<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20548


                                   FORM 10-Q

    [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1998


    [_]  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: 0-25674


                        CBT GROUP PUBLIC LIMITED COMPANY
             (Exact name of registrant as specified in its charter)



          Republic of Ireland                            Not Applicable
   ----------------------------------------------------------------------
   (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                     Identification No.) 



                              1005 HAMILTON COURT
                          MENLO PARK, CALIFORNIA 94025
          (Address of principal executive offices, including zip code)


                                 (650) 614-5900
              (Registrant's telephone number, including area code)


Indicate by check mark whether 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 Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past ninety (90) days.

                                Yes [X]  No [_]

The number of American Depositary Shares (issued or issuable in exchange for
Registrant's issued and outstanding Ordinary Shares) outstanding as of July 29,
1998 was 43,881,451.

                                       1
<PAGE>
 
                        CBT GROUP PUBLIC LIMITED COMPANY

                               TABLE OF CONTENTS

                                                                        Page
                                                                       Number
                                                                       ------
PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements

                 Condensed Consolidated Balance Sheets as of
                 December 31, 1997 and as of June 30, 1998                  3

                 Condensed Consolidated Statements of
                 Operations for the three and six month
                 periods ended June 30, 1997 and 1998                       4

                 Condensed Consolidated Statements of Cash
                 Flows for the six month periods ended June
                 30, 1997 and 1998                                          5

                 Notes to Condensed Consolidated Financial
                 Statements                                                 6


         Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of
                 Operations                                                 7


PART II. OTHER INFORMATION

         Item 1. Legal Proceedings                                         19

         Item 2. Changes in Securities                                     19

         Item 4. Submission of Matters to a Vote of the
                 Security Holders                                          19

         Item 6. Exhibits and Reports on Form 8-K                          21

                                       2
<PAGE>

PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS

 
                                 CBT GROUP PLC
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                            (dollars in thousands)
<TABLE>
<CAPTION> 
                                                                 DECEMBER 31,             JUNE 30,
                                                                     1997                   1998
                                                                   --------               --------
                                                                                         (Unaudited)
<S>                                                              <C>                     <C>   
                            ASSETS                                                       
Current assets
--------------
Cash                                                               $ 35,506               $ 45,577
Short term investments                                               36,038                 36,091
Accounts receivable, net                                             40,030                 44,009
Inventories                                                             615                  1,021
Deferred tax assets, net                                                140                    142
Prepaid expenses                                                      4,198                  8,458
                                                                   --------               --------
             Total Current assets                                   116,527                135,298
Intangible assets                                                     5,600                  4,878
Property and equipment, net                                          10,207                 14,345
Investment                                                              200                    350
Deferred tax assets, net                                                342                     47
Other assets                                                          8,453                 12,023
                                                                   --------               --------
             Total  assets                                          141,329                166,941
                                                                   ========               ========
               LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
-------------------
Borrowings under bank overdraft facility and overdrafts                  13                     13
Accounts Payable                                                      4,820                  6,296
Accrued payroll and related expenses                                  6,411                  3,785
Other accrued liabilities                                            16,715                 17,491
Deferred revenues                                                     4,551                  1,075
                                                                   --------               --------
             Total Current Liabilities                               32,510                 28,660
Non Current Liabilities
-----------------------
Other accrued liabilities                                               519                    474
Minority equity interest                                                622                    622
                                                                   --------               --------
             Total Non Current Liabilities                            1,141                  1,096
Shareholders' Equity
--------------------
Ordinary Shares: 30,000,000 shares authorized , IR37.5p par           6,372                  6,571
 value, at December 31, 1997 and 120,0000 shares
 authorized, par value IR9.375p at June 30, 1998;
Issued and outstanding:10,511,190 shares at December 31,
 1997 and 43,249,900 shares at June 30, 1998
Additional paid-in-capital                                           97,868                115,745
Accumulated surplus                                                   2,984                 14,425
Deferred Compensation                                                  (112)                     -
Treasury Stock                                                           (2)                    (2)
Cumulative translation adjustment                                       568                    446
                                                                   --------               --------
             Total Shareholders' equity                             107,678                137,185
                                                                   --------               --------
Total Liabilities and shareholders' equity                          141,329                166,941
                                                                   ========               ========
</TABLE>
Note:  The condensed consolidated balance sheet at December 31, 1997 has been
derived from the audited financial statements at that date and has been restated
to reflect the acquisition of The ForeFront Group, Inc (see note 2 below). In
addition, the balance sheet does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.

                                       3
<PAGE>
 
                                 CBT GROUP PLC
                                        
                Condensed Consolidated Statements of Operations
                (dollars in thousands, except per share amounts)
                                        
<TABLE>
<CAPTION>
                                                         Three Months                        Six Months
                                               --------------------------------  ----------------------------------
                                                        Ended June 30,                     Ended June 30,
                                               --------------------------------  ----------------------------------
                                                    1997             1998              1997              1998
                                               ---------------  ---------------  ----------------  ----------------
                                                 (Unaudited)     (Unaudited)        (Unaudited)      (Unaudited)
<S>                                            <C>              <C>              <C>               <C>
Revenues                                              $29,755          $44,852           $56,482           $84,781
Cost of revenues                                        5,173            6,697             9,854            12,641
                                                      -------          -------           -------           -------
Gross profit                                           24,582           38,155            46,628            72,140
Operating expenses:
  Research and development                              4,731            6,604             9,162            12,994
  Sales and marketing                                  13,415           18,622            26,243            35,490
  General and administrative                            3,616            3,594             5,964             6,808
  Acquired research and development                       447               --               447                --
  Cost of acquisitions                                     --            5,505               926             5,505
                                                      -------          -------           -------           -------
    Total operating expenses                           22,209           34,325            42,742            60,797
                                                      -------          -------           -------           -------
Income from operations                                  2,373            3,830             3,886            11,343
Other income, net                                         665              936             1,220             1,903
                                                      -------          -------           -------           -------
Income before provision for income taxes                3,038            4,766             5,106            13,246
Provision for income taxes                                817              667             1,336             1,805
                                                      -------          -------           -------           -------
Net income                                              2,221            4,099             3,770            11,441
                                                      =======          =======           =======           =======
Net income per equivalent ADS (1) - Basic               $0.06            $0.09             $0.09             $0.27
                                                      =======          =======           =======           =======
ADSs used in computing net income per                  39,923           43,283            39,690            42,939
 equivalent ADS - Basic                               =======          =======           =======           =======
Net income per equivalent ADS (1) - Diluted             $0.05            $0.09             $0.09             $0.25
                                                      =======          =======           =======           =======
ADSs used in computing net income per equivalent       43,938           46,357            43,757            46,080
                                                      =======          =======           =======           =======
</TABLE>

(1)  Net income per equivalent ADS gives effect to the two-for-one share split
     of Registrants' ADSs effected March 1998. Prior periods have been restated
     to give effect to such split.

                                       4
<PAGE>
 
                                 CBT GROUP PLC

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          INCREASE (DECREASE) IN CASH
                            (dollars in thousands)



                                                Six Months Ended June 30,
                                                   1997         1998
                                                -----------  -----------
                                                (Unaudited)  (Unaudited)
 
CASH FLOW FROM OPERATING ACTIVITIES
Net income                                         $ 3,770      $11,441
Adjustments to reconcile net income to
 net cash provided by operating activities:
   Depreciation and amortization                     1,671        2,958
   Loss on Disposal of Assets                                        70
   Accrued interest on short-term investments         (222)         236
   Compensation Expense                                 51          112
Changes in operating assets and Liabilities:
   Accounts receivable                              (3,928)      (4,114)
   Inventories                                        (150)        (410)
   Deferred Tax Assets                                  --          293
   Non Cash acquired R&D costs                         447           --
   Prepaid expenses and other assets                (3,285)      (7,885)
   Accounts payable                                   (391)       1,541
   Accrued payroll and related expenses
     and other accrued liabilities                   2,338       (1,784)
   Deferred revenues                                (2,251)      (3,455)
                                                   -------      -------
Net cash provided by operating activities           (1,950)        (997)
                                                   -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment                 (2,096)      (6,499)
 Payments to acquire short-term investments           (248)     (50,330)
 Proceeds from short-term investments                   --       50,041
 Proceeds from disposal of property and equipment       --           20
 Payments to acquire Investments                        --         (150)
                                                    ------       ------
 Net cash used in investing activities              (2,344)      (6,918)
                                                    ------       ------
 
CASH FLOWS FROM FINANCING ACTIVITIES
 Repayment of bank loans                              (794)          --
 Repayments under bank overdraft facility             (138)          --
 Proceeds from issuance of preferred shares 
   in subsidiary                                       605           --
 Proceeds from issuance of ordinary shares, 
   net                                               5,106       18,076
                                                     -----       ------
Net cash (used in) provided by financing 
  activities                                         4,779       18,076
                                                     -----       ------
Effect of exchange rate changes on cash                (80)         (90)
                                                     -----       ------
Net (decrease) increase in cash                        405       10,071
 
Cash at beginning of period                         17,560       35,506
                                                   -------      -------
Cash at end of period                              $17,965      $45,577
                                                   =======      =======
 

                                       5
<PAGE>
 
                                 CBT GROUP PLC

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1  INTERIM CONSOLIDATED FINANCIAL STATEMENTS

  These interim consolidated financial statements have been prepared in
  accordance with generally accepted accounting principles for interim financial
  information and with the instructions to Form 10-Q.  Accordingly, they do not
  include all the information and footnotes required by generally accepted
  accounting principles for complete financial statements.  In the opinion of
  management, all adjustments (consisting of normal recurring accruals),
  considered necessary for a fair presentation of financial position, results of
  operations and cash flows at the dates and for the periods presented have been
  included. The interim financial information herein is not necessarily
  indicative of results for any future period.


NOTE 2  ACQUISITION OF THE FOREFRONT GROUP, INC

 On May 29, 1998, CBT Group PLC ("CBT," or the "Company") completed the
 acquisition of The ForeFront Group, Inc ("ForeFront"). The Company issued
 approximately 2.2 million ADSs in connection with the acquisition and assumed
 options, warrants and other rights to acquire ForeFront common stock that can
 be exercised for approximately 1.0 million ADSs. The transaction is being
 accounted for as a "pooling of interests" in accordance with U.S. generally
 accepted accounting principles.


NOTE 3  SHARE SPLIT

 On March 9, 1998 the Company effected a two-for-one split of its issued and
 outstanding ADSs.  Subsequent thereto, the Company's shareholders approved a
 proposal at the Company's 1998 Annual General Meeting to subdivide each of the
 Ordinary Shares of IR37.5p into four Ordinary Shares of IR9.375p (the "Ordinary
 Share Split"). As a consequence of the Ordinary Share Split, effective May 22,
 1998 each ADS represents and is exchangeable for one Ordinary Share (the "Ratio
 Change"). Aside from the Ratio Change, the Ordinary Share Split had no effect
 on the ADSs and had no effect on the number of ADSs outstanding.


NOTE 4  CHANGES IN ACCOUNTING PRINCIPLES

 Effective January 1, 1998, the Company adopted Statement of Financial
 Accounting Standards No. 130, "Reporting Comprehensive Income."  This Statement
 requires all items recognized under accounting standards as components of
 comprehensive earnings be reported in an annual financial statement that is
 displayed with the same prominence as other financial statements.  This
 Statement also requires that an entity classify items of other comprehensive
 earnings by their nature in an annual financial statement.  For example, other
 comprehensive income may include foreign currency translation adjustments,
 minimum pension liability adjustments, and other unrealized gains and losses on
 marketable securities classified as available-for-sale.  Annual financial
 statements for prior periods will be reclassified, as required.

                                       6
<PAGE>
 
 The Company's total comprehensive earnings were as follows:

                                                        Six months ended
                                                            June 30,
                                                     1997              1998
                                                  -----------       -----------
(dollars in thousands)                            (Unaudited)       (Unaudited)
                             
Net Income                                          $3,770            $11,441
Other Comprehensive Income                            (123)              (122)
                                                    ------            -------
                             
Total Comprehensive Income                           3,647             11,319
                                                    ======            =======




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


IMPORTANT NOTE ABOUT FORWARD LOOKING STATEMENTS

The following discussion contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  Predictions of future events are
inherently uncertain.  Actual events could differ materially from those
predicted in the forward looking statements as a result of the risks set forth
in the following discussion, and in particular, the risks discussed below under
the caption "Additional Risk Factors that Could Affect Operating Results."


OVERVIEW

CBT Group PLC ("CBT Group" or the "Company") is a leading provider of
interactive education software designed to meet the information technology
("IT") education and training needs of businesses and organizations worldwide.
The Company develops, publishes and markets a comprehensive library of 694
software titles covering a range of client/server, mainframe, Internet and
intranet technologies. CBT Group's products are used by 1,731 of the world's
leading corporations to train employees to develop and apply mission-critical
technologies in the workplace. CBT Group works with leading software companies,
including Cisco Systems, Inc. ("Cisco"), Informix Corporation ("Informix"),
Lotus Development Corporation ("Lotus"), Marimba, Inc. ("Marimba"), Microsoft
Corporation ("Microsoft"), Netscape Communications Corporation ("Netscape"),
Novell, Inc. ("Novell"), Oracle Corporation ("Oracle"), SAP America, Inc.
("SAP"), TIBCO Software Inc. ("TIBCO"), Intel Corp ("Intel), Centra Software
("Centra"), Rational Software ("Rational"), Sybase, Inc. ("Sybase") and the IBM-
Netscape-Sun Microsystems, collaborative Java education effort to develop and
market vendor-specific training. CBT Group has also formed the Internet Security
Training Consortium with Check Point Software Technologies, Inc. ("Check
Point"), Cisco, IBM, Intel Corporation, the Javasoft business unit of Sun
Microsystems, Inc., Lotus, Netscape, Network Associates, Inc. (formerly McAfee
Associates, Inc.) ("Network Associates"), RSA Data Security, Inc. ("RSA Data
Security"), Security Dynamics Technologies, Inc. ("Security Dynamics"), and
VeriSign, Inc. ("VeriSign") to address the Internet security training needs of
enterprises worldwide.

                                       7
<PAGE>
 
The Company derives revenues primarily from license agreements under which
customers license the Company's titles for periods of one, two or three years.
The license agreement format generally allows the customer to exchange titles
for other titles in the Company's library on an annual basis if the agreement is
for more than one year. The initial annual license fee is generally recognized
as revenue at the time of delivery of products, and subsequent annual license
fees are generally recognized on the anniversary of each delivery date. Although
the Company's license agreements are noncancellable by their terms, there can be
no assurance that any customer will fulfill the contractual obligations under
its agreement. Cancellation, reduction or delay in orders by or shipments to any
of these customers could have a material adverse effect on the Company's
business and results of operations. In addition, the Company derives revenues
from sales of its courses, primarily through its direct sales and telesales
organizations and resellers.

In recent years, the Company has entered into several development and marketing
alliances with key vendors of client/server software under which the Company
develops titles for training on specific products. Under certain of its
development and marketing alliances, the Company's partners have agreed to fund
certain product development costs. The Company recognizes such funding as
revenues on a percentage of completion basis, and the costs associated with such
revenues are reflected as cost of revenues. These agreements have the effect of
shifting expenses associated with developing certain new products from research
and development to cost of revenues. The Company expects that cost of revenues
may fluctuate from period to period in the future based upon many factors,
including, but not limited to, the timing of expenses associated with
development and marketing alliances


RECENT DEVELOPMENTS

Acquisition of The ForeFront Group, Inc.
----------------------------------------

On May 29, 1998, the Company acquired The ForeFront Group, Inc., a Houston-based
provider of high-quality, cost-effective, computer-based training products and
network utilities for technical professionals. In the merger, each share of
ForeFront common stock was exchanged for 0.3137 ADSs, and the Company assumed
outstanding ForeFront stock options, warrants and other rights to acquire
ForeFront common stock. The Company issued approximately 2.2 million ADSs in
connection with the acquisition and assumed options, warrants and other rights
to acquire ForeFront common stock that can be exercised for approximately 1.0
million ADSs. The transaction is being accounted for as a "pooling of interests"
in accordance with U.S. generally accepted accounting principles.


Uncertainty Relating to Integration.


The successful combination of CBT Group and ForeFront, including the successful
operation of ForeFront as an autonomous subsidiary of CBT Group, will require
substantial effort from each company. The diversion of the attention of
management and any difficulties encountered in the transition process could have
an adverse impact on CBT Group's ability to realize the full benefits of the
merger. The successful combination of the two companies will also require
coordination of their sales and marketing efforts. In addition, the process of
combining the two organizations could cause the interruption of, or a loss of
momentum in, ForeFront's activities.

Certain key executives of ForeFront will not continue with the combined company
after the transition period following the merger. David Sikora, President and
Chief Executive Officer of ForeFront, and Michael Kaplan, President of ForeFront
Direct, Inc., terminated their employment at the date of merger, May 29, 1998,
and Mr. Kaplan has agreed to continue as a consultant with CBT Group for four
months thereafter. There can be no assurance that the loss of these two
executives will not disrupt the integration of the two companies or prevent CBT
Group form realizing any of the anticipated benefits of the Merger.

                                       8
<PAGE>
 
In addition, options previously granted to other key executives of ForeFront
accelerated at the date of the Merger. There can be no assurance that CBT Group
will be able to retain these other key executives of ForeFront's key management,
technical, sales and customer support personnel, or that it will realize any of
the anticipated benefits of the Merger.


Effect of Merger on Customers and Partners


Certain of ForeFront's existing customers or strategic partners may view
themselves as competitors of CBT Group, and therefore determine that the Merger
is competitively disadvantageous to them. As a consequence, ForeFront's
relationship with these customers or strategic partners could be adversely
affected. In addition, CBT Group's relationships with certain of its customers
that compete with ForeFront may be adversely affected by the Merger, which could
adversely affect the ability of CBT Group to continue relationships with such
customers after the Merger.


Share Split
-----------

On March 9, 1998 the Company effected a two-for-one split of its issued and
outstanding ADSs. Subsequent thereto, the Company's shareholders approved a
proposal at the Company's 1998 Annual General Meeting to subdivide each of the
Ordinary Shares of IR37.5p into four Ordinary Shares of IR9.375p (the "Ordinary
Share Split"). As a consequence of the Ordinary Share Split, effective May 22,
1998 each ADS represents and is exchangeable for one Ordinary Share (the "Ratio
Change"). Aside from the Ratio Change, the Ordinary Share Split had no effect on
the ADSs and had no effect on the number of ADSs outstanding.

                                       9
<PAGE>
 
RESULTS OF OPERATIONS

The following table sets forth certain restated consolidated statements of
operations data as a percentage of revenues:


                                    Three Months Ended     Six Months Ended
                                          June 30,              June 30,

                                      1997       1998       1997       1998
                                      ----       ----       ----       ---- 
Revenues                               100%       100%       100%       100%
Cost of revenues                      17.4       14.9       17.4       14.9
                                      ----       ----       ----       ----
Gross profit                          82.6       85.1       82.6       85.1
Operating expenses:
 Research and development             15.9       14.7       16.2       15.3
 Sales and marketing                  45.1       41.5       46.5       41.9
 General and administrative           12.1        8.0       10.6        8.0
 Acquired research and development     1.5         --        0.8         --
 Costs of acquisitions                  --       12.3        1.6        6.5
                                      ----       ----       ----       ----

   Total operating expenses           74.6       76.5       75.7       71.7
                                      ----       ----       ----       ---- 

Income from operations                 8.0        8.6        6.9       13.4
Other income, net                      2.2        2.1        2.2        2.2
                                      ----       ----       ----       ---- 
Income before provision for 
  income taxes                        10.2       10.7        9.1       15.6

Provision for income taxes             2.7        1.5        2.4        2.1
                                      ----       ----       ----       ---- 

Net income                             7.5        9.2        6.7       13.5
                                      ====       ====       ====       ==== 


Revenues
--------

Revenues increased 51% to $44.9 million in the three months ended June 30, 1998
from $29.8 million in the three months ended June 30, 1997, and increased 50% to
$84.8 million in the six months ended June 30, 1998 from $56.5 million in the
six months ended June 30, 1997. The increases in revenues during these periods
were primarily attributable to the continuing increase in the number of
available courses, strong customer contract renewals and upgrades and expanded
marketing and distribution efforts.

Revenues in the United States for the three and six month periods ended June 30,
1998 increased to $32.9 million (or 73.3% of revenues) and $61.1 million (or
72.1% of revenues), respectively, from $21.9 million (or 73.5% of revenues) and
$41.8 million (or 74% of revenues) for the three and six month periods ended
June 30, 1997, respectively. These increases were primarily the result of an
increase in new  corporate customers, on-line training from Scholars.com and
telesales which reached in excess of 15% of sales for the first time (boosted by
the acquisition of ForeFront) and renewals and upgrades to existing customers.
The number of available courses continued to expand during the quarter.   During
the second quarter the Company signed five contracts with a contract value in
excess of $1 million.

                                       10
<PAGE>
 
Revenues in Europe for the three and six month periods ended June 30, 1998
increased to $7.9 million (or 17.6% of revenues) and $14.2 million (or 16.7% of
revenues), respectively, from $4.8 million (or 16.1% of revenues) and $8.7
million (or 15.4% of revenues) for the three and six month periods ended June
30, 1997, respectively. In addition, revenues from outside the United States and
Europe (principally from Australia, Canada and the Middle East) in the three and
six month period were $4.1 million (or 9.1% of revenues) and $9.5 million (or
11.2% of revenues) respectively compared to $3.1 million (or 10.4% of revenues)
and $6.0 million (or 10.6% of revenues) respectively for the three and six month
periods ended June 30, 1997. Because a significant portion of the Company's
business is conducted outside the United States, the Company is subject to
numerous risks of doing business in other countries, including risks related to
currency fluctuations.


Cost of Revenues
----------------

Cost of revenues includes the cost of materials (such as CD-ROMs, diskettes,
packaging and documentation), royalties to third parties, the portion of
development costs associated with funded development projects and fulfillment
costs.


Gross margins increased to 85.1% in the three and six month periods ended June
30, 1998, from 82.6% in the three and six month periods ended June 30, 1997. The
higher gross margins during the three and six month periods ended June 30, 1998 
were primarily due to the decrease in third party products sold by the Company's
Australian subsidiary which have higher royalty obligations than CBT products. 
The increased gross margin can also be attributed to ForeFront sales which have 
lower royalty obligations than those of CBT. The Company expects that cost of
revenues may fluctuate from period to period in the future based upon many
factors, including the mix of titles licensed (between titles developed
exclusively by CBT and royalty-bearing titles developed pursuant to development
and marketing alliances) and the timing of expenses associated with development
and marketing alliances.


Research and Development Expenses
---------------------------------

Research and development expenses consist primarily of salaries and benefits,
occupancy expenses, travel expenses and fees paid to outside consultants.
Research and development expenses increased in absolute terms but declined as a
percentage of revenues  in the three and six month periods ended June 30, 1998
to $6.6 million (or 14.7% of revenues) and $13 million (or 15.3% of revenues),
respectively, from $4.7 million (or 15.9% of revenues) and $9.2 million (or
16.2% of revenues) in the comparable periods of the prior year. These increases
in absolute terms are primarily the result of the hiring of additional research
and development personnel required to expand and enhance the Company's library
of software products. The Company delivered 69 new interactive education
software titles in the second quarter of 1998 bringing the total for the six
months ended June 30, 1998 to 136 titles. The company's library currently
comprises 694 titles, representing a 24 percent increase over the number of
titles at the end of 1997.   The decreases in research and development expenses
as a percentage of revenues during these periods were due primarily to more
rapid increases in revenues than in associated expenses and the company's
ability to spread its fixed costs over a larger revenue base.  The Company
believes that significant investment in research and development is required to
remain competitive in the information technology education and training market,
and the Company therefore expects research and development expenses to continue
to increase in absolute terms in future periods.

                                       11
<PAGE>
 
Software development costs are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, under which the Company is
required to capitalize software development costs after technological
feasibility has been established.  To date, development costs after
establishment of technological feasibility have been immaterial, and all
software development costs have been expensed.


Sales and Marketing Expenses
----------------------------

Sales and marketing expenses consist primarily of salaries and commissions,
advertising and promotional expenses and related overhead costs.  These expenses
increased in absolute terms but have declined as a percentage of revenues in the
three and six month periods ended June 30, 1998 to $18.6 million (or 41.5% of
revenues) and $35.5 million (or 41.9% of revenues), respectively, from $13.4
million (or 45.1% of revenues) and $26.2 million (or 46.5% of revenues) for the
comparable periods of the prior year. The increases in absolute terms were
primarily attributable to an increase in the number of sales and sales related
personnel in the United States and, to a lesser extent, outside the United
States. Commission costs have also increased in absolute terms along with the
increase in revenues during this period. The decreases in sales and marketing 
expenses as a percentage of revenues during these periods were due primarily to
more rapid increases in revenues than in associated expenses and the company's
ability to spread its fixed costs over a larger revenue base. The Company
expects to continue to increase sales and marketing expenses in the future to
support an increase in its sales force and expansion of its marketing efforts.


General and Administrative Expenses
-----------------------------------

General and administrative expenses increased in absolute terms but declined as
a percentage of revenues in the six month period ended June 30, 1998 to $6.8
million (or 8% of revenues), compared to  $6 million (or 10.6% of revenues) for
the six month period ended June 30, 1997. The increases in absolute terms were
the result of increased staffing, primarily in the Management Information
Systems department, to support expanding operations. The decreases as a
percentage of revenues were principally due to more rapid increases in revenues
than in associated expenses and the company's ability to spread its fixed costs
over a larger revenue base. The Company anticipates that general and
administrative expenses will increase in future periods due to increases in
staffing and infrastructure.


Cost of acquisitions
--------------------

The costs of acquisitions for the six months ending June 30, 1998 were $5.5
million (or 6.5% of revenues) for the six months ending June 30, 1998 compared
to $1 million (or 1.6% of revenues) for the six months ended June 30, 1997. The
acquisition costs during the three and six months ended June 30, 1998 are non
recurring costs relating to the acquisition of ForeFront on May 29, 1998.


Other Income, Net
-----------------

Other income, net, comprises interest expense, interest income and foreign
currency exchange gains and losses. The Company recognized other income, net, of
$936,000 and $1.9 million in the three and six month periods ended June 30,
1998, respectively, as compared to other income, net, of $665,000 and $1.2
million for the comparable periods of the prior year. The increases in other
income during such periods were primarily attributable to higher cash balances
and interest on short-term investments.

                                       12
<PAGE>
 
The Company's consolidated financial statements are prepared in dollars,
although several of the Company's subsidiaries have functional currencies other
than the US dollar, and a significant portion of the Company's and its
subsidiaries' revenues, costs and assets are denominated in currencies other
than their respective functional currencies.  Fluctuations in exchange rates may
have a material adverse effect on the Company's results of operations,
particularly its operating margins, and could result in exchange losses.  The
impact of future exchange rate fluctuations on the Company's results of
operations cannot be accurately predicted. To date, the Company has not sought
to hedge the risks associated with fluctuations in the exchange rate, but may
undertake such transactions to hedge specific currency risks in the future.
There can be no assurance that any hedging techniques implemented by the Company
would be successful in eliminating or reducing the effects of currency
fluctuations.


Provision for Income Taxes
--------------------------

CBT Group PLC 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.  Because taxes are incurred at the subsidiary
level, and one subsidiary's tax losses cannot be used to offset the taxable
income of subsidiaries in other tax jurisdictions, the Company's consolidated
effective tax rate may increase to the extent that the Company reports tax
losses in some subsidiaries and taxable income in others.

The Company has significant operations and generates a majority of its taxable
income in the Republic of Ireland, and certain of the Company's Irish operating
subsidiaries are taxed at rates substantially lower than U.S. tax rates.  The
Company's largest Irish subsidiary currently qualifies for a 10% tax rate which,
under current legislation, is in force until 2010, and another Irish subsidiary
is income tax exempt.  If such subsidiaries were no longer to qualify for such
tax rates or if the tax laws were rescinded or changed, the Company's operating
results could be materially adversely affected.  Moreover, because the Company
incurs income tax in several countries, an increase in the profitability of the
Company in one or more of these countries could result in a higher overall tax
rate.  In addition, if tax authorities were to challenge successfully the manner
in which profits are recognized among the Company's subsidiaries, the Company's
taxes could increase and its cash flow and net income could be materially
adversely affected.

The effective tax rates for the three and six month periods ended June 30, 1998
were 14.0% and 13.6%, compared to 26.9% and 26.2% for the comparable periods in
1997. The higher tax rates for the three and six month periods ended June 30,
1997 were primarily the result of the losses incurred by ForeFront during that
period, which were not available for offset against taxable profits of the
Company. The effective tax rate prior to restatement for ForeFront under pooling
of interests was 15.0% for the three and six month periods ending June 30, 1998.


LIQUIDITY AND CAPITAL RESOURCES

Cash and short-term investments at June 30, 1998 increased to $81.7 million from
$71.5 million at December 31, 1997. Working capital increased to $106.6 million
at June 30, 1998 from $84.0 million at December 31, 1997. These increases were
primarily the result of receipts from the issuance of shares upon exercise of
employee share options, which were partially offset by expenditures on property
and equipment to support the Company's expanded operations.

Net cash utilized by operating activities was $1.0 million in the six months
ended June 30, 1998 compared to net cash utilized by operating activities of
$2.0 million for the comparable period of the prior year.

                                       13
<PAGE>
 
Capital expenditures were $6.5 million in the six months ended June 30, 1998
compared to $2.1 million for the comparable period of 1997. The increase was
primarily attributable to expenditures relating to computer equipment and
infrastructure and a new facility in Scottsdale, Arizona. Although the Company
currently has no material capital commitments, the Company expects to spend
significantly more in 1998 than in previous years, primarily as a result of
improvements to its information systems and capital expenditures associated with
new offices in Redwood City, California,  Scottsdale, Arizona and the new
research and development and fulfillment facilities in Dublin, Ireland. The
Company expects to make significant additional investments in these areas during
the remainder of 1998.

The Company believes that its existing cash and short-term investments will be
sufficient to meet its cash requirements for at least the next twelve months.
The Company from time to time considers the acquisition of complementary
businesses, products or technologies, which may require additional financing.


NEW ACCOUNTING STANDARDS

In February 1998, the Financial Accounting Standards Board issued SFAS No.132,
"Employers' Disclosures About Pensions and Other Post-Retirement Benefits."
This Statement revises employers' disclosures about pensions and other post-
retirement benefit plans.  It does not, however, change the measurement of
recognition of those plans.  This Statement standardizes the disclosure
requirements for pensions and other post-retirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures.  Restatement of disclosures for
earlier periods is required.  This Statement is effective for the Company's
financial statements for the fiscal year ended December 31, 1998.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Opinion ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use".  This SOP provides guidance on
accounting for the costs of computer software developed or obtained for internal
use.  This SOP states that entities are required to capitalize certain internal-
use software costs once certain criteria are met.  Currently, the Company
generally expenses the costs of developing or obtaining internal-use software as
incurred.  The Company is currently evaluating SOP 98-1, but does not expect it
to have a material impact on its consolidated financial statements.  This SOP is
effective for financial statements for fiscal years beginning after December 15,
1998.  Earlier application is encouraged in fiscal years for which the annual
financial statements have not been issued.


ADDITIONAL RISK FACTORS THAT COULD AFFECT OPERATING RESULTS

In addition to the other factors identified in this report, the following risk
factors could materially and adversely affect the Company's future operating
results and could cause actual events to differ materially from those predicted
in the Company's forward looking statements relating to its business.


Fluctuations in Operating Results
---------------------------------

The Company has in the past experienced fluctuations in its quarterly operating
results and anticipates that such fluctuations will continue and could intensify
in the future. Fluctuations in operating results may result in volatility in the
price of the Company's ADSs. Although the Company was profitable in each of the
last eighteen quarters, there can be no assurance that such profitability will
continue in the future or that the levels of profitability will not vary
significantly among quarterly periods. The Company's operating results may
fluctuate as a result of many factors, including size and timing of orders and
shipments, mix of sales between products developed solely by the Company and
products developed through development and marketing alliances, royalty rates,
the announcement, introduction and acceptance of new products, product

                                       14
<PAGE>
 
enhancements and technologies by the Company and its competitors, mix of sales
between the Company's field sales force, its other direct sales channels and its
indirect sales channels, competitive conditions in the industry, loss of
significant customers, delays in availability of existing or new products,
spending patterns of the Company's customers, currency fluctuations and general
economic conditions.

The Company's expense levels are based in significant part on its expectations
regarding future revenues and are fixed to a large extent in the short term.
Accordingly, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Any significant revenue
shortfall would therefore have a material adverse effect on the Company's
results of operations. In addition, the Company hired additional employees in
the first six months of 1998. This increase in employee expense could have a
negative impact on the Company's operating margins during 1998.


Competition
-----------

The IT education and training market is highly fragmented and competitive, and
the Company expects this competition to increase.  The Company expects that
because of the lack of significant barriers to entry into this market, new
competitors may enter the market in the future.  In addition, larger companies
are competing with the Company in the IT education and training market, in part
through the acquisition of the Company's competitors, and the Company expects
this trend to continue. Such competitors may also include publishing companies
and vendors of application software, including those vendors with whom the
Company has formed development and marketing alliances.

The Company competes primarily with third-party suppliers of instructor-led IT
education and training and internal training departments and with other
suppliers of IT education and training, including several other companies that
produce interactive software training.  To a lesser extent, the Company also
competes with consultants, value-added resellers and network integrators.
Certain of these value-added resellers also market products competitive with
those of the Company.  The Company expects that as organizations increase their
dependence on outside suppliers of training, the Company will face increasing
competition from these other suppliers as IT education and training managers
more frequently compare training products provided by outside suppliers.

Many of the Company's current and potential competitors have substantially
greater financial, technical, sales, marketing and other resources, as well as
greater name recognition, than the Company. In addition, the IT education and
training market is characterized by significant price competition, and the
Company expects that it will face increasing price pressures from competitors as
IS managers demand more value for their training budgets. Accordingly, there can
be no assurance that the Company will be able to provide products that compare
favorably with new instructor-led techniques or other interactive training
software or that competitive pressures will not require the Company to reduce
its prices significantly.


Developing Market
-----------------

The market for IT education and training is rapidly evolving. New methods of
delivering interactive education software are being developed and offered in the
marketplace, including intranet and Internet deployment and management systems.
Many of these new delivery and training management systems will involve new and
different business models and contracting mechanisms.  In addition, multimedia
and other product functionality features are being added to the educational
software.  Accordingly, CBT's future success will depend upon, among other
factors, the extent to which CBT is able to develop and implement products which
address these emerging market requirements. There can be no assurance that CBT
will be successful in meeting changing market needs.

                                       15
<PAGE>
 
Seasonality
-----------

The software industry generally, and the Company in particular, are subject to
seasonal revenue fluctuations, based in part on customers' annual budgetary
cycles and in part on the annual nature of sales quotas.  These seasonal trends
have in the past caused, and in the future are expected to continue to cause,
revenues in the first quarter of a year to be less, perhaps substantially so,
than revenues for the immediately preceding fourth quarter. In addition, the
Company has in past years added significant headcount in the sales and marketing
and research and development functions in the first quarter, and to a lesser
extent, the second quarter. Because these headcount additions do not immediately
contribute significant revenues, the Company's operating margins in the earlier
part of the year tend to be significantly lower than in the later parts of the
year. It is expected that this factor will affect CBT's operating margins to
some extent, in the third quarter of 1998. There can be no assurance, however,
that operating margins in the fourth quarter will meet the Company's
expectations. Many software companies also experience a seasonal downturn in
demand during the summer months. There can be no assurance that these or other
seasonal trends will not have a material adverse effect on the Company's results
of operations.


Management of Expanding Operations and Acquisitions
---------------------------------------------------

The Company has recently experienced rapid expansion of its operations, which
has placed, and is expected to continue to place, significant demands on the
Company's administrative, operational and financial personnel and systems.  The
Company's future operating results will substantially depend on the ability of
its officers and key employees to manage changing business conditions and to
implement and improve its operational, financial control and reporting systems.
In particular, the Company requires significant improvement in its order entry
and fulfillment and management information systems in order to support its
expanded operations. If the Company is unable to respond to and manage changing
business conditions, its business and results of operations could be materially
adversely affected.

As a result of the consummation of a number of acquisitions the Company's
operating expenses have increased.  There can be no assurance that the
integration of these businesses can be successfully completed in a timely
fashion, or at all, or that the revenues from the acquired businesses will be
sufficient to support the costs associated with those businesses, without
adversely affecting the Company's operating margins.  Any failure to
successfully complete the integration in a timely fashion or to generate
sufficient revenues from the acquired businesses could have a material adverse
effect on the Company's business and results of operations.

The Company regularly evaluates acquisition opportunities and is likely to make
acquisitions in the future. Future acquisitions by the Company could result in
potentially dilutive issuances of equity securities, the incurrence of debt and
contingent liabilities and amortization expenses related to goodwill and other
intangible assets, which could materially adversely affect the Company's results
of operations. Product and technology acquisitions entail numerous risks,
including difficulties in the assimilation of acquired operations, technologies
and products, diversion of management's attention to other business concerns,
risks of entering markets in which the Company has no or limited prior
experience and potential loss of key employees of acquired companies. The
Company's management has had limited experience in assimilating acquired
organizations and products into the Company's operations. No assurance can be
given as to the ability of the Company to integrate successfully any operations,
personnel or products that have been acquired or that might be acquired in the
future, and the failure of the Company to do so could have a material adverse
effect on the Company's results of operations.

                                       16
<PAGE>
 
Dependence on Key Personnel
---------------------------

The Company's future success depends, in large part, on the continued service of
its key management, sales, product development and operational personnel and on
its ability to attract, motivate and retain highly qualified employees,
including management personnel. In particular, the loss of certain senior
management personnel or other key employees could have a material adverse effect
on the Company's business. In addition, the Company depends on writers,
programmers and graphic artists, as well as third-party content providers. The
Company expects to continue to hire additional product development, sales and
marketing, IS and accounting staff. However, there can be no assurance that the
Company will be successful in attracting, retaining or motivating key personnel.
The inability to hire and retain qualified personnel or the loss of the services
of key personnel could have a material adverse effect upon the Company's current
business, new product development efforts and future business prospects.


Risk of Increasing Taxes
------------------------

Certain of the Company's subsidiaries have significant operations and generate
significant taxable income in Ireland, and certain of the Company's Irish
subsidiaries are taxed at rates substantially lower than tax rates in effect in
the United States and in other countries in which the Company has operations.
The extent of the tax benefit could vary from period to period, and there can be
no assurance that the Company's tax situation will not change.


Year 2000 Risk
--------------

The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "Year
2000" issue is pervasive and complex, as virtually every computer operation will
be effected in the same way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.

The Company is assessing both the internal readiness of its computer systems and
the compliance of its software sold to customers for handling the year 2000. The
Company expects to implement successfully the systems and programming changes
necessary to address year 2000 issues, and does not believe that the cost of
such actions will have a material effect on the Company's results of operations
or financial condition. There can be no assurance, however, that there will not
be a delay in, or increased costs associated with, the implementation of such
changes, and the Company's inability to implement such changes could have an
adverse effect on future results of operations. With the exception of CBT
Group's DOS-based courseware and its Wintracs administrative tracking tool, the
Company is satisfied that the software it supplies to its customers is year 2000
compliant and it is not dependent on its customers implementing the systems and
programming changes necessary to handle the year 2000.

The company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for year 2000 compliance. It is
anticipated that all reprogramming, except for CBT Group products which will no
longer be available beginning December 31, 1999, will be complete by June 30,
1999, allowing adequate time for testing. This process includes getting
confirmations from the Company's primary vendors that plans are being developed
or are already in place to address processing transactions in the year 2000.
However, there can be no assurance that the systems of other companies on which
the Company's 

                                       17
<PAGE>
 
systems rely will be timely converted or that any such failure to
convert by another company would not have an adverse effect on the Company's
system.

                                       18
<PAGE>
 
PART II.  OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS
 
          During the period covered by this report, the previously disclosed
          possible litigation involving the transfer of certain securities of
          Datacode Electronics Ltd. was settled. The terms of the settlement did
          not have a material effect on the results of operations or financial
          condition of the Company.


ITEM 2.   CHANGES IN SECURITIES

          On March 9, 1998 the Company effected a two-for-one split of its
          issued and outstanding ADSs. Subsequent thereto, the Company's
          shareholders approved a proposal at the Company's 1998 Annual General
          Meeting to subdivide each of the Ordinary Shares of IR37.5p into four
          Ordinary Shares of IR9.375p (the "Ordinary Share Split"). As a
          consequence of the Ordinary Share Split, effective May 22, 1998 each
          ADS represents and is exchangeable for one Ordinary Share (the "Ratio
          Change"). Aside from the Ratio Change, the Ordinary Share Split had no
          effect on the ADSs and had no effect on the number of ADSs
          outstanding.


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

          The Company held its annual general meeting of shareholders on April
          28, 1998 (the "AGM"). Voting was conducted by a show of hands in
          accordance with Irish law. Four shareholders or their representatives
          were present for the vote. There were no abstentions, broker non-votes
          or votes withheld with respect to any matter. The following is a brief
          description of each matter submitted to a vote of the security holders
          at the AGM and a summary of the votes tabulated with respect to each
          such matter:

          (1)  Re-election as directors of the following persons who retired by
               rotation and being eligible offered themselves for re-election in
               accordance with the Company's Articles of Association;

               Mr. John M. Grillos

                    Votes "FOR"      Votes "AGAINST"
                    -----------      ---------------
                         4                0


               Mr. Patrick J. McDonagh

                    Votes "FOR"      Votes "AGAINST"
                    -----------      ---------------
                         4                0

                                       19
<PAGE>
 
          (2)  The shareholders authorized the Company's Board of Directors to 
               fix the remuneration of the Company's auditors for the year
               ending December 31, 1998;

                    Votes "FOR"      Votes "AGAINST"
                    -----------      ---------------
                         4                0


          (3)  The shareholders authorized and approved an amendment to the 1994
               Share Option Plan (the "1994 Plan") increasing the total number
               of shares reserved for issuance thereunder by 250,000 ordinary
               shares (which will be represented by 1,000,000 ADSs) and the
               directors were authorized to do such acts and things as they may
               consider necessary or expedient to establish and carry into
               effect the increase in the number of shares available for
               issuance under the 1994 plan;

                    Votes "FOR"      Votes "AGAINST"
                    -----------      ---------------
                         4                 0


         (4)   The shareholders authorized and approved an amendment to the
               Company's Capital to subdivide each of the Ordinary Shares of
               IR37.5p, issued and authorized, into four Ordinary Shares of
               IR9.375p each (the "Ordinary Share Split"), giving the Company an
               authorized share capital of IR11,250,000 divided into 120,000,000
               ordinary shares of IR9.375p each and the Memorandum and Articles
               of Association of the Company were amended to reflect this change
               in the authorized share capital of the company;

                    Votes "FOR"      Votes "AGAINST"
                    -----------      ---------------
                         4                 0

                                       20
<PAGE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


 (a)  Exhibits
 -------------

     2.1  Agreement and Plan of Reorganization, dated as of March 16, 1998,
          among CBT Group PLC, Rockets Acquisition Corp. and The ForeFront
          Group, Inc (Incorporated by reference to Exhibit 2.1 to the Company's
          Registration Statement on Form S-4 (File No. 333-51159))

     2.2  Form of Voting Agreement (Incorporated by reference to exhibit 2.2 to
          the Company's  Registration Statement on Form S-4 (File No. 333-
          51159))

     2.3  Form of ForeFront Affiliate Agreement (Incorporated by reference to
          Exhibit 2.3 to the Company's Registration Statement on Form S-4 (File
          No. 333-51159))

     2.4  Form of Certificate of Merger (Incorporated by reference to Exhibit 
          2.4 to the Company's Registration Statement on Form S-4 (File No. 333-
          51159))

     3.1  Memorandum of Association of CBT Group PLC

     3.2  Articles of Association of CBT Group PLC

     4.1  Deposit Agreement, dated as of April 13, 1995 as amended and restated
          as of May 22, 1998, among CBT Group PLC, The Bank of New York as
          Depositary, and the Owners and Beneficial Owners of American
          Depositary Receipts (Incorporated by reference to Exhibit (a) to Post-
          Effective Amendment No. 1 to the Company's Registration Statement on
          Form F-6 (File No. 333-8380))

     4.2  Restricted Deposit Agreement, dated as of November 30, 1995 as 
          amended and restated as of May 22, 1998, among CBT Group PLC, The Bank
          of New York as Depositary, and the Owners and Beneficial Owners of
          Restricted American Depositary Receipts

    10.1  Agreement and Mutual Release, dated June 3, 1998 between CBT Group 
          PLC and Jeffrey N. Newton

    11.1  Statement Regarding Computation of Net Income Per Ordinary Share

    27.1  Financial Data Schedule (EDGAR version only)



  (b)  Reports on Form 8-K
  ------------------------

     The Company filed a report on Form 8-K with the Securities and Exchange
     Commission on June 12, 1998 reporting under ITEM 2 the Company's
     acquisition of THE FOREFRONT GROUP, INC.

                                       21
<PAGE>
 
                                   SIGNATURE



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


                                 CBT GROUP PLC



Date: August 14, 1998           By:  /s/ James J. Buckley
                                     --------------------
                                     James J. Buckley
                                     Chief Executive Officer and President



Date: August 14, 1998           By:  /s/ Richard Y. Okumoto
                                     ----------------------
                                     Richard Y. Okumoto
                                     Vice President, Finance and Chief Financial
                                     Officer

                                       22