be required to expend
significant capital and other resources to protect against such security
breaches or to address problems caused by security breaches. The privacy of
users may also deter people from using the Internet to conduct transactions that
involve transmitting confidential information.

OUR RESTRUCTURING PLANS MAY BE INEFFECTIVE OR MAY LIMIT OUR ABILITY TO COMPETE.

Since the Merger, we have recorded an aggregate of $30.3 million in merger and
exit costs and an aggregate of $30.8 million of restructuring and other
non-recurring charges. There are several risks inherent in these efforts to
transition to a new cost structure.

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<PAGE>

These include the risk that we will not be successful in restoring
profitability, and hence we may have to undertake further restructuring
initiatives that would entail additional charges and create additional risks. In
addition, there is the risk that cost-cutting initiatives will impair our
ability to effectively develop and market products and remain competitive. Each
of the above measures could have long-term effects on our business by reducing
our pool of talent, decreasing or slowing improvements in our products, making
it more difficult for us to respond to customers, limiting our ability to
increase production quickly if and when the demand for our products increases
and limiting our ability to hire and retain key personnel. These circumstances
could cause our earnings to be lower than they otherwise might be.

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 success is largely dependent on the personal efforts and abilities of our
senior management. Failure to retain these executives, or the loss of certain
additional senior management personnel or other key employees, could have a
material adverse effect on our business and future prospects. We are also
dependent on the continued service of our key sales, content development and
operational personnel and on our ability to attract, train, motivate and retain
highly qualified employees. In addition, we depend on writers, programmers, Web
designers and graphic artists. We may be unsuccessful in attracting, training,
retaining or motivating key personnel. In particular, the negative consequences
(including litigation) of having to restate SmartForce's historical financial
statements, uncertainties surrounding the Merger, and our recent adverse
operating results and stock price performance could create uncertainties that
materially and adversely affect our ability to attract and retain key personnel.
The inability to hire, train and retain qualified personnel or the loss of the
services of key personnel could have a material adverse effect upon our
business, new product development efforts and future business prospects.

CHANGES IN ACCOUNTING STANDARDS REGARDING STOCK OPTION PLANS COULD LIMIT THE
DESIRABILITY OF GRANTING STOCK OPTIONS, WHICH COULD HARM OUR ABILITY TO ATTRACT
AND RETAIN EMPLOYEES, AND COULD ALSO REDUCE OUR PROFITABILITY.

The Financial Accounting Standards Board is considering whether to require all
companies to treat the value of stock options granted to employees as an
expense. The United States Congress and other governmental and regulatory
authorities have also considered requiring companies to expense stock options.
If this change were to become mandatory, we and other companies would be
required to record a compensation expense equal to the value of each stock
option granted. This expense would be spread over the vesting period of the
stock option. Currently, we are generally not required to record compensation
expenses in connection with stock option grants. If we were required to expense
stock option grants, it would reduce the attractiveness of granting stock
options because the additional expense associated with these grants would reduce
our profitability. However, stock options are an important employee recruitment
and retention tool, and we may not be able to attract and retain key personnel
if we reduce the scope of our employee stock option program. Accordingly, in the
event we are required to expense stock option grants, either our profitability,
or our ability to use stock options as an employee recruitment and retention
tool would be adversely impacted.

INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND FOR OUR PRODUCTS AND
SERVICES, WHICH MAY RESULT IN REDUCED REVENUES AND GROSS MARGINS AND LOSS OR
MARKET SHARE.

The market for corporate education and training solutions is highly fragmented
and competitive. We expect the market to become increasingly competitive due to
the lack of significant barriers to entry. In addition to increased competition
from new companies entering into the market, established companies are entering
into the market through acquisitions of smaller companies, which directly
compete with us, and this trend is expected to continue. We may also face
competition from publishing companies and vendors of application software,
including those vendors with whom we have formed development and marketing
alliances.

     Our primary sources of direct competition are:

     -   third-party suppliers of instructor-led information technology,
         business, management and professional skills education and training;

     -   suppliers of computer-based training and e-Learning solutions;

     -   internal education and training departments of potential customers; and

     -   value-added resellers and network integrators.

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Growing competition may result in price reductions, reduced revenue and gross
margins and loss of market share, any one of which would have a material adverse
effect on our business. Many of our current and potential competitors have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition, and we expect to face increasing
price pressures from competitors as managers demand more value for their
training budgets. Accordingly, we may be unable to provide e-Learning solutions
that compare favorably with new instructor-led techniques, other interactive
training software or new e-Learning solutions.

OUR BUSINESS IS SUBJECT TO CURRENCY FLUCTUATIONS THAT COULD ADVERSELY AFFECT OUR
OPERATING RESULTS.

Due to our multinational operations, our operating results are subject to
fluctuations based upon changes in the exchange rates between the currencies in
which revenues are collected or expenses are paid. In particular, the value of
the U.S. dollar against the euro and related currencies will impact our
operating results. Our expenses will not necessarily be incurred in the currency
in which revenue is generated, and, as a result, we will be required from time
to time to convert currencies to meet our obligations. These currency
conversions are subject to exchange rate fluctuations, and changes to the value
of the euro, pound sterling and other currencies relative to the U.S. dollar
could adversely affect our business and results of operations.

OUR CORPORATE TAX RATE MAY INCREASE, WHICH COULD ADVERSELY AFFECT OUR CASH FLOW,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Our corporate tax rate may increase, which could adversely affect our cash flow,
financial condition and results of operations. Some of our Irish operating
subsidiaries are taxed at rates substantially lower than tax rates in effect in
the United States and other countries in which we have operations. As we have
substantial assets and properties located in, and our business operations are
principally conducted in, the United States, we are in the process of exploring
the reorganization of our operations and repatriating certain assets to Ireland
in order to maintain an effective tax rate at the level currently applicable to
us. If we are unable to effect such a reorganization, or if at any time our
Irish subsidiaries were no longer to qualify for these lower tax rates or if the
applicable tax laws were rescinded or later changed, our operating results could
be materially adversely affected. Moreover, because we will incur income tax in
several countries, an increase in our profitability in one or more of these
countries could result in a higher overall tax rate. In addition, if U.S. or
other foreign tax authorities were to change applicable tax laws or successfully
challenge the manner in which our subsidiaries' profits are currently
recognized, our taxes could increase, and our business, cash flow, financial
condition and results of operations could be materially adversely affected. In
addition, there may be limitations imposed on the level and timing of the
utilization of historic net operating losses for tax purposes as a result of the
Merger. These limitations may adversely impact cash flow depending on the extent
of any such limitation.

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.

Our success depends to a degree upon the protection of our rights in
intellectual property. We rely upon a combination of patent, copyright, and
trademark laws to protect our proprietary rights. We have also entered into, and
will continue to enter into, confidentiality agreements with our employees,
consultants and third parties to seek to limit and protect the distribution of
confidential information. However, we have not signed protective agreements in
every case.

Although we have taken steps to protect our proprietary rights, these steps may
be inadequate. Existing patent, copyright, and trademark laws offer only limited
protection. Moreover, the laws of other countries in which we market our
products may afford little or no effective protection of our intellectual
property. Additionally, unauthorized parties may copy aspects of our products,
services or technology or obtain and use information that we regard as
proprietary. Other parties may also breach protective contracts we have executed
or will in the future execute. We may not become aware of, or have adequate
remedies in the event of, a breach. Litigation may be necessary in the future to
enforce or to determine the validity and scope of our intellectual property
rights or to determine the validity and scope of the proprietary rights of
others. Even if we were to prevail, such litigation could result in substantial
costs and diversion of management and technical resources.

OUR NON-U.S. OPERATIONS ARE SUBJECT TO RISKS WHICH COULD NEGATIVELY IMPACT OUR
FUTURE OPERATING RESULTS.

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We expect that international operations will continue to account for a
significant portion of our revenues. Operations outside of the United States are
subject to inherent risks, including:

         -    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.

Any of these factors could have a material adverse effect on our future
operations outside of the United States, which could negatively impact our
future operating results.

THE MARKET PRICE OF OUR ADSs MAY FLUCTUATE AND MAY NOT BE SUSTAINABLE.

The market price of our ADSs has fluctuated significantly since our initial
public offering and is likely to continue to be volatile. In addition, in recent
years the stock market in general, and the market for shares of technology
stocks in particular, have experienced extreme price and volume fluctuations,
which have often been unrelated to the operating performance of affected
companies. The market price of our ADSs may continue to experience significant
fluctuations in the future, including fluctuations that are unrelated to our
performance. As a result of these fluctuations in the price of our ADSs, it is
difficult to predict what the price of our ADSs will be at any point in the
future, and you may not be able to sell your ADSs at or above the price that you
paid for them.

OUR SALES CYCLE MAY MAKE IT DIFFICULT TO PREDICT OUR OPERATING RESULTS.

The period between our initial contact with a potential customer and the
purchase of our products (not including SmartCertify) by that customer typically
ranges from three to twelve months. Factors that contribute to our long sales
cycle, include:

         -    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.

These long sales cycles, which typically range from three to twelve months or
more, make it difficult to predict the quarter in which sales may occur. Delays
in sales could cause significant variability in our revenues and operating
results for any particular period.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.

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Software products as complex as ours contain known and undetected errors or
"bugs" that result in product failures. The existence of bugs could result in
loss of or delay in revenues, loss of market share, diversion of product
development resources, injury to reputation or damage to efforts to build brand
awareness, any of which could have a material adverse effect on our business,
operating results and financial condition.

THE CONVICTION OF ARTHUR ANDERSEN LLP ON OBSTRUCTION OF JUSTICE CHARGES MAY
ADVERSELY AFFECT ARTHUR ANDERSEN LLP'S ABILITY TO SATISFY ANY CLAIMS ARISING
FROM THE PROVISION OF AUDITING SERVICES TO SKILLSOFT CORPORATION AND MAY IMPEDE
OUR ACCESS TO CAPITAL MARKETS AFTER THE MERGER.

Arthur Andersen LLP audited SkillSoft Corporation's financial statements for the
fiscal years ended January 31, 2002, January 31, 2001 and January 31, 2000. On
March 14, 2002, an indictment was unsealed charging it with federal obstruction
of justice arising from the government's investigation of Enron Corp. On June
15, 2002, Arthur Andersen LLP was convicted of these charges. It is possible
that the effect of this conviction on Arthur Andersen LLP's financial condition
may adversely affect the ability of Arthur Andersen LLP to satisfy any claims
arising from its provision of auditing services to SkillSoft Corporation.

Should we seek to access the public capital markets, SEC rules will require us
to include or incorporate by reference in any prospectus three years of audited
financial statements. The SEC's current rules would require us to present
audited financial statements for one or more fiscal years audited by Arthur
Andersen LLP and use reasonable efforts to obtain its consent until the audited
financial statements for the fiscal year ending January 31, 2005 become
available. If prior to that time the SEC ceases accepting financial statements
audited by Arthur Andersen LLP, it is possible that the available audited
financial statements for the fiscal years ended January 31, 2002, January 31,
2001 and January 31, 2000 audited by Arthur Andersen LLP might not satisfy the
SEC's requirements. In that case, we would be unable to access the public
capital markets unless Ernst & Young LLP, our current independent accounting
firm, or another independent accounting firm, is able to audit the financial
statements originally audited by Arthur Andersen LLP. Any delay or inability to
access the public capital markets caused by these circumstances could have a
material adverse effect on our business, profitability and growth prospects.

ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of October 31, 2003, we did not use derivative financial instruments for
speculative or trading purposes.

INTEREST RATE RISK

Our general investing policy is to limit the risk of principal loss and to
ensure the safety of invested funds by limiting market and credit risk. We
currently use a registered investment manager to place our investments in highly
liquid money market accounts and government-backed securities. All highly liquid
investments with original maturities of three months or less are considered to
be cash equivalents. Interest income is sensitive to changes in the general
level of U.S. interest rates. Based on the short-term nature of our investments,
we have concluded that there is no significant market risk exposure.

FOREIGN CURRENCY RISK

Due to our multinational operations, our business is subject to fluctuations
based upon changes in the exchange rates between the currencies in which we
collect revenues or pay expenses and the U.S. dollar. Our expenses are not
necessarily incurred in the currency in which revenue is generated, and, as a
result, we are required from time to time to convert currencies to meet our
obligations. These currency conversions are subject to exchange rate
fluctuations, in particular changes to the value of the euro, Canadian dollar
and pound sterling relative to the U.S. dollar, which could adversely affect our
business and the results of operations.

ITEM 4. - CONTROLS AND PROCEDURES

Following the merger of SmartForce PLC and SkillSoft Corporation on September 6,
2002, we integrated the business processes, human resources, disclosure controls
and procedures, and internal controls of the two companies. During this process,
significant deficiencies in disclosure controls and procedures and internal
controls were identified predominantly with respect to financial reporting at
non-U.S. subsidiaries of the former SmartForce PLC and our ability to process
the consolidated financial closing cycle. These deficiencies resulted in a
significant strain to the internal resources and on the infrastructure of the
finance organization and adversely impacted both the year-end and quarter-end
financial closing process. External resources were engaged to assist

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<PAGE>

management in both the year-end and quarter-end financial closing process and in
identifying areas for improvement. In addition, permanent resources and
accounting process improvements have been and will continue to be added and
implemented to improve the non-U.S. finance operations, the financial closing
process, and the overall internal control environment.

Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, and with the assistance
of outside consultants, we evaluated the effectiveness of our disclosure
controls and procedures as of October 31, 2003. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures needed significant improvements with respect
to certain aspects of our financial reporting at predominantly the non-U.S.
subsidiaries of the former SmartForce PLC and in our ability to process the
consolidated financial closing cycle. Our independent auditors have informed us
that they believe we have material weaknesses and reportable conditions in
internal controls in certain of these areas. We have implemented interim
mitigating control procedures as part of the process of preparing our financial
statements for the quarter ended October 31, 2003 and the year ended January 31,
2003. Although the Company continues to make progress in these areas, the
Company continues to utilize outside resources to support its accounting and
finance department. The Company believes that further improvements in its
processes will be required.

Except as noted above, no change in our internal control over financial
reporting occurred during the fiscal quarter ended October 31, 2003 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

                                       33

<PAGE>

                                     PART II

ITEM 1. - LEGAL PROCEEDINGS

SEC INVESTIGATION

On or about February 4, 2003, the Securities Exchange Commission (SEC) informed
us that we are the subject of a formal order of private investigation relating
to our November 19, 2002 announcement that we would restate the financial
statements of SmartForce PLC for the period 1999 through June 2002. We
understand that the SEC's investigation concerns SmartForce's financial
disclosure and accounting during that period, other related matters, compliance
with rules governing reports required to be filed with the SEC, and the conduct
of those responsible for such matters. We continue to cooperate with the SEC in
this matter.

CLASS ACTION LAWSUITS

Following the November 19, 2002 announcement of our intent to restate the
SmartForce financial statements for 1999, 2000, 2001, and the first two quarters
of 2002, several class action lawsuits were filed against us and certain of our
current and former officers and directors in the United States District Court
for the District of New Hampshire. These lawsuits alleged, that we
misrepresented or omitted to state material facts in our SEC filings and press
releases regarding our revenues and earnings and failed to correct such false
and misleading SEC filings and press releases, which are alleged to have
artificially inflated the price of our ADSs. These lawsuits have all been
assigned to Chief Judge Paul J. Barbadoro. On March 26, 2003, Judge Barbadoro
consolidated the lawsuits under the caption "In re SmartForce Securities
Litigation," Civil Action No. 02-544-B, appointed as lead plaintiffs the
Teacher's Retirement System of Louisiana and the Louisiana Sheriff's Pension &
Relief Fund, and approved the lead plaintiffs' choice of lead counsel and local
counsel. On October 31, 2003, lead plaintiffs filed two amended complaints in
this consolidated action, one on behalf of a purported class of purchasers of
our ADSs between April 27, 1999 through November 18, 2002, naming as defendants
SkillSoft PLC, Gregory M. Priest, Patrick E. Murphy, David C. Drummond and Jack
Hayes; and another on behalf of a purported class of SkillSoft Corporation
shareholders who acquired our ADSs in connection with the merger, naming as
defendants SkillSoft PLC, Gregory M. Priest, Patrick E. Murphy, Ronald C.
Conway, John M. Grillos, James S. Krzywicki, Patrick J. McDonough, Dr. Ferdinand
von Prondzynski, Stewart K.P. Gross, William T. Coleman, P. Howard Edelstein and
Charles E. Moran, as well as some additional entities. The complaints allege
that we misrepresented or omitted to state material facts, which are alleged to
have artificially inflated the price of our ADSs. The consolidated lawsuit seeks
unspecified monetary damages together with interest, costs, fees and expenses.
We believe that we have meritorious defenses to this action and intend to defend
ourselves vigorously.

At the end of our fiscal third quarter of 1998, several purported class action
lawsuits were filed in the United States District Court for the Northern
District of California against us, one of our subsidiaries and certain of our
former and current officers and directors alleging violations of the federal
securities laws. It has been alleged in these lawsuits that we misrepresented or
omitted to state material facts regarding our business and financial condition
and prospects in order to artificially inflate and maintain the price of our
ADSs, and misrepresented or omitted to state material facts in our registration
statement and prospectus issued in connection with our merger with ForeFront. In
December 2003, we reached a settlement of this litigation. Under the terms of
the settlement, we will make a $10 million cash payment within 30 days and an
additional $6 million payment in mid-2004. Our insurance carriers will pay an
additional $16 million for total settlement payments of $32 million. The
settlement is subject to court approval and there is no assurance that the court
will approve the settlement.

NETG LITIGATION

Our subsidiary, SkillSoft Corporation, several of its executive officers and key
employees, and a former major investor of SkillSoft Corporation are named as
defendants in a lawsuit pending in the Circuit Court of Cook County, Illinois
filed by National Education Training Group, Inc. (NETg), the former employer of
several of those individuals (the NETg State Court Litigation). The claims seek
injunctive relief against SkillSoft Corporation and Messrs. Moran, Nine,
Townsend, Brown and Ritze and Ms. Hovis and demand the return, and no future use
by SkillSoft Corporation and these defendants, of the alleged trade secrets. The
claims also seek compensatory damages of $400 million, exemplary damages in the
additional amount of $400 million, additional compensatory, incidental and
consequential damages in an unspecified amount and punitive damages of $50
million or such other amount as the court deems just or appropriate. In
addition, on October 26, 2000, NETg filed suit against SkillSoft Corporation in
the United States District Court for the Northern District of Illinois alleging
that SkillSoft Corporation's educational and training software products infringe
United States Patent No. 6,039,575, which was issued on March 21, 2000 and is
allegedly owned by NETg. The complaint seeks both monetary damages and
injunctive relief (the NETg Patent Litigation). The details of the NETg State
Court Litigation and the NETg Patent Litigation are set forth more fully in our
Quarterly Report on Form 10-Q for the period ended April 30, 2003.

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<PAGE>

On July 21, 2003, the parties entered into a settlement agreement, which will
result in a final dismissal and termination of the NETg State Court Litigation
and the NETg Patent Litigation. Under the terms of the settlement agreement, we
have agreed to pay NETg an aggregate of $44 million in two payments of $22
million each. We made the first payment on July 25, 2003. The second payment is
due on July 21, 2004. We also agreed not to make certain specific modifications
to our information technology training courseware for a limited period of time.
In exchange, SkillSoft Corporation and the other defendants received complete
but conditional releases from any liability relating to the subject matter of
the NETg State Court Litigation or the NETg Patent Litigation, or with certain
exceptions, based on or arising from the alleged use of any alleged NETg
intellectual property. We also received a perpetual, non-transferable,
non-exclusive license to develop, use, sell, offer for sale, lease or offer to
lease products or services containing or embodying certain NETg technology or
inventions disclosed or described in certain NETg patent applications. The
Settlement Agreement provides that "it is specifically understood that two
million dollars of the payments provided for under the Settlement Agreement,
shall be in respect of" such license. Under the terms of the settlement
agreement, if NETg was not compelled to return the first $22 million payment on
or before October 28, 2003, then the releases would become unconditional, the
NETg State Court Litigation would be dismissed with prejudice and the NETg
Patent Litigation would not be pursued further. On October 29, 2003, the state
court entered the parties' stipulation of dismissal, and the action was
dismissed with prejudice. The above-referenced releases likewise became
unconditional.

IP LEARN

On April 23, 2002, IP Learn, LLC (IP Learn) filed a complaint in the United
States District Court for the Northern District of California against us. The
complaint alleges that we infringed on five United States patents assigned to IP
Learn. The complaint was subsequently amended to add an additional patent. The
IP Learn patents in question are U.S. Patent Nos. 6,126,448; 6,118,973;
5,934,909; 5,779,486; 5,743,746; and 6,398,556. We believe that these patents
are related primarily to computer-aided learning methods and systems. In the
complaint, IP Learn asked the court for a preliminary and permanent injunction
as well as unspecified damages. On June 27, 2002, we filed our answer to IP
Learn's amended complaint, denying infringement and asserting counterclaims
seeking declaratory relief that the patents-in-suit are invalid and that we have
not infringed the patents-in-suit.

On October 1, 2002, IP Learn served our subsidiary SkillSoft Corporation with an
amended complaint alleging that SkillSoft Corporation infringed U.S. Patent Nos.
6,126,448; 6,118,973; 5,934,909; 5,779,486; and 6,398,556. The complaint seeks
both monetary damages and injunctive relief. In response to the amended
complaint, SkillSoft Corporation filed a motion to dismiss or, in the
alternative, for a more definite statement. The United States District Court for
the Northern District of California granted SkillSoft Corporation's motion to
dismiss on October 15, 2002, and on October 25, 2002, IP Learn filed its Second
Amended Complaint alleging again that SkillSoft Corporation is infringing the
five IP United States patents assigned to IP Learn listed above. The Second
Amended Complaint seeks both monetary damages in an unspecified amount and
injunctive relief. On November 8, 2002, SkillSoft Corporation filed its Answer
to the Second Amended Complaint, in which it denied liability and asserted
counterclaims seeking declaratory relief that the specified patents are invalid
and that SkillSoft Corporation has not infringed the specified patents.

In June 2003, we reached an agreement with IP Learn regarding the settlement of
the pending litigation pursuant to which we obtained a license to use certain of
IP Learn's patents. Under the terms of the settlement agreement, we made a cash
payment and issued ordinary shares (which are represented by ADSs). On or about
November 18, 2003, pursuant to the settlement agreement and a stipulation filed
by the parties, the court entered an order dismissing the lawsuits with
prejudice.

LIONET

On June 13, 2002, Lionet Limited, a limited liability company incorporated and
doing business in Ireland, filed a claim against us in Ireland, alleging, among
other things, that we breached the terms of our software license agreement with
Lionet Limited in that we permitted or failed to prevent the decompilation of
the provided software products and that we have failed to cooperate in audits to
determine the nature of such alleged copying or de-compilation. Lionet Limited
sought damages for lost license fees of $6.8 million and other damages. On
October 23, 2003, we entered into a settlement agreement with Lionet Limited.

We are not a party to any other material legal proceedings.

ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS

In connection with the settlement agreement we entered into with IP Learn
regarding the litigation described in Part II - Item 1. Legal Proceedings, we
made a cash payment to IP Learn and on October 3, 2003, we issued an aggregate
of 100,000 ordinary shares (which

                                       35

<PAGE>
are represented by ADSs) to IP Learn and its designees. This issuance of
ordinary shares was made in reliance on section 4(2) of the Securities Act of
1933, as amended.

ITEM 3. - DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We held our 2003 annual general meeting of shareholders on October 31, 2003.
Under the terms of the deposit agreement, The Bank of New York is entitled to
vote or cause to be voted on behalf of, and in accordance with the instructions
received from, the ADS holders. Two individual shareholders, the proxy for the
ordinary shareholders and a representative of AIB, the custodian for the
ordinary shares representing the ADS's, were present for the vote. Voting was
conducted on a show of hands in accordance with Irish law. There were no
abstentions, broker non-votes or votes withheld with respect to any matter
submitted to a vote of the ordinary shareholders at the annual general meeting.
The following is a brief description of each matter submitted to a vote of the
ordinary shareholders and a summary of the votes tabulated with respect to each
such matter at the annual general meeting, as well as a summary of the votes
cast by the Bank of New York based on the ADR facility:

         (1) Re-election as a director of Gregory M. Priest, who retired by
rotation and being eligible offered himself for re-election in accordance with
our Articles of Association.

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders           4            0           0
ADS Holders                90,115,810    9,423,409     74,484

         (2) Election as directors, each of whom were appointed during the year:
    (a) Charles E. Moran

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders          4             0           0
ADS Holders                99,261,401     277,523     74,779

    (b) William T. Coleman III

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders          4             0           0
ADS Holders                99,263,391     274,498     75,814

    (c) Stewart K.P. Gross

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders          4             0           0
ADS Holders                99,255,520     281,249      76,934

    (d) P. Howard Edelstein

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders          4             0           0
ADS Holders                99,253,140     282,741      77,822

         (3) Authorization of the Audit Committee of the Board of Directors to
fix the remuneration of our auditors for the fiscal year ending January 31,
2004.

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders          4             0           0
ADS Holders                99,013,491     458,482     141,730

         (4) Amendment of our 1995 Employee Share Purchase Plan (the "ESPP") to
increase the number of Ordinary Shares available for sale under the ESPP from
3,000,000 to 3,800,000.

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<PAGE>

                           Votes "FOR"   "AGAINST"   "ABSTAIN"
Ordinary Shareholders          4             0           0
ADS Holders                99,055,524     408,154     150,025

ITEM 5. - OTHER INFORMATION

Not applicable.

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

(a)      Exhibits.

See the Exhibit Index attached hereto.

(b)      Reports.

On September 22, 2003, we filed Amendment No. 1 to a Current Report on Form 8-K
under Item 7 containing financial statements and pro forma financial information
in connection with our merger with SkillSoft Corporation on September 6, 2002.
On December 4, 2003, we furnished a Current Report on Form 8-K under Item 12
containing a copy of our earnings release for the fiscal quarter ended October
31, 2003.

We previously disclosed the following Current Report on Form 8-K in our
Quarterly Report on Form 10-Q for the quarter ended July 31, 2003:

On September 11, 2003, we furnished a Current Report on Form 8-K under Item 9
containing a copy of our earnings release for the fiscal quarter ended October
31, 2003 pursuant to Item 12 (Results of Operations and Financial Condition).

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<PAGE>
                                    SIGNATURE

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

                                           SKILLSOFT PUBLIC LIMITED COMPANY

         Date: December 15, 2003

                                           By: /s/ Thomas J. McDonald
                                               ----------------------
                                                 Thomas J. McDonald
                                               Chief Financial Officer

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<PAGE>

EXHIBIT INDEX

10.1     Stipulation of Settlement, dated November 26, 2003.

10.2     Indemnification Agreement, dated November 13, 2003, by and between the
         Company and P. Howard Edelstein.

31.1     Certification of the Company's CEO pursuant to Rule 13a-14 under the
         Securities Exchange Act of 1934.

31.2     Certification of the Company's CFO pursuant to Rule 13a-14 under the
         Securities Exchange Act of 1934.

32.1     Certification of the Company's CEO pursuant to 18 U.S.C. section 1350,
         as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2     Certification of the Company's CFO pursuant to 18 U.S.C. section 1350,
         as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

                                       39