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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               -----------------

                                   FORM 10-K

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

   For the fiscal year ended: July 31, 2001

[_]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 000-21535

                               -----------------

                              ProsoftTraining.com
            (Exact name of Registrant as specified in its charter)

         Nevada                  87-0448639
     (State or other            (IRS Employer
     jurisdiction of         Identification No.)
    incorporation or
      organization)

               3001 Bee Caves Road, Suite 300, Austin, TX 78746
              (Address of principal executive offices) (Zip Code)

                                (512) 328-6140
             (Registrant's telephone number, including area code)

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

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

                    Common Stock, Par Value $.001 Per Share
                               (Title of class)

   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 twelve (12) months (or such shorter period that the
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 [_]

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]

   The aggregate market value of the Registrant's common stock held by
non-affiliates of the Registrant as of September 28, 2001, was $14,971,769
based on the number of shares outstanding on such date and the last sale price
for the common stock on such date of $0.64 per share as reported on the
NASDAQ--National Market System.

   Part III is incorporated by reference from the Registrant's definitive proxy
statement for its 2001 Annual Meeting of Stockholders to be filed with the
Commission within 120 days of July 31, 2001.

   The number of shares of Common Stock issued and outstanding as of October
18, 2001: 23,973,256.


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                              PROSOFTTRAINING.COM

                      INDEX TO ANNUAL REPORT ON FORM 10-K

<TABLE>
<CAPTION>
                                                                                                 Page
                                                PART I                                           ----
<C>      <S>                                                                                     <C>

Item 1.  Business...............................................................................   1
           Organization History.................................................................   1
           Overview.............................................................................   1
           The Prosoft Strategy.................................................................   2
           Products.............................................................................   3
           Customers............................................................................   5
           Competition..........................................................................   6
           Competitive Advantages...............................................................   6
           Sources of Revenue...................................................................   8
           Sales, Marketing and Customer Support................................................   8
           Seasonality..........................................................................   8
           Trademarks and Copyrights............................................................   9
           Employees............................................................................   9
           Regulations..........................................................................   9

Item 2.  Properties.............................................................................  10

Item 3.  Legal Proceedings......................................................................  10

Item 4.  Submission of Matters to Vote of Security Holders......................................  10

                                                PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters..................  11

Item 6.  Selected Financial Data................................................................  11

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations..  11

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............................  16

Item 8.  Financial Statements and Supplementary Data............................................  17

Item 9.  Changes in and Disagreements with Accountants on Accounting & Financial Disclosure.....  32

                                               PART III

Item 10. Directors And Executive Officers Of The Registrant.....................................  33

Item 11. Executive Compensation.................................................................  33

Item 12. Security Ownership Of Certain Beneficial Owners And Management.........................  33

Item 13. Certain Relationships And Related Transactions.........................................  33

                                                PART IV

Item 14. Exhibits And Financial Statement Schedules And Reports On Form 8-K.....................  34

         Signatures.............................................................................  35

         Exhibit Index..........................................................................  37
</TABLE>

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ITEM 1. BUSINESS

   This Annual Report on Form 10-K contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that may cause such a difference include, but are not limited to, those
discussed throughout this document.

Organization History

   ProsoftTraining.com (the "Company" or "ProsoftTraining" or "Prosoft" or "we"
or "our") is incorporated under the laws of the State of Nevada. From its
incorporation in May 1985 until March 1996, the Company had no significant
operations. Beginning in February 1995, the Company's business was operated as
a sole proprietorship (the "Proprietorship"). In December 1995, Pro-Soft
Development Corp., a California corporation ("Old ProSoft"), was incorporated
and acquired the business from the Proprietorship effective January 1, 1996. In
March 1996, the Company entered into an Agreement and Plan of Reorganization
(the "Reorganization Agreement") with Old ProSoft and the Old ProSoft
shareholders. Under the terms of the Reorganization Agreement, Old ProSoft
shareholders received one share of Common Stock of the Company in exchange for
each of their shares of Old ProSoft, and Old ProSoft became a wholly owned
subsidiary of the Company (the "Reorganization"). As part of the
Reorganization, all of the executive officers and directors of the Company
resigned and the executive officers and directors of Old ProSoft became the
executive officers and directors of the Company and the Company changed its
name from Tel-Fed, Inc. to ProSoft Development, Inc. The Company changed its
name to Prosoft I-Net Solutions, Inc. in October 1996 and in December 1998
changed its name to ProsoftTraining.com.

Overview

   ProsoftTraining is a leading provider of information technology ("IT")
curriculum and certifications to help individuals develop, upgrade and validate
critical IT skills. We sell and license our courseware, certifications and
instructional services to academic institutions, commercial training centers,
internal corporate training departments and individuals around the world.

   Through our ComputerPREP division, we distribute an extensive library of
job-role and vendor-specific IT curriculum, including instructor-led,
computer-based, Web-based and self-study products to academic institutions,
commercial training centers and corporations. Customers can choose from 965
unique course titles that cover software products and certification programs
such as Microsoft, Oracle, Linux, A+, Cisco, Certified Internet Webmaster
("CIW"), and Certified in Convergent Network Technologies ("CCNT").

   We own and manage two proprietary job-role certification programs, CIW and
CCNT. We develop certification exams and provide candidates access to them
through our own testing site and commercial testing sites in the VUE and
Prometric networks. As the owner of the certification programs, we also create
official preparatory courseware and authorize official training centers as
appropriate.

   CIW has become the seventh-largest among more than 350 IT certifications,
and the third-largest vendor-independent IT certification. We believe that our
CIW certification program has emerged as the recognized industry-standard job
role certification for Internet technologies. The certification covers job
roles in Internet administration, security, application development,
programming, design and e-commerce. The Company reported that the number of
exams taken set a new record in August 2001 and the number of CIW
certifications earned exceeded 30,000 by September 2001. Certification
candidates have come from more than 100 countries.

   The CCNT credential and convergent technology courses were part of the
Mastery Point Learning Systems acquisition announced on February 28, 2001.
Convergence technology ("CT") is the merging of voice, video and data on a
single network, integrating telecommunications and computer technologies. CCNT
is a vendor-neutral credential program that teaches and validates an
individual's knowledge of basic data communications, basic telecommunications
and telephony. Our CCNT exams and curriculum are sponsored and endorsed by the
Telecommunications Industry Association ("TIA"). We believe that the
convergence technology industry is still

                                      1

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emerging and presents growth potential for our business because substantial
workforce training will be required to support the industry's growth.

   As the global economy continues to shift from an industrial base to a
knowledge base, the demand for a workforce equipped with a broad set of
technology skills continues to grow. Over the last decade, IT certifications
from product vendors emerged as an effective way to create marketable IT skills
or provide an entry point into a career in IT. More recently, non-vendor
job-role IT certifications have emerged that accomplish the same objectives in
today's open IT environment, which includes a greater variety of technologies
such as the Internet, telecommunications and Linux. Job-role certifications
provide entry to, and flexibility in, career options. Vendor-independent,
job-role IT certification programs that validate skills demonstrate
employability and individual initiative, and are portable between employers.

   We believe our revenue growth potential is primarily related to the shortage
of IT skills in today's workforce. Even though many companies are experiencing
reductions in staff, a substantial IT skills shortage still exists. Many
corporations have empty positions that need to be filled or employees who need
to update their skills. In addition, the rapid pace of change in today's
environment will require workers to continually update skills to remain
current. We believe this need will exist for many years.

The Prosoft Strategy

   Our objective is to be the leading provider of IT skills curriculum and
certifications that help individuals and organizations increase the value and
productivity of their human capital. Key elements of our strategy include:

   Providing Superior Content. We intend to continually update our courses,
introduce new courses and leverage our courses across multiple formats,
customers and industries. We continually monitor developments and changes in
the IT industry in general, as well as the specific needs of our customers. We
revise our CIW courses three times each year to reflect evolving technologies.
In the last year, we added self-study products for CIW and A+ and extended our
library to include 372 Web-based and CD-ROM e-learning products.

   Expanding the CIW Certification. We have established CIW as the
industry-leading certification program for Internet professionals. CIW has the
endorsement of the Association of Internet Professionals and the International
Webmasters Association, among others, and is accredited by a number of colleges
and universities around the world. By maintaining these endorsements; seeking
the endorsement of leading hardware, software and e-business service providers;
increasing the availability of preparatory training; and keeping the
certification updated to reflect employer needs, we believe that we can enhance
customer awareness and confidence in our certification and training products.

   Offering New IT Certifications. We have demonstrated competency in
developing and managing IT certification programs. We believe the market for IT
certifications, particularly vendor-neutral certifications, and the outsourcing
of certification management is growing. We intend to expand our products and
revenues in this business. Last year, we also accepted management
responsibility for the jCert Initiative Java certification program, and for a
new TIA upper-level CT certification to be called Convergent Technologies
Professional.

   Leveraging CIW Authorized Training Provider ("CIW ATP") Network. To
participate in the CIW program, training providers must become CIW ATPs by
agreeing to use Official CIW courseware and CIW Certified Instructors ("CIW
CIs"). We intend to leverage our CIW ATP channel by providing training, tools
and incentives to sell more of our products and services. We believe there is a
substantial opportunity to use price and promotion to cross-sell more non-CIW
products to our existing CIW customers.

   Targeting New Markets. We intend to target new markets. This year we
targeted community colleges and other academic institutions as a market where
we could increase our product sales, especially CIW, A+ and Microsoft Office
User Specialist ("MOUS") products. We have increased our presence in this
market by directing our sales force to call on targeted colleges and by
modifying certain of our products to better meet the needs of academic
instructors and administrators.

                                      2

<PAGE>

   Expanding International Presence. As the rate of Internet adoption has
accelerated outside of the United States, we believe that significant
international market demand exists for our Internet skills training and
certification products, especially in Europe and Asia. We currently have
significant partnerships in Japan and Korea and sales offices in Ireland and
Hong Kong. We plan to further expand our reach into both Europe and Asia by
developing direct and indirect sales channels and curriculum support
capabilities in these regions, translating and localizing our CIW certification
exams and content into other languages, and by strategically acquiring or
partnering with companies with international capabilities or content.

   Pursuing Strategic Acquisitions. We have pursued and completed strategic
acquisitions to facilitate the growth of our business, such as our acquisitions
of Mastery Point Learning Systems, ComputerPREP, Internet Certification
Institute International, The Chapel Hill Group - Technology Consultants, Inc.,
and Net Guru Technologies. We intend to continue to pursue strategic
acquisitions, both in the United States and internationally, that provide
access to complementary products and services, including companies with
vendor-neutral content expertise and companies that can expand domestic or
international distribution channels for our IT skills training, content and
certification.

Products

   We develop and distribute products and services for IT skills development
and validation. We group our products into three categories--certification,
courseware and services:

   Certification Products. We create, own and manage IT certification programs.
An IT certification program consists of certification exams that validate
knowledge related to a set of topics or skills. Hardware and software vendors
using third-party distributors and consultants originated IT certifications as
a way to improve customer service and reduce service costs. Industry-standard
hardware for PCs provided the impetus for vendor-neutral certifications
administered independently of any single vendor. More recently, the rapid
adoption of open technologies such as the Internet, UNIX and Linux
(characterized by easy integration of and substitution among many vendors'
products) prompted the creation of IT certifications focused on job-roles.

   Any group or organization can create a certification program. The success of
the program is determined by its acceptance in the marketplace; such acceptance
is usually measured by the number of certifications earned. Certification exams
are typically published electronically through a testing provider network. In
the United States, these exams typically cost between $95 and $195, depending
on the length and complexity of the exam. Entry-level certifications may only
require a single exam, but professional-level certifications typically require
between three and seven exams. No preparation is required for an exam, but most
candidates choose to use courses, books or practice exams. Many companies,
including ProsoftTraining, create products or offer courses for popular exams.
Sometimes the owner of the certification program will authorize preparatory
materials or preparation course providers.

   In January 1998, the Company acquired Net Guru Technologies, Inc. and its
CIW IT certification program. The CIW program is built around critical Internet
job functions. In the early days of the World Wide Web, a single individual
usually had responsibility for Web site development and administration. Because
these early Web experts knew something about most aspects of the Internet, they
acquired the title "Webmaster." The Internet and its networks, servers and
applications have now grown so complex that no one person can easily provide
expertise in all areas. Instead, distinct Internet job-roles have emerged. CIW
job roles map to those identified by the National Workforce Center for Emerging
Technologies and the Association of Internet Professionals, among others.

   Our CIW certification tests cover Internet job roles and are proctored
through leading testing provider networks Prometric and Virtual University
Enterprises ("VUE"). Prometric has 5,200 testing affiliates worldwide and VUE
has more than 2,000. These are the same testing services used by other leading
certification providers such as Novell, Microsoft and Cisco. In the United
States, a CIW exam typically costs $125. Depending on region, we pay the
testing provider networks 50 to 60 percent of the test cost for their services.
Figure 1 shows a road map of the CIW Certification program.

                                      3

<PAGE>

                                   Figure 1

                          CIW Certification Road Map

                                  [FLOW CHART]

                                 CIW Flow Chart

   Our CIW ATP network consists of commercial training organizations and
academic institutions, each with a number of authorized learning centers. CIW
ATPs agree to use only official courseware provided by us, teach courses using
only CIW Certified Instructors and advertise courses using our Official CIW
trademark and logo. Commercial CIW ATPs typically pay an average fee of $3,000.
Annual fees for academic CIW ATPs are generally waived in lieu of minimum
courseware purchase requirements.

   In February 2001, the Company announced the acquisition of Mastery Point
Learning Systems ("MPLS"). MPLS owned the CCNT certificate program. Our CCNT
exams sponsored by the TIA are delivered over the Web from our own server.
Unlike CIW, our CCNT exams are not proctored. CCNT training and testing are
typically sold in a bundle to corporate customers. Individuals must pass five
exams to earn a CCNT certificate. A five-test bundle is offered to individuals
at U.S. $100.

                                      4

<PAGE>

   We also provide certification management services to organizations and
associations that want to develop and promote certifications. We currently
serve as the program manager for the jCert Initiative and have been selected by
the TIA to develop a proctored convergence technology certification.

   Courseware Products. We develop content and distribute courseware products
worldwide through our ComputerPREP division. ComputerPREP offers individuals,
schools, colleges, training centers and corporations one of the world's largest
libraries of classroom, Web-based, computer-based, distance learning, and
self-study curriculum. Most of our courses are organized into job-role
certification tracks and are vendor-neutral. Other products help develop
proficiency in particular computer programs, programming languages or operating
systems. As of September 2001, our course content consists of 965 unique
titles, covering a range of certifications and technologies, including Cisco,
Oracle, Linux+, A+, Microsoft, Network+, CIW and CCNT. Many titles are produced
in multiple learning formats, such as classroom, Web-based, and self-study.

   Service Products. We have a pool of instructors, consisting of employees and
third-party contractors, who are available to the training industry and
corporations to teach our CIW courses or to train our customers' instructors.
During fiscal 2001, 17 percent of our revenue was derived from these services.
As of September 30, 2001, we had 8 instructors on staff; we also had additional
instructors available on a contract basis. Instructors usually specialize in
two or three of our CIW certification tracks.

Customers

   We serve four major customer groups: academic institutions, commercial
training centers, corporations and individuals.

   Academic Institutions: In the last year, academic institutions have begun to
incorporate formal IT certification programs into their curricula. We have had
significant success with community colleges and national skills standards
organizations such as the National Skills Standards Board ("NSSB") and the
National Workforce Center for Emerging Technologies ("NWCET") that promote and
support standard occupational certification programs in schools and other
government-funded organizations.

   Community colleges and continuing education programs at four-year
universities represent an attractive channel for our certification-related
courseware. Community colleges in particular are rapidly deploying IT
certification programs, are geographically widespread, and cancel few classes
after they have been scheduled and advertised. In fiscal 2001, academic
institutions accounted for approximately 35 percent of our courseware revenue.
We have begun to penetrate this market segment with our CIW products, and
expect to leverage our CIW relationships to cross-sell our other
certification-related products.

   The governor of Louisiana will announce in November 2001 that state
organizations should align vocational IT training programs to the Cisco
Certified Network Administrator ("CCNA"), MOUS, A+ and CIW certifications. None
of these other certifications compete with CIW and, through our ComputerPREP
division, we provide curriculum for all the other endorsed programs. Louisiana
is one of the first states to incorporate industry-recognized IT training
program direction into statewide policy and we believe that other states will
follow.

   Through the Educator-to-Educator ("E2E") Institute, the NWCET is going to
help prepare community colleges nationwide to teach CIW. E2E helps bridge the
gap between the education and technology communities by providing professional
IT development for educators at all levels from kindergarten through college,
and at all skill levels from beginner to expert. Upon completion of the E2E
national rollout in 2002, the E2E program expects to reach up to 90 percent of
community colleges in the United States.

   Commercial Training Centers: Before we acquired ComputerPREP, the majority
of our customers were commercial training centers that had elected to become
CIW ATPs. The acquisition of ComputerPREP dramatically expanded the number of
products we could make available to our traditional customer base, and added
more than 1,000 training center customers to whom we could market a full range
of IT training products, including CIW. In fiscal 2001, commercial training
centers accounted for approximately 40 percent of our

                                      5

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courseware revenue. During fiscal year 2001, the number of CIW ATPs grew to
almost 1,000, though we expect that this number may shrink somewhat as a result
of the difficult economic environment's effect on U.S.-based commercial
training centers. Despite this expected shift in fiscal year 2002, we believe
that the CIW ATP program will remain one of the largest authorized IT training
programs.

   Internal Corporate Training Departments: Corporations were early adopters of
IT training and certification programs because they had to develop the
technology infrastructure and support mechanisms to help their organization
grow. Many corporations have their own training departments to help their
employees, partners, and customers get educated and certified. We focus our
corporate sales efforts on selling training courseware to companies that have
internal training departments, and our various self-study, computer-based and
Web-based training products for those that do not.

   Individuals: Although the individual learner is ultimately the end-user of
our product in all of the customer groups, we also sell our products directly
to end-users via e-commerce. Business professionals, experienced and certified
IT professionals, and career changers are among the individuals who use our
products to learn and become certified. In fiscal year 2001, we significantly
expanded our range of products that could be sold directly to end-users,
specifically our self-study, computer-based and Web-based training products.

Competition

   Each area of our business is highly competitive, and there currently are
only minor economic barriers to entry into any of them. We face competition
from many other companies offering training and certification services and
products, and also compete with the internal training, marketing and publishing
units of large corporations. Some of our competitors have access to greater
resources and capital than are currently available to us. We compete in general
IT skills courseware with Element K, Thomson Learning and Pearson LLC, each of
which has one or more subsidiaries that sells courseware. The trade association
CompTIA offers the i-Net+ certification, which competes with our CIW Associate
certification. This competing certification may adversely affect our
certification revenue. Individuals who have i-Net+ certification may receive
the CIW Associate certification by providing contact information, proof of
i-Net+ certification, and a U.S. $49.00 transfer fee. We believe this
arrangement encourages these individuals to take further CIW courses and earn
CIW Professional and Master certifications. We also supply i-Net+ courseware to
our customers because CompTIA does not offer courseware for its certifications.
Trade associations such as Association of Web Professionals and World
Organization of Webmasters also have either released or announced plans to
offer Internet certifications.

Competitive Advantages

   Content Frequently Updated: Prosoft's competitive strengths lie in its
commitment to frequently update its content to reflect the most recent
technology, industry standards and best practices. Historically, our CIW
curriculum has been updated three times per year to keep course objectives
current and relevant to emerging and accepted Internet technologies. We have
adopted XML technology to improve our abilities to frequently update our
courseware and reuse learning objects. Once complete in 2002, this library will
increase the efficiency of the Company's continuous course update process and
allow for the rapid creation of customized content in multiple output forms,
including Web-based delivery.

   We believe that few, if any, information technology course content
organizations will initially be able to match our XML content library for
flexibility and ease of use. Our library will be compatible with industry
publishing standards that will allow easy insertion into learning management
systems. Our library will also have true independent learning objects that can
be combined to create custom courses that meet the needs of an individual
learner or organization. Though several of our competitors have declared they
are converting their courses to XML, the usability of the finished library is
highly dependent on library design and the course development discipline used
when the content was originally developed. Because we have had this end point
in mind for many years, our content is well suited to take full advantage of
the features and flexibility of XML.

                                      6

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   Variety of Courseware and Delivery: We believe that the variety of products
we offer--both in course titles and delivery methods--differentiates the
Company in the IT training and certification industry. We provide high-quality
products that appeal to a variety of different learning styles as well as
different IT competencies to serve today's workforce and future professionals.
In addition to instructor-led, self-study, computer-based and Web-based
training on a given topic, we have introduced "blended learning" options that
consist of bundles of two or more modalities of a given course. Because our
various course materials are generally developed from the same underlying
content, our blended learning solutions provide student and instructor
flexibility in terms of matching each student's unique needs to a particular
learning format. The ability to offer consistent content in a variety of
delivery modalities has come to be known as "content parity." Our rigorous
development process helps achieve content parity, and full deployment of the
XML publishing process will make this our standard.

   Job-Role and Vendor-Specific Certification Courseware: Our content library
covers both job-role and vendor-specific certifications. We believe that the
combination of both job-role and vendor-specific curriculum is essential to
serving the skilled IT labor needs today and in the future.

   Vendor-specific certifications, such as those from Novell, Microsoft, and
Cisco grew tremendously in popularity during the 1990s. Estimates for the
number of people holding these certifications range from one to two million
worldwide. Though vendors usually offer official courseware through authorized
channels for their certifications, a large market has emerged for alternative
courseware from content companies such as Prosoft. We distribute courseware for
vendor-specific certifications for Microsoft, Cisco, Oracle, and Sun.

   Job-role certifications began with the advent of industry-standard hardware
for PCs. They are gaining in popularity as a result of the introduction of new
IT and Internet-related jobs requiring competency in industry standards,
knowledge of best practices, and familiarity with hardware and software from
many vendors. CompTIA led this movement with the introduction of A+, the
entry-level job-role certification for PC support technicians. With more than
400,000 A+ certifications earned, the success of the A+ program clearly
demonstrates the demand for and value of job-role certifications. More
recently, comprehensive job-role certifications, such as CIW, have emerged as
analogs to leading vendor certifications in depth and breadth of topics
covered. CIW has gained tremendous recognition and acceptance as a standard
job-role, vendor-neutral, Internet certification over the past year. Now CCNT
is emerging as a standard job-role certificate program for the CT industry,
with the endorsement from TIA, the adoption by leading manufacturers including
Cisco, SBC and Avaya, and incorporation by two of the largest training center
networks, New Horizons and IBM. We distribute courseware for CIW, A+, Network+,
i-Net+, Linux+ and LPI certifications.

   CIW Certification Program: The Company owns the CIW certification and
Official CIW curriculum. The CIW certification has received the support and
endorsement of non-profit, widely recognized organizations that have important
visibility and credibility among policy makers, academic institutions and
businesses. We believe that NWCET's rollout of the CIW program with the E2E
Institute will help increase the number of people taking CIW exams. We believe
that NSSB's recognition of industry-accepted job-role certifications in
general, and CIW in the Internet area, will benefit CIW and the Company, as the
NSSB increases visibility and helps Louisiana and other governmental entities
access federal funding for job training. Internationally, CIW has begun to be
recognized or endorsed by governmental and quasi-governmental organizations
that may prove to be even more influential than similar endorsements in the
United States. As an example, the IT Training Quality and Certification
Institute of Hong Kong ("ITTQC") and the Hong Kong Computer Society endorse the
Master CIW Administrator curriculum. Similar announcements are expected soon in
other countries.

   Comprehensive A+ Curriculum: We believe that the ComputerPREP A+ curriculum
offers a learning solution that is the most comprehensive, includes the most
innovative features, and appeals to the widest variety of learners. A+ training
is among the largest offerings of many of our customers, so being able to meet
both their CIW and A+ courseware needs gives us additional opportunity to have
our customers buy most of their IT training materials from us.

   The ComputerPREP classroom materials for A+, Network+ and Linux+ recently
earned the new CompTIA Authorized Quality Curriculum (CAQC) stamp of approval.
The third-party review, conducted by ProCert Labs, states that it "highly
recommends" the curriculum to IT educators and learners.

                                      7

<PAGE>

   Distribution Partners with Significant Presence: Training providers such as
IBM, New Horizons, ExecuTrain, CompUSA, SmartForce, NETg, and Hewlett-Packard
distribute courses using our content. We have relationships with training
organizations representing more than 1,000 learning centers and academic
institutions in 69 countries. We believe we can significantly increase
penetration among our existing customers through increased sales and marketing
efforts.

   Emerging International Presence: Prosoft has a significant international
presence--approximately 40 percent of CIW exams are conducted outside the
United States. We have subsidiaries or formal distribution relationships in
China, Japan and Korea, from which we expect to benefit in the next year. We
are one of the only IT courseware suppliers distributing broadly outside the
United States. In addition to fueling exam and revenue growth, we believe as we
further develop our international customer base, we will benefit from being
somewhat protected from the effects of cyclicality in one part of the world.

Sources of Revenue

   We derive our revenue primarily from three sources: certification,
courseware and services.

   Certification Revenue. Certification revenue includes fees received from the
administration of our certification tests and annual fees received from CIW
ATPs. We recognize certification revenue when certification tests are
administered, and from CIW ATPs over the period during which we have a
commitment for continuing involvement or obligation to provide services to the
CIW ATP.

   Courseware Revenue. Courseware revenue includes fees received from the sale
of course materials (books, CD-ROMs, self study kits, and Web-based course
books and licensing of our content. We recognize courseware revenue from the
sale of course books when they are shipped. We also recognize courseware
revenue from courseware licenses of various types. Under a reproduction
license, a customer purchases the right to print a textbook using that
customer's own cover page and introduction, while our content remains
unchanged. Courseware licenses are either purchased on a fee-per-use basis or
for a one-time fee. Revenue is recognized over the period in which we have a
commitment for continuing involvement or obligation to provide services to the
customer. In some cases, no such commitment exists, and revenue is recognized
when content is shipped.

   Services Revenue. Services revenue includes fees received for training the
instructors of our learning center providers and of companies that plan to
conduct our courses internally. It also includes fees received for providing
instructors to our CIW ATPs or other companies to teach our courseware.
Finally, services revenue includes fees received for consulting services in
which we assist our clients in creating or delivery of custom solutions.
Instructors are charged on a per day basis and consulting is charged on a time
and materials basis. We recognize services revenue when instruction or
consulting services are provided.

Sales, Marketing and Customer Support

   We sell and market our courses to students mainly through a channel of
learning centers and academic institutions. As of September 30, 2001, we had 54
people directly involved in sales, marketing and customer support in the United
States, Hong Kong, and Ireland. Our customer courseware fulfillment
organization in Phoenix, Arizona reviews courseware orders for accuracy. Our
service fulfillment organization in Austin, Texas performs a similar function
for services orders. These service and support groups assist the sales
organization by entering orders for courseware or instructors into our computer
system, then contacting the customer to make sure arrangements are satisfactory
and to obtain feedback after delivery. Because many customers need to make
last-minute adjustments or wait to order courseware until a few days before a
class starts, our quick response is a competitive advantage.

Seasonality

   Our revenue and income can vary from quarter to quarter due to seasonal and
other factors. We experience greater revenue in the second half of our fiscal
year (February through July) than in the first half of our fiscal year

                                      8

<PAGE>

(August through January). In the European market, August is usually a poor
month because many workers take their summer holiday at that time. In the
United States, the period from Thanksgiving to New Year's tends to be slow for
the training industry. Other seasonality is due to customers' spending patterns
and corporate training budgets.

Trademarks and Copyrights

   Copyright laws protect most of our courseware. We have also received or
filed for trademark and service mark registration for certain of our products,
tag lines and feature names. We will continue to protect our trademarks and to
seek copyright registration for newly developed courseware and software
products.

Employees

   As of September 30, 2001, we employed a total of 137 associates located in
the United States, Europe and Asia. Of these associates, 8 are instructors, 30
are in content development and 54 are in sales, marketing and customer support.
We also use the services of outside contract instructors to teach some of our
curriculum. None of our associates is represented by a labor organization. We
consider our relations with our associates and outside contract instructors to
be satisfactory.

Regulations

   Most of the jurisdictions in which we operate, regulate and license certain
kinds of vocational, trade, technical or other post-secondary education. We
believe that employer-funded or reimbursed information technology training is
exempt from such requirements in most of the United States. To the extent that
we want to participate in programs funded by government entities, we will apply
for licensing in the regulatory jurisdiction. If we are found to be in
violation of a state's licensing or other regulatory requirements, we could be
subject to civil or criminal sanctions, including monetary penalties. We are
also subject to federal, state and local regulations concerning the
environment, occupational safety and health standards. We have not experienced
significant difficulty in complying with such regulations and compliance has
not had a material effect on our business or our financial results.

                                      9

<PAGE>

ITEM 2. PROPERTIES

   As of September 30, 2001, the Company had entered into leases for commercial
space in the following locations:

<TABLE>
<CAPTION>
                  Square  Monthly      Rent
    Location      Footage  Cost     Expiration
    --------      ------- -------   ----------
<S>               <C>     <C>     <C>
Santa Ana, CA....  7,640  $10,021   July 2002
Phoenix, AZ...... 13,301  $25,771   April 2006
Austin, TX....... 18,280  $34,473 December 2006
Vienna, VA.......  3,497  $ 5,943 November 2001
Eden Prairie, MN.  7,040  $ 5,538 February 2004
Chapel Hill, NC..  3,853  $ 6,142  October 2001
Limerick, Ireland  4,200  $ 3,850   April 2005
Hong Kong, China.    400  $   972 Month to Month
</TABLE>

   The Austin, Texas location is our headquarters which provides a location for
executive offices, administrative, sales, marketing, and instructor services.
There is one classroom in Austin. The Phoenix, Arizona location serves sales,
courseware publishing, and customer service purposes. The facility in Santa
Ana, California serves our content development activities. The Vienna, Virginia
and Chapel Hill, North Carolina locations are currently unoccupied. The
Limerick and Hong Kong facilities serve sales and customer service purposes.
There is one classroom in Limerick.

ITEM 3. LEGAL PROCEEDINGS

   On April 22, 1998, we were sued by Frank J. DiSanto in state court in
Jackson County, Michigan. Mr. DiSanto's original complaint alleged
misrepresentation in connection with a confidential offering memorandum,
pursuant to which Mr. DiSanto purchased $600,000 of our common stock. Mr.
DiSanto sought rescission of the stock purchase, interest, attorneys' fees and
other unspecified damages. We filed an answer and affirmative defenses denying
liability. The plaintiff has had the opportunity to amend the complaint four
times. The court has struck all claims for damages except the claim that
Prosoft failed to use its best efforts under the terms of a registration rights
agreement to which plaintiff was a party. The case went to court ordered
non-binding mediation. The mediation panel ruled that the plaintiff had no
basis for damages, and recommended that the plaintiff be ordered to pay costs
to Prosoft in the amount of $20,000. The plaintiff rejected the mediation panel
ruling. Subsequent to mediation, the court denied a summary judgment motion
filed by Prosoft. Trial is scheduled for November 2001.

   The Free Methodist Foundation and other parties related to Mr. DiSanto filed
an identical complaint to Mr. DiSanto's amended complaint on March 11, 1999 in
state court in Jackson County, Michigan. The lawsuit was removed to the U.S.
District Court for the Eastern District of Michigan. In September 2000, the
federal court found that there was no basis for the plaintiffs to seek damages,
and entered summary judgment in favor of Prosoft for all claims. The plaintiffs
filed a motion for reconsideration, which was rejected by the court in October
2000. The matter is currently on appeal in the United States District Court.

   From time to time, we may also be involved in litigation relating to claims
arising out of our operations in the normal course of business. As of the date
of this report, we are not a party to any other material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

   None.

                                      10

<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

   The Company's common stock currently trades on the NASDAQ National Market
under the trading symbol of "POSO". Before August 14, 2000, the Company's
common stock traded on the NASDAQ SmallCap Market. The following table sets
forth for each quarter during fiscal years 2001 and 2000 the high and low bid
quotations for the Common Stock as reported by NASDAQ.

<TABLE>
<CAPTION>
Quarter                             Low    High
-------                            ------ ------
<S>                                <C>    <C>
May 1, 2001--July 31, 2001........ $ 1.03 $ 3.19
February 1, 2001--April 30, 2001.. $ 2.40 $14.75
November 1, 2000--January 31, 2001 $ 6.31 $15.00
August 1, 2000--October 31, 2000.. $ 6.62 $15.06
May 1, 2000--July 31, 2000........ $10.19 $25.00
February 1, 2000--April 30, 2000.. $ 8.88 $29.88
November 1, 1999--January 31, 2000 $ 2.81 $12.94
August 1, 1999--October 31, 1999.. $ 2.13 $ 4.38
</TABLE>

   On October 4, 2001, the Company had approximately 3,989 stockholders of
record.

   To date, no dividends have been declared or paid on any capital stock of the
Company, and the Company does not anticipate paying any dividends in the
foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

   The selected financial data set forth below should be read in conjunction
with the consolidated financial statements and the notes thereto and other
information contained elsewhere in this report.

<TABLE>
<CAPTION>
                                                        Year Ended July 31,
                                           ---------------------------------------------
                                            2001     2000     1999      1998      1997
                                           -------  ------- --------  --------  --------
                                               (In thousands, except per share data)
<S>                                        <C>      <C>     <C>       <C>       <C>
Consolidated Statement of Operations Data:
Revenue................................... $31,425  $19,572 $  8,716  $  8,837  $  3,483
Income (loss) from operations.............  (4,932)   1,427  (11,201)  (16,771)  (20,853)
Net income (loss).........................  (4,167)   1,631  (11,607)  (16,525)  (20,651)
Net income (loss) per share:
   Basic..................................    (.18)     .09     (.90)    (1.48)    (2.48)
   Diluted................................    (.18)     .08     (.90)    (1.48)    (2.48)

Consolidated Balance Sheet Data at Year End:
Total assets.............................. $55,216  $58,519 $  7,634  $ 12,524  $ 20,794
Short-term debt...........................     121       85      919     1,465     1,960
Long-term debt............................     158      246    2,840       559     1,520
Stockholders' equity......................  49,572   50,372      472     6,716    13,049
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS

   The following discussion should be read in conjunction with the consolidated
financial statements and the accompanying notes. It includes certain
forward-looking statements. Actual results could differ materially and numerous
factors may affect future results, liquidity and capital resources. These
factors include softness in the general economic environment, the Company's
limited operating history, uncertainty of a rapidly evolving market, future
capital requirements and uncertainty of future funding, the need to respond to
rapid technological change and a highly competitive market.

                                      11

<PAGE>

Development of Business

   ProsoftTraining.com, formerly Prosoft I-Net Solutions, Inc., was founded in
1995 as a proprietorship that delivered training in vocational and advanced
technical subjects. After completing a private placement of stock in March
1997, the Company embarked on a strategy to build a nationwide network of
learning centers to teach technical skills for the emerging Internet market.
Overhead costs associated with the "bricks-and-mortar" network significantly
outpaced revenues. In fiscal year 1999, the Company closed the learning center
network and focused exclusively on selling its educational programs and
instructional services to the technology training industry.

Results of Operations

  Revenues

   Total revenues for 2001 increased 61% to $31.43 million compared with 2000,
due to a broader acceptance of the Company's proprietary CIW internet
certification program, an increase in CIW certified instructors teaching CIW
courses with our proprietary courseware and additional courseware revenue
related to the ComputerPREP acquisition.

   Total revenues for 2000 increased 125% to $19.57 million compared with 1999.
Revenue growth was driven primarily by an increase in our customer base from
our CIW ATP program and strategic partner distribution relationships.

   Services revenue in 2001 decreased by 49%, or $5.09 million, compared with
2000, and increased 56%, or $3.75 million, for 2000 compared with 1999. The
2001 decrease was attributable to the economic slowdown, a reduction in
corporate training activities, an increase in CIW certified instructors at our
CIW channel partners and a decrease in demand for our non-CIW services
business. The 2000 increase resulted primarily from an increase in our
instructors teaching at customer sites.

   Courseware revenues in 2001 increased by 241%, or $15.91 million, compared
to 2000, and increased 322%, or $5.04 million, for 2000 compared with 1999. The
2001 increase was driven by a broader acceptance of the Company's proprietary
CIW Internet courseware and the ComputerPREP acquisition. The 2000 increase is
the result of an increasing customer base in connection with our CIW ATP
program and strategic partner distribution relationships.

   Certification revenues in 2001 increased by 41%, or $1.04 million, compared
to 2000, and increased 438%, or $2.07 million, for 2000 compared with 1999.
Certification revenues consist of CIW certification exam fees, which we began
offering in the second quarter of fiscal year 1999, and annual fees received
from CIW ATP's.

  Cost of Revenues

   Cost of revenues in 2001 increased $4.57 million, or 46%, compared with
2000. As a percentage of revenue, gross profit, defined as total revenue less
costs of revenue, increased to 54% in 2001, from 49% in 2000. This increase was
primarily due to an increase in courseware revenue, which generally yields
higher gross profits, and to a decrease in services revenue, which generally
yields lower gross profits. This increase in gross profit percentage was
partially offset by a shift in the mix of fees in certification revenue. CIW
certification exam fees, which generally yield lower gross profits, increased,
and CIW ATP fees, which generally yield higher gross profits, decreased. Cost
of revenues in 2000 increased $1.78 million, or 22%, compared with 1999. As a
percentage of revenue, gross profit increased to 49% in 2000, from 7% in 1999.
This increase was due to the overall revenue increase in all services, products
and fees.

                                      12

<PAGE>

  Content Development

   Content development expenses in 2001 increased $0.88 million, or 73%, and
was 6% of revenues, the same percentage when compared with 2000, and increased
$0.24 million, or 25%, and decreased 5 percentage points in 2000 as a
percentage of revenues, compared with 1999. The 2001 dollar increase was
largely the result of higher personnel costs associated with updating an
expanded library of courseware associated with the ComputerPREP acquisition and
new e-learning products. The 2000 dollar increase was primarily due to higher
personnel costs associated with an annual update of all CIW courseware and the
development of CIW exam questions.

  Sales and Marketing

   Sales and marketing expenses increased $5.22 million, or 229%, in 2001 as
compared with 2000 and increased $0.67 million, or 41%, in 2000, compared to
1999. As a percent of revenue, sales and marketing expenses increased 12
percentage points in 2001 as compared with 2000, and decreased 7 percentage
points in 2000, compared to 1999. The dollar increases are attributable to
higher sales volume. The current year increase was also attributable to
increases in the number of employees, related primarily to the ComputerPREP
acquisition in July 2000, the acquisition of Mastery Point Learning Systems
during the year, and our CIW market brand campaign. The 2000 dollar increase
was primarily due to additional commission paid on increased revenues.

  General and Administrative

   General and administrative expenses increased $3.88 million, or 93%, and
increased 4 percentage points as a percentage of revenues in 2001 as compared
with 2000 and increased $1.08 million, or 35%, and decreased 14 percentage
points as a percentage of revenues in 2000, compared with 1999. The current
year dollar increases were primarily attributable to the ComputerPREP
acquisition and a larger executive management team. Current year expenses were
also higher due to increased bad debt expense due to specific credit concerns,
primarily in the commercial training market. The 2000 dollar increase was
primarily due to increased personnel and related costs associated with the
expansion of the Company.

  Depreciation and Amortization

   Depreciation expense was $0.67 million, $0.18 million and $1.83 million for
the years ended July 31, 2001, 2000 and 1999, respectively. The increase in
2001 when compared to 2000 was primarily due to the acquisitions of
ComputerPREP and Mastery Point Learning Systems. The decrease in 2000 when
compared to 1999 was primarily due to the absence of expense associated with
classroom equipment when the Company exited the retail training business.

   Amortization expense associated with goodwill and other acquired intangibles
was $2.94 million, $0.80 million and $0.60 million for the years ended July 31,
2001, 2000 and 1999, respectively. We do not expect amortization of goodwill
and other acquired intangibles to increase in future periods as a result of the
2001 acquisition of Mastery Point Learning Systems.

  Restructuring Charge (Credit)

   During 2001, we recorded a $0.66 million restructuring charge, which had an
approximate $.03 earnings per diluted share impact to our common stock. The
2001 charge related to our decision to disinvest in the instructor-led training
business and realign the sales structure. The charge consisted of employee
severance and other employee-related costs of $0.23 million and fixed asset
write-downs, leased facilities, equipment and other costs of $0.43 million.
Headcount was reduced by approximately 25%.

   During 2000, we recorded a $0.37 million reversal of the 1999 restructuring
reserve, which had an approximate $.02 earnings per diluted share impact to our
common stock. The reversal resulted from negotiated lease termination
agreements on several leased facilities at a cost lower than orginally
anticipated.

                                      13

<PAGE>

   During 1999, we recorded a $3.72 million restructuring charge, which had an
approximate $.29 earnings per diluted share impact to our common stock. The
1999 charge related to our decision to exit the retail training business. The
charge included $2.33 million for leased facilities, equipment and other
termination costs, $1.10 million for fixed asset write-downs and $0.29 million
for employee severance and other employee related costs.

  Interest Income and Interest Expense

   Interest income for 2001 of $0.41 million versus the prior year increased
$0.21 million. Interest income in 2000 of $0.20 million increased $0.12 million
versus 1999. The increases in both years were mainly due to higher cash
balances associated with private placements of stock and the exercise of stock
options and warrants in 2000.

   Interest expense decreased $0.38 million in 2001 to $0.04 million and $0.06
million in 2000 to $0.42 million. The decrease in 2001 is primarily the result
of lower capital lease obligations. The decrease in 2000 is primarily
attributable to the conversion of the debentures in January 2000.

  Deferred Income Tax Benefit

   Deferred income tax benefit was $0.40 million in 2001 compared with $0.43
million in 2000. Deferred income tax benefits in 2001 and 2000 resulted from a
decrease in the deferred tax asset valuation allowance, primarily the result of
our analysis of realizing some portion of our future tax benefit of tax loss
carryforwards and additional temporary differences. There were no income taxes
in 1999 due to net losses.

Liquidity and Capital Resources

   Cash used in operating activities was $3.39 million in 2001 compared to cash
provided by operating activities of $0.45 million in 2000, a decrease of $3.84
million. The 2001 decrease was primarily due to a reduction in accounts payable
of $3.29 million and a net loss of $4.17 million, offset by the noncash impact
of depreciation and amortization of $3.86 million.

   Cash from operating activities increased $6.53 million in 2000 compared with
1999. Cash provided from operating activities in 2000 resulted primarily from
net income, excluding the noncash impact of depreciation and amortization,
offset by higher receivables due primarily to higher revenue.

   Cash used in investing activities decreased $9.40 million in 2001 compared
with 2000. The decrease was primarily due to a reduction in cash used for
acquisitions, particularly offset by increased capital expenditures and
courseware and license purchases. Acquisition expenditures were $2.48 million,
$14.96 million and $.33 million for 2001, 2000 and 1999, respectively. In 2001,
we purchased Mastery Point Learning Systems, and in 2000, we purchased
ComputerPREP.

   Cash provided by financing activities decreased $25.38 million to $1.66
million in 2001 compared to 2000. This decrease was primarily due to the
absence of private placements of stock and lower proceeds from the issuances of
common stock for stock option exercises.

   Cash provided by financing activities increased $23.10 million to $27.04
million in 2000 compared with 1999. This increase was primarily due to higher
proceeds from the issuances of common stock, partially offset by a decrease in
borrowings. In 2000, we sold 3.3 million shares of common stock in private
placements and issued 2.1 million shares of our common stock upon the exercise
of stock options and warrants. In 1999, we sold $3.06 million of convertible
debentures.

   In October, 2001, the Company received $2.5 million from Hunt Capital Growth
Fund II, L.P. ("Hunt Capital") pursuant to an issuance to Hunt Capital of a
Subordinated Secured Convertible Note. The Note is secured by all of the assets
of the Company, has a five-year term, carries a 10% coupon, and does not
require any interest payments until maturity. The Note is convertible into
Common Stock of the Company at $0.795, which was 120% of the ten-day average
closing market price of the Common Stock.

                                      14

<PAGE>

   Management believes that, with respect to its current operations, cash on
hand and funds from operations, together with its credit facility, will be
sufficient to cover reasonably foreseeable working capital and capital
expenditure requirements. Acquisition transactions, if any, are expected to be
financed through a combination of cash on hand and from operations, and the
possible issuance from time to time of long-term debt or other securities.
Future financings, if required, will be arranged to meet Prosoft's requirements
with the timing, amount and form of issue depending on the prevailing market
and general economic conditions.

Additional Factors That May Affect Future Results of Operations and Market
Price of Stock

   The discussions in this Form 10-K concerning future financing needs, changes
in business strategy, future profitability and factors affecting liquidity
contain forward-looking statements. Although management believes that these
statements are reasonable in view of the facts available to it, no assurance
can be given that all of these statements will prove to be accurate. Numerous
factors could have a material effect upon whether these projections could be
realized or whether these trends will continue. Among these factors are those
set forth in the following section, as well as those discussed elsewhere
herein.

Possibility of Continuing Losses

   We have incurred net losses of approximately $54 million from our inception
on December 5, 1995, through July 31, 2001. For the year ended July 31, 2000,
we reported net income of $1.62 million, but for the year ended July 31, 2001,
we reported a net loss of $4.17 million, despite significant revenue growth.
Our ability to continue to generate revenue growth in the future is subject to
uncertainty. In order to achieve profitability, we must continue to increase
our revenues, and manage our expenses. We cannot assure you that we will be
able to continue to increase revenues, manage expenses, or achieve
profitability.

Uncertainty of Future Capital Requirements

   Since our inception, we have been dependent on outside financing to fund our
operations and growth. We have raised approximately $82 million from private
placements and incurred losses of approximately $54 million from our inception
through July 31, 2001. We experienced revenue growth in the last two fiscal
years as a result of the implementation of the new business strategy. This
shift in our business strategy has provided increased revenues and if we
continue to invest in our products and brands at current levels and revenues
continue to grow as in the last fiscal year, we expect to return to
profitability for the next fiscal year. We currently expect that cash on hand
and funds from operations will be sufficient to meet our minimum foreseeable
working capital, capital expenditure and capital lease requirements for the
next 12 months. However, if we do not attain profitability and generate
positive cash flow as anticipated, our ability to continue as a going concern
may be jeopardized unless additional outside financing can be obtained.

Uncertainty of Future Funding

   If we do not return to profitability and generate positive cash flow as
anticipated, we may need additional outside financing. Even if we do maintain
profitability and positive cash flow, we may need outside financing to fund
further growth of our business. We do not know at this time when we may need
additional funds, and we cannot be certain that if we do need additional funds
in the future, we will be able to obtain them on terms satisfactory to us, if
at all. If we are unable to raise additional funds when necessary, we may have
to reduce planned expenditures, scale back our operations or growth, or enter
into financing arrangements on terms which we would not otherwise accept.

Intense Competition in Training Market

   We face substantial competition in the training market. Competition in the
information technology training market is intense, rapidly changing and
affected by the rapidly evolving nature of the information technology industry.
A number of other companies offer products and services similar to ours, and
additional new competitors may emerge in the future. Many of our existing
competitors have substantially greater capital resources, technical expertise,
marketing experience, research and development status, established customers
and facilities than we do. As a result, there is a risk that we will not be
able to successfully compete with existing and future competitors, which would
adversely affect our financial performance.

                                      15

<PAGE>

Need to Respond to Rapid Technological Changes

   In our industry, technology advances rapidly and industry standards change
frequently. To remain competitive and return to profitability, we must
continually enhance our existing products and services and promptly introduce
new products, services, and technologies to meet the changing demands of our
customers. Our failure to respond to technological changes quickly will
adversely affect our financial performance.

Effect of Market Overhang on Stock Price

   Future sales of our Common Stock could depress the market price of our
Common Stock. In addition, the perception that such sales will occur could also
adversely affect the price. As long as certain registration statements which
have been filed with the SEC remain effective, the selling stockholders under
those registration statements may sell approximately 6.2 million shares, or
approximately 25% of the shares of Common Stock currently outstanding on a
diluted basis. These shares were privately issued and are otherwise subject to
restrictions on resale under securities laws. Any such sales, or even the
market perception that such sales could be made, may depress the price of the
Common Stock. The majority of the shares registered are already saleable under
Rule 144.

Volatility of Stock Price

   Our Common Stock has experienced substantial price volatility, which may
continue to occur in the future. Additionally, the stock market from time to
time experiences significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These broad market
fluctuations may also adversely affect the market price of our Common Stock. In
addition to such broad market fluctuations, factors such as the following may
have a significant effect on the market price of our Common Stock:

    .  fluctuations in our operating results

    .  the perception by others of our ability to obtain any necessary new
       financing

    .  limited trading market for our Common Stock

    .  announcements of new ventures or products and services by us or our
       competitors

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

   We have risk related to currency exchange rate fluctuations. A portion of
our cash flows is expected to be received in non-U.S. currencies.

                                      16

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                      PROSOFTTRAINING.COM AND PREDECESSOR

           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
                                                                                                    Page
                                                                                                    ----
<S>                                                                                                 <C>
Report of Independent Certified Public Accountants.................................................  18

Financial Statements of ProsoftTraining.com
   Consolidated Balance Sheets at July 31, 2001 and 2000...........................................  19
   Consolidated Statements of Operations for the years ended July 31, 2001, 2000 and 1999..........  20
   Consolidated Statement of Stockholders' Equity for the years ended July 31, 2001, 2000 and 1999.  21
   Consolidated Statements of Cash Flows for the years ended July 31, 2001, 2000 and 1999..........  22
   Notes to Consolidated Financial Statements......................................................  23

Schedule
   Schedule II--Valuation and Qualifying Accounts..................................................  36
</TABLE>

                                      17

<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
ProsoftTraining.com

   We have audited the accompanying consolidated balance sheets of
ProsoftTraining.com and subsidiaries as of July 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended July 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
ProsoftTraining.com and subsidiaries at July 31, 2001 and 2000 and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended July 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.

   We have also audited Schedule II of ProsoftTraining.com for each of the
three years in the period ended July 31, 2001. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.

                                          /s/ GRANT THORNTON LLP

Dallas, Texas
September 14, 2001, except for Note 13, as to which the date is October 16,
  2001

                                      18

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                  July 31,
                                                                             ------------------
                                                                               2001      2000
                                                                             --------  --------
<S>                                                                          <C>       <C>
                                  ASSETS
Current assets:
   Cash and cash equivalents................................................ $  5,136  $ 13,044
   Accounts receivable, less allowances of $1,003 and $251..................    3,663     4,894
   Prepaid expenses and other current assets................................      615       195
                                                                             --------  --------
       Total current assets.................................................    9,414    18,133

   Deferred income taxes....................................................      925       425
   Property and equipment, net..............................................    1,735     1,068
   Goodwill, net of accumulated amortization of $3,450 and $1,088...........   39,082    37,637
   License agreements, net of accumulated amortization of $1,075 and $541...    4,060     1,256
                                                                             --------  --------
       Total assets......................................................... $ 55,216  $ 58,519
                                                                             ========  ========
                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable - trade................................................. $  2,352  $  5,147
   Accrued expenses.........................................................    2,633     2,188
   Current portion of capital lease obligations.............................      121        85
   Accrued restructure costs................................................      161       133
                                                                             --------  --------
       Total current liabilities............................................    5,267     7,553
   Obligations under capital leases, net of current portion.................      158       246
   Other....................................................................      200       291
                                                                             --------  --------
       Total liabilities....................................................    5,625     8,090
                                                                             --------  --------
   Commitments and contingencies............................................       --        --
   Common stock subject to redemption.......................................       19        57
Stockholders' equity:
   Common shares, par value $.001 per share: authorized shares: 75,000,000;
     outstanding: 23,686,898 and 22,645,462 shares..........................       24        23
   Additional paid-in capital...............................................  104,016   100,562
   Accumulated deficit......................................................  (54,394)  (50,227)
   Accumulated other comprehensive income...................................        1        89
   Less common stock in treasury, at cost: 11,912 shares....................      (75)      (75)
                                                                             --------  --------
       Total stockholders' equity...........................................   49,572    50,372
                                                                             --------  --------
       Total liabilities and stockholders' equity........................... $ 55,216  $ 58,519
                                                                             ========  ========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      19

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)


<TABLE>
<CAPTION>
                                     Fiscal Years Ended July 31,
                                     --------------------------
                                      2001     2000      1999
                                     -------  -------  --------
<S>                                  <C>      <C>      <C>
Revenues:
   Services......................... $ 5,334  $10,426  $  6,680
   Courseware.......................  22,513    6,608     1,565
   Certification....................   3,578    2,538       471
                                     -------  -------  --------
       Total revenues...............  31,425   19,572     8,716
                                     -------  -------  --------
Costs and expenses:
   Cost of revenues.................  14,465    9,891     8,115
   Content development..............   2,074    1,199       957
   Sales and marketing..............   7,506    2,282     1,613
   General and administrative.......   8,035    4,158     3,074
   Depreciation and amortization....   3,613      981     2,435
   Restructuring charge (credit)....     664     (366)    3,723
                                     -------  -------  --------
       Total costs and expenses.....  36,357   18,145    19,917
                                     -------  -------  --------
Income (loss) from operations.......  (4,932)   1,427   (11,201)
Interest income.....................     408      200        78
Interest expense....................     (43)    (421)     (484)
                                     -------  -------  --------
Income (loss) before income taxes...  (4,567)   1,206   (11,607)
Income tax benefit..................     400      425        --
                                     -------  -------  --------
Net income (loss)................... $(4,167) $ 1,631  $(11,607)
                                     =======  =======  ========

Net income (loss) per share:
   Basic............................ $ (0.18) $  0.09  $  (0.90)
                                     =======  =======  ========
   Diluted.......................... $ (0.18) $  0.08  $  (0.90)
                                     =======  =======  ========
Weighted average shares outstanding:
   Basic............................  23,065   17,297    12,845
                                     =======  =======  ========
   Diluted..........................  23,065   20,455    12,845
                                     =======  =======  ========
</TABLE>

       The accompanying notes are an integral part of these statements.


                                      20

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                     Accumulated
                                              Common Stock    Additional Treasury Stock                 Other
                                            -----------------  Paid-in   -------------  Accumulated Comprehensive
                                              Shares   Amount  Capital   Shares  Amount   Deficit      Income      Total
                                            ---------- ------ ---------- ------  ------ ----------- ------------- --------
<S>                                         <C>        <C>    <C>        <C>     <C>    <C>         <C>           <C>
Balances at August 1, 1998................. 11,502,079  $12    $ 47,030  11,912   $(75)  $(40,251)       $--      $  6,716
Net loss...................................         --   --          --      --     --    (11,607)        --       (11,607)
Foreign currency translation adjustment....         --   --          --      --     --         --         10            10
                                                                                                                  --------
Total comprehensive loss...................         --   --          --      --     --         --         --       (11,597)
Issuance of stock warrants.................         --   --       1,124      --     --         --         --         1,124
Common stock issued for debenture interest.     38,113   --         134      --     --         --         --           134
Conversion of debentures and warrants to
 stock.....................................    491,250   --         539      --     --         --         --           539
Issuance of common stock for cash, net of
 issuance costs of $113....................    678,000    1         564      --     --         --         --           565
Acquisition of business....................    311,000   --         567      --     --         --         --           567
Issuance of common stock for services......     20,000   --          20      --     --         --         --            20
Issuance of common stock in satisfaction of
 put provisions............................    771,631    1       1,969      --     --         --         --         1,970
Exercise of stock options, warrants and
 other transactions........................    485,060   --         434      --     --         --         --           434
                                            ----------  ---    --------  ------   ----   --------       ----      --------
Balances at July 31, 1999.................. 14,297,133   14      52,381  11,912    (75)   (51,858)        10           472
Net income.................................         --   --          --      --     --      1,631         --         1,631
Foreign currency translation adjustment....         --   --          --      --     --         --         79            79
                                                                                                                  --------
Total comprehensive income.................         --   --          --      --     --         --         --         1,710
Common stock issued for debenture interest.     18,937   --          82      --     --         --         --            82
Conversion of debentures and warrants to
 stock.....................................  1,787,500    2       1,988      --     --         --         --         1,990
Issuance of common stock for cash, net of
 issuance costs of $1,248..................  3,278,032    4      24,695      --     --         --         --        24,699
Acquisition of business....................  1,142,422    1      17,865      --     --         --         --        17,866
Exercise of stock options, warrants and
 other transactions........................  2,121,438    2       3,551      --     --         --         --         3,553
                                            ----------  ---    --------  ------   ----   --------       ----      --------
Balances at July 31, 2000.................. 22,645,462   23     100,562  11,912    (75)   (50,227)        89        50,372
Net loss...................................         --   --          --      --     --     (4,167)        --        (4,167)
Foreign currency translation adjustment....         --   --          --      --     --         --        (88)          (88)
                                                                                                                  --------
Total comprehensive loss...................         --   --          --      --     --         --         --        (4,255)
Issuance of common stock for employee
 stock purchase plan.......................     28,342   --          30      --     --         --         --            30
Acquisition of business....................    164,496   --       1,500      --     --         --         --         1,500
Issuance of common stock for services......     20,401   --          61      --     --         --         --            61
Exercise of stock options, warrants and
 other transactions........................    828,197    1       1,863      --     --         --         --         1,864
                                            ----------  ---    --------  ------   ----   --------       ----      --------
Balances at July 31, 2001.................. 23,686,898  $24    $104,016  11,912   $(75)  $(54,394)      $  1      $ 49,572
                                            ==========  ===    ========  ======   ====   ========       ====      ========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      21

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)


<TABLE>
<CAPTION>
                                                                                  Years Ended July 31,
                                                                              ---------------------------
                                                                               2001      2000      1999
                                                                              -------  --------  --------
<S>                                                                           <C>      <C>       <C>
Operating Activities:
   Net income (loss)......................................................... $(4,167) $  1,631  $(11,607)
   Adjustments to reconcile net income (loss) to cash provided by
     (used in) operating activities:
       Depreciation and amortization.........................................   3,861       981     2,435
       Operating expenses paid in common stock...............................      61        --        20
       Restructuring.........................................................     157      (366)    1,457
       Disposition of property and equipment.................................      --        --        49
       Accretion of debt discount............................................      --        99       145
       Debenture interest paid in common stock...............................      --        82       134
       Deferred income taxes.................................................    (400)     (425)       --
       Changes in operating assets and liabilities:
          Accounts receivable................................................     925    (1,321)      231
          Prepaid expenses and other current assets..........................    (845)      207       (65)
          Accounts payable...................................................  (3,285)     (377)      360
          Accrued expenses...................................................     491       545      (439)
          Accrued restructure costs..........................................    (192)     (602)    1,230
          Deferred revenue...................................................      --        --       (23)
                                                                              -------  --------  --------
              Net cash provided by (used in) operating activities............  (3,394)      454    (6,073)
Investing Activities:
   Acquisitions, net of cash acquired........................................  (2,479)  (14,961)     (330)
   Purchases of property and equipment.......................................  (1,004)     (608)      (26)
   Courseware and license purchases..........................................  (2,672)       --        --
   Decrease in notes receivable from officers/stockholders...................      --        13       326
                                                                              -------  --------  --------
              Net cash used in investing activities..........................  (6,155)  (15,556)      (30)
Financing Activities:
   Issuance of common stock..................................................   1,757    28,281     1,268
   Principal payments on debt and capital leases.............................     (93)   (1,433)     (528)
   Proceeds from convertible debentures......................................      --        --     3,060
   Other.....................................................................      --       191       136
                                                                              -------  --------  --------
              Net cash provided by financing activities......................   1,664    27,039     3,936
Effects of exchange rates on cash............................................     (23)      (46)        9
                                                                              -------  --------  --------
   Net increase (decrease) in cash and cash equivalents......................  (7,908)   11,891    (2,158)
   Cash and cash equivalents at beginning of year............................  13,044     1,153     3,311
                                                                              -------  --------  --------
   Cash and cash equivalents at end of year.................................. $ 5,136  $ 13,044  $  1,153
                                                                              =======  ========  ========
Supplementary disclosure of cash paid during the year for:
       Interest.............................................................. $    41  $    209  $    244
                                                                              =======  ========  ========
       Income taxes.......................................................... $    --  $     --  $     --
                                                                              =======  ========  ========
Supplementary disclosure of non-cash investing financing activities:
   Equipment acquired under capital leases................................... $    --  $     --  $     --
                                                                              =======  ========  ========
   Acquisition of businesses:
       Assets acquired....................................................... $ 4,368  $ 35,616  $  1,404
       Liabilities assumed...................................................    (389)   (5,375)     (507)
       Common stock issued...................................................  (1,500)  (15,280)     (567)
                                                                              -------  --------  --------
   Net cash paid for acquisitions............................................ $ 2,479  $ 14,961  $    330
                                                                              =======  ========  ========
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      22

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       (In thousands, except share data)

1. Summary of Significant Accounting Policies

  Business

   ProsoftTraining.com is a provider of information technology (IT) skills
content, training and certification. We sell and license our courseware,
instruction services and Internet skills certification, Certified Internet
Webmaster, or CIW, to training companies, internal corporate training
departments and academic institutions around the world. Our products allow
individuals to develop, upgrade and certify their IT skills.

  Consolidation

   The financial statements include the accounts of the Company and its wholly
owned subsidiaries ComputerPREP, ProsoftTraining Europe Limited and Prosoft
Training Hong Kong Limited. Intercompany transactions and balances are
eliminated in consolidation.

  Currency Translation

   Assets and liabilities of foreign functional currency financial statements
are translated into United States dollars at the exchange rate in effect at the
close of the period. Income statement amounts are translated at the average
exchange rates during the period. The Company accumulates translation
adjustments as a separate component of stockholders' equity.

  Cash Equivalents

   The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

  Concentration of Credit Risk

   Financial instruments that subject the Company to credit risk consist
primarily of accounts receivable. Credit risk with respect to accounts
receivable is generally not concentrated due to the number of customers
comprising the Company's customer base and their geographic dispersion. The
Company performs ongoing credit evaluations of its customers and maintains an
allowance for potential credit losses.

  Financial Instruments

   The fair value of the Company's financial instruments, consisting of cash
and cash equivalents and accounts receivable approximate their carrying values.

  Advertising Costs

   The Company expenses the costs of advertising as incurred. Advertising
expenses were $107, $104, and $91 in 2001, 2000 and 1999, respectively.

  Property and Equipment

   Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, generally two to seven years. Leasehold improvements are
amortized over the shorter of the life of the lease or the improvement.

                                      23

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


  Goodwill and License Agreements

   Goodwill is the excess of the purchase price over the fair value of tangible
net assets acquired in business combinations accounted for as purchases.
License agreements are those rights acquired from others through business
combinations to produce and distribute courseware and other publications.
Goodwill and license agreements are amortized on a straight-line basis over a
period of seven to twenty years, subject to impairment based on the carrying
value exceeding fair value.

  Valuation of Long-Lived Assets

   The Company evaluates the carrying value of long-lived assets, including
goodwill, whenever events or changes in circumstances indicate the carrying
amount may not be fully recoverable. If the total of the expected future
undiscounted cash flows is less than the carrying amount of the asset, a loss
is recognized based on the amount by which the carrying value exceeds the
asset's fair value.

  Revenue Recognition

   The Company derives revenue from three primary sources, services, courseware
and certification. Services revenue includes training and consulting services
and is recognized when the services are provided. Courseware revenue is derived
from the sale of books or licensing of our training materials for reproduction
or repurposing, or under OEM arrangements. Courseware revenue is recognized
when the products are shipped. Certification revenue includes testing fees from
administration of our certification tests and annual fees received from CIW
Authorized Training Providers ("CIW ATP"). Testing fees are recognized when the
tests are administered and CIW ATP fees are recognized when the contract is
signed or, if the Company has an obligation for continuing involvement with the
CIW ATP, revenue is recognized over that period of the obligation.

  Stock-based Compensation

   The Company accounts for stock-based compensation to employees using the
intrinsic value method. Under this method, compensation cost for stock-based
compensation to employees is the excess, if any, of the quoted market price of
the stock at the grant date over the amount an employee must pay to acquire the
stock and is amortized over the related vesting period, or immediately if no
further vesting criteria exists.

  Use of Estimates

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and revenues and expenses during the
period reported. Actual results could differ from those estimates.

  Income (Loss) Per Share

   The Company uses the weighted-average number of common shares outstanding
during each period to compute basic income (loss) per common share. Diluted
income (loss) per share is computed using the weighted-average number of common
shares outstanding plus the number of additional common shares that would have
been outstanding if dilutive potential common shares had been issued. In years
2001 and 1999, all potential common shares were anti-dilutive.

                                      24

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


  Recent Account Pronouncements

   In June 2001, the Financial Accounting Standards Board approved for issuance
Statement of Financial Accounting Standards No. 141 (SFAS 141), Business
Combinations. This standard eliminates the pooling method of accounting for
business combinations initiated after June 30, 2001. In addition, SFAS 141
addresses the accounting for intangible assets and goodwill acquired in a
business combination. This portion of SFAS 141 is effective for business
combinations completed after June 30, 2001. The Company does not expect SFAS
141 to have a material effect on the Company's financial position, results of
operations or cash flows.

   In June 2001, the Financial Accounting Standards Board approved for issuance
Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and
Intangible Assets, which clarifies the accounting for impairments to purchased
goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets
with indefinitive lives will no longer be amortized, but will be tested for
impairment annually and also in the event of an impairment indicator. SFAS 142
is effective for fiscal years beginning after December 15, 2001, with early
adoption permitted for companies with fiscal years beginning after March 15,
2001, if their first quarter financial statements have not previously been
issued. The Company expects that the adoption of SFAS 142 will increase annual
operating income by approximately $2,700. The Company expects to adopt SFAS 142
on August 1, 2002.

   In August 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 144 (SFAS 144),
Accounting for the Impairment or Disposal of Long-Lived Assets. This standard
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This standard establishes a single framework, based on
Statement of Financial Accounting Standards No. 121 (SFAS 121), Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, for long-lived assets to be disposed of by sale and resolves certain
implementation issues related to SFAS 121. SFAS 144 is effective for fiscal
years beginning after December 15, 2001. The Company does not expect SFAS 144
to have a material effect on the Company's financial position, results of
operations or cash flows.

  Reclassifications

   Certain reclassifications were made to the prior years' consolidated
financial statements to conform to the urrent year presentation.

2. Restructuring Charge

   During 2001, the Company recorded a $664 restructuring charge related to our
decision to disinvest in the instructor-led training business and realign our
sales structure.

   During 2000, the Company recorded a $366 reversal of our 1999 restructuring
charge related to negotiated lease termination agreements on several facilities
at a cost lower than originally anticipated.

                                      25

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


   During 1999, the Company recorded a $3,723 charge for restructuring
associated with our decision to exit the retail training business. The
following table displays the activity and balances of the accrued restructure
costs account:

<TABLE>
<CAPTION>
                         Severance and  Property and
                         Other Related   Equipment   Leased Facilities
                         Employee Costs Write-downs   and Other Costs   Total
                         -------------- ------------ ----------------- -------
<S>                      <C>            <C>          <C>               <C>
Restructure charge......     $ 285        $ 1,104         $ 2,334      $ 3,723
Settlements.............      (234)        (1,104)         (1,155)      (2,493)
                             -----        -------         -------      -------
Balance at July 31, 1999        51             --           1,179        1,230
Settlements.............       (51)            --            (680)        (731)
Restructure adjustments.        --             --            (366)        (366)
                             -----        -------         -------      -------
Balance at July 31, 2000     $  --        $    --         $   133      $   133
Restructing Charge......       229             --             436          665
Settlements.............      (229)            --            (407)        (636)
                             -----        -------         -------      -------
Balance July 31, 2001...     $  --        $    --         $   162      $   162
                             =====        =======         =======      =======
</TABLE>

3. Acquisitions

   In July 2000, the Company purchased all of the outstanding common stock of
ComputerPREP, Inc. ("ComputerPREP"), a wholly owned subsidiary of Drake
Personnel (New Zealand) Limited ("Drake"), in exchange for $15,000 and
1,142,422 shares of the Company's common stock and warrants to purchase 600,000
shares of common stock. Shares and warrants issued in connection with this
purchase have been valued at $17,800. As a result of the acquisition of
ComputerPREP, which was accounted for as a purchase, goodwill of $36,000 was
recorded by the Company. In July 2001, goodwill was reduced $491 due to the
reversal of accrued contract termination costs at the date of acquisition, at a
cost lower than originally anticipated.

   In December 2000, the Company acquired the assets of Mastery Point Learning
Systems ("MPLS") in exchange for $2,643 and 164,496 shares of the Company's
common stock. Shares issued in connection with this purchase have been valued
at $1,500. As a result of this acquisition, which was accounted for as a
purchase, goodwill of $4,167 was recorded by the Company.

   The operating results of the acquired businesses have been included in the
consolidated statements of operations from the dates of acquisition. Pro forma
operating results, giving effect to the MPLS acquisition, are not presented
because the pro forma effect is not materially different than the Company's
actual results. The following unaudited pro forma information presents summary
consolidated results of operations of the Company and ComputerPREP as if this
acquisition had occurred at the beginning of 2000. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made as of these dates or
of results which may occur in the future.

<TABLE>
<CAPTION>
                   Year Ended
                  July 31, 2000
                  -------------
<S>               <C>
Revenues.........    $31,579
Net income.......    $ 4,203
Income per share:
   Basic.........    $   .21
   Diluted.......    $   .18
</TABLE>

                                      26

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


4. Property and Equipment

   Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                           July 31,
                                         -------------
                                          2001   2000
                                         ------ ------
<S>                                      <C>    <C>
Computer equipment and software......... $2,514 $1,486
Office equipment, furniture and fixtures  1,096    786
                                         ------ ------
                                          3,610  2,272
Less accumulated depreciation...........  1,875  1,204
                                         ------ ------
Property and equipment, net............. $1,735 $1,068
                                         ====== ======
</TABLE>

5. Debt

   In November 1998, the Company issued $3,200 of 13% convertible debentures.
The debentures were to mature in November 2003 and were convertible into the
Company's common stock at $1.60 per share. In connection with the issuance of
these debentures, the Company issued detachable stock warrants. The value
assigned to the warrants of $1,124 was reflected as debt discount and was
accreted over the term of the debentures using the interest method. In January
2000, the Company exercised its right to force conversion of all unconverted
debentures of $2,490 into the Company's common stock. The debentures were
converted into 1,556,250 shares of common stock. As a result of this
conversion, the convertible debenture principal and related debt discount have
been reclassified to stockholders' equity.

   The Company currently has a $3,500 credit facility with a bank bearing
interest at a current rate of 12% per annum. Available borrowings are based on
a formula of eligible accounts receivable. The term of the credit facility is
for one year, and from year to year thereafter, unless terminated by the
Company or the bank. As of July 31, 2001 and 2000, there were no amounts
outstanding under this credit facility.

6. Stock Options, Warrants and Put Rights on Common Stock

  Stock options

   The Company's stock option plans provide for the granting of options to
purchase shares of the Company's common stock to employees, officers, directors
and consultants. The plans include nonstatutory options and incentive stock
options. Options generally vest over three to four years and expire no earlier
than five years and no later than ten years after the date of grant. The plans
authorized the issuance of an aggregate of 6,573,000 shares of common stock. As
of July 31, 2001, 793,540 options were available for grant under the plans.

                                      27

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


   Stock option transactions are as follows:

<TABLE>
<CAPTION>
                                          Weighted Average
                                Shares     Exercise Price
                              ----------  ----------------
<S>                           <C>         <C>
Outstanding at August 1, 1998  2,118,620       $4.99
   Granted...................  2,466,923       $1.53
   Exercised.................   (254,241)      $1.11
   Cancelled................. (1,979,471)      $5.15
                              ----------
Outstanding at July 31, 1999.  2,351,831       $1.96
   Granted...................  1,017,601       $7.91
   Exercised.................   (931,683)      $2.29
   Cancelled.................   (250,395)      $4.27
                              ----------
Outstanding at July 31, 2000.  2,187,354       $4.32
   Granted...................  2,635,758       $4.93
   Exercised.................   (516,907)      $2.04
   Cancelled.................   (434,687)      $7.98
                              ----------
Outstanding at July 31, 2001.  3,871,518       $4.63
                              ==========
Exercisable at July 31, 1999.  1,500,294       $2.19
                              ==========
Exercisable at July 31, 2000.  1,232,248       $2.20
                              ==========
Exercisable at July 31, 2001.  1,214,544       $4.13
                              ==========
</TABLE>

   The following table summarizes information concerning options outstanding
and exercisable as of July 31, 2001:

<TABLE>
<CAPTION>
                     Options Outstanding       Options Exercisable
                ------------------------------ -------------------
                                    Weighted
                          Weighted   Average              Weighted
                          Average   Remaining             Average
Range of                  Exercise Contractual            Exercise
Exercise Prices  Number    Price      Life      Number     Price
--------------- --------- -------- -----------  -------   --------
<S>             <C>       <C>      <C>         <C>        <C>
$1.00--$4.00... 2,368,223  $ 1.42   5.4 years  840,161     $ 1.59
$5.00--$9.50...   722,500    8.74   4.2 years  176,950       8.53
$10.00--$15.37.   780,795   10.56   3.9 years  197,433      10.98
</TABLE>

   The Company has adopted only the disclosure provisions of Statement of
Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, for employee stock options and continues to apply Accounting
Board Opinion No. 25, Accounting for Stock Issued to Employees, for recording
stock options granted. Pro forma information regarding net loss and net loss
per share is required by SFAS 123 as if the Company had accounted for its
stock-based awards to employees under the fair value method. The fair value of
the Company's stock-based awards to employees was estimated using the
Black-Scholes multiple option pricing model.


   The fair value of the Company's stock-based awards to employees was
estimated assuming no expected dividends and the following assumptions:

<TABLE>
<CAPTION>
                                 2001    2000    1999
                                ------- ------- -------
<S>                             <C>     <C>     <C>
Weighted average expected life. 4 years 3 years 3 years
Expected stock price volatility    109%    100%     60%
Risk-free interest rate........    5.4%    6.7%    5.5%
</TABLE>

                                      28

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


   For purpose of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information for the years ended July 31 is as follows:

<TABLE>
<CAPTION>
                                         2001     2000     1999
                                        -------  ------  --------
<S>                                     <C>      <C>     <C>
Net income (loss)--actual.............. $(4,167) $1,631  $(11,607)
Net loss--pro forma.................... $(7,676) $ (705) $(13,412)
Basic income (loss) per share--actual.. $  (.18) $  .09  $   (.90)
Basic loss per share--pro forma........ $  (.33) $ (.03) $  (1.04)
Diluted income (loss) per share--actual $  (.18) $  .08  $   (.90)
Diluted loss per share--pro forma...... $  (.33) $ (.03) $  (1.04)
</TABLE>

   The weighted average fair value of options granted during the years ended
July 31, 2001, 2000 and 1999 was $3.53, $6.93 and $1.88, respectively.

  Warrants

   During 1999, the Company issued warrants to purchase 1,617,500 shares of
common stock to purchasers of its convertible debentures at $1.10 per share.
Warrants for 337,500 shares of common stock were exercised at prices ranging
from $1.00 to $1.10 and warrants for 4,999 shares expired. During 2000, the
Company issued warrants to purchase 1,374,035 shares of common stock
exercisable at $.01 to $16.50 per share. Warrants for 1,188,209 shares of
common stock were exercised at prices ranging from $1.10 to $3.38. During 2001,
the Company issued warrants to purchase 17,083 shares of common stock
exercisable at $1.25 to $10.13 per share. Warrants for 225,150 shares of common
stock were exercised at prices ranging from $1.10 to $11.00 and warrants for
5,000 shares expired. As of July 31, 2001, warrants for 1,497,759 shares of
common stock, exercisable at $.01 to $20.06 per share and expiring through
2010, remained outstanding.

  Put Rights on Common Stock

   In connection with prior acquisitions, the Company guaranteed the value of
the common stock issued in the acquisitions by granting put rights covering
68,728 and 152,809 shares at $6.275 and $11.125 per share, respectively. The
Company is obligated through these put rights to repurchase the shares for
cash. As a result, the redemption amount has been reclassified from permanent
equity to temporary equity under the caption, "common stock subject to
redemption". During 1998, 11,912 shares were repurchased under these rights.
During 1999, the Company issued 567,098 shares of common stock in settlement of
put rights covering 56,816 and 147,717 shares at $6.275 and $11.125 per share,
respectively. During 2001, put rights covering 3,394 shares expired. As of July
31, 2001 and 2000, put rights covering 1,698 shares at $11.125 per share and
5,092 shares at $11.125 per share remained outstanding, respectively.

                                      29

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)


7. Commitments

   The Company leases certain facilities as well as computers, production and
other office equipment under noncancellable lease agreements. The Company's
future minimum lease payments at July 31, 2001 under such agreements are as
follows:

<TABLE>
<CAPTION>
                                                         Capital Operating
                                                         Leases   Leases
                                                         ------- ---------
<S>                                                      <C>     <C>
2002....................................................  $ 130   $1,051
2003....................................................     76      845
2004....................................................     64      823
2005....................................................     58      781
2006....................................................     10      681
                                                          -----   ------
Future Minimum Lease Payments...........................    338   $4,181
                                                                  ======
Less amounts representing interest......................    (59)
                                                          -----
Present value of minimum lease payments.................    279
Less current portion....................................   (121)
                                                          -----
Obligations under capital leases, net of current portion  $ 158
                                                          =====
</TABLE>

   Assets held under capital leases are included in property and equipment and
had a total cost of $351, and a net book value of $0 at July 31, 2001 and 2000.

   Rent expense for the periods ended July 31, 2001, 2000, and 1999 totaled
$788, $298, and $793 respectively.

   In 2001, the Company entered into an agreement with iGeneration ("iGen") for
the purchase of its preferred stock. In September 2001, the Company invested
$188 in iGen preferred stock and is obligated under the agreement to make an
additional investment of $312 by November 30, 2001, provided iGen's existing
investors invest $1,248 by November 30, 2001.

8. Earnings per Share

   The following represents a reconciliation of weighted-average common shares
outstanding for purposes of calculating basic and diluted net income (loss) per
share:

<TABLE>
<CAPTION>
                                                Year ended July 31,
                                          --------------------------------
                                             2001       2000       1999
                                          ---------- ---------- ----------
<S>                                       <C>        <C>        <C>
Average common shares outstanding........ 23,065,271 17,296,560 12,845,182
Assumed conversions:
   Stock options.........................         --  1,731,361         --
   Warrants..............................         --  1,427,094         --
                                          ---------- ---------- ----------
Diluted average common shares outstanding 23,065,271 20,455,015 12,845,182
                                          ========== ========== ==========
</TABLE>

   In 2001 and 1999, all potential common shares were anti-dilutive. In 2000,
outstanding stock options and warrants not included in the computation of
diluted earnings per share because their effect would be anti-dilutive totaled
1,064,375 shares.

                                      30

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)



9. Contingencies

   The Company is engaged in the defense of certain claims and lawsuits arising
out of the ordinary course and conduct of its business, the outcome of which is
not determinable at this time. In the opinion of management, any liability that
might be incurred by the Company upon the resolution of these claims and
lawsuits will not, in the aggregate, have a material adverse effect on the
Company's consolidated results of operations, cash flows or financial
condition.

10. Income Taxes

   A reconciliation of income tax (benefit) expense using the statutory federal
income tax rate of 34% is as follows:

<TABLE>
<CAPTION>
                                                  Year ended July 31,
                                               -------------------------
                                                2001     2000     1999
                                               -------  -------  -------
<S>                                            <C>      <C>      <C>
Income tax expense (benefit) at statutory rate $(1,553) $   410  $(3,946)
Amortization of non-deductible goodwill.......     803      271      200
State income taxes, net of federal benefit....     (99)      72     (696)
Other.........................................     (72)    (152)     (59)
Increase in valuation allowance...............     521   (1,026)   4,501
                                               -------  -------  -------
Deferred income tax benefit................... $  (400) $  (425) $    --
                                               =======  =======  =======
</TABLE>

   Deferred income taxes reflect the tax consequences on future years of
differences between the tax basis of assets and liabilities and their basis for
financial reporting purposes. Temporary differences that give rise to deferred
tax assets are as follows:

<TABLE>
<CAPTION>
                                   2001      2000      1999
                                 --------  --------  --------
<S>                              <C>       <C>       <C>
Net operating loss carryforwards $ 23,748  $ 21,712  $ 18,601
Accrued expenses................      247       157       579
Accounts receivable.............      210       105        85
Property and equipment..........      313       329        --
                                 --------  --------  --------
                                   24,518    22,303    19,265
Other...........................      (46)      (46)      (29)
                                 --------  --------  --------
                                   24,472    22,257    19,236
Valuation allowance.............  (23,547)  (21,832)  (19,236)
                                 --------  --------  --------
Net deferred tax assets......... $    925  $    425  $     --
                                 ========  ========  ========
</TABLE>

   As a result of the significant net losses incurred in fiscal 1999 and 1998,
the Company recorded a valuation allowance to fully reserve its deferred tax
asset. However, as a result of the restructuring of its operations and the
positive operating results for fiscal year 2000, management believes it is more
likely than not that the results of future operations will generate sufficient
income to realize the deferred tax asset as reduced by the valuation allowance.

   At July 31, 2001, the Company has net operating loss carryforwards available
to offset future federal and state taxable income of approximately $62,500 and
$31,200, respectively. Such carryforwards expire principally in 2011 to 2021
and 2002 to 2006, respectively. Federal and state net operating loss
carryforwards of approximately $13,200 and $6,600 were generated from the
exercise of employee stock options and any decrease

                                      31

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                       (In thousands, except share data)

in the valuation reserve related to these carryforwards will be reflected in
the financial statements as a credit to additional paid-in capital. In 2001,
the Company recognized a tax benefit of $100 related to these carryforwards
which was recorded directly to paid-in capital. Because of the equity
transactions completed by the Company in 1996, utilization of certain net
operating loss carryforwards for federal income tax reporting purposes created
prior to those transactions will be subject to annual limitations under the
change in ownership provisions of the Tax Reform Act of 1986.

11. Business Segments and Foreign Operations

   Information regarding foreign operations follows:

<TABLE>
<CAPTION>
                   Year Ended July 31,
                  ----------------------
                   2001    2000    1999
                  ------- ------- ------
<S>               <C>     <C>     <C>
Net sales........ $31,425 $19,572 $8,716
   United States.  29,208  17,958  7,737
   Foreign.......   2,217   1,614    979
Long-lived assets $44,877 $39,961
   United States.  44,726  39,775
   Foreign.......     151     186
</TABLE>

12. Unaudited Quarterly Data

   Summarized quarterly financial data for 2001 and 2000 follow:

<TABLE>
<CAPTION>
                                           1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
                                           ----------- ----------- ----------- -----------
<S>                                        <C>         <C>         <C>         <C>
Year ended July 31, 2001:
   Revenues...............................   $9,464      $9,152      $ 7,187     $ 5,622
   Operating profit (loss)................      792         219       (2,854)     (3,089)
   Net income (loss)......................    1,139         544       (2,790)     (3,060)
   Basic income (loss) per common share...      .05         .02         (.12)       (.13)
   Diluted income (loss) per common share.      .05         .02         (.12)       (.13)

Year ended July 31, 2000:
   Revenues...............................   $3,781      $4,001      $ 5,146     $ 6,644
   Operating profit (loss)................      230         169          500         528
   Net income (loss)......................       60          20          514       1,037
   Basic income (loss) per common share...       --          --          .03         .06
   Diluted income (loss) per common share.       --          --          .02         .06
</TABLE>

13. Subsequent Events

   On October 16, 2001, the Company received $2,500 from Hunt Capital Growth
Fund II, L.P. ("Hunt Capital") pursuant to the issuance to Hunt Capital of a
Subordinated Secured Convertible Note. The Note is secured by the assets of the
Company, has a five-year term, carries a 10% coupon and does not require any
interest payments until maturity. The Note is convertible into Common Stock of
the Company at $.0795, which is 120% of the ten-day average closing market
price of the Common Stock at closing.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

   None.

                                      32

<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   The information required by this item will be included in the Company's
Proxy Statement with respect to its 2001 Annual Meeting of Stockholders to be
filed with the Commission within 120 days of July 31, 2001 and is incorporated
herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION

   The information required by this item will be included in the Company's
Proxy Statement with respect to its 2001 Annual Meeting of Stockholders to be
filed with the Commission within 120 days of July 31, 2001 and is incorporated
herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required by this item will be included in the Company's
Proxy Statement with respect to its 2001 Annual Meeting of Stockholders to be
filed with the Commission within 120 days of July 31, 2001 and is incorporated
herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required by this item will be included in the Company's
Proxy Statement with respect to its 2001 Annual Meeting of Stockholders to be
filed with the Commission within 120 days of July 31, 2001 and is incorporated
herein by this reference.

                                      33

<PAGE>

                                    PART IV

ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

   a. The following documents are filed as part of this report.

       1. Consolidated Financial Statements

          See "Index to Consolidated Financial Statements"-- Item 8.

       2. Exhibits

          See "Exhibit Index."

   b. Reports on Form 8-K.

       The Company filed a report on Form 8-K, dated June 28, 2001, with the
       Securities and Exchange Commission reporting the creation of a Rights
       Plan. The filing included the Rights Plan and related documents.

                                      34

<PAGE>

                                  SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) 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.

                                          PROSOFTTRAINING.COM

                                          By:/s/ ROBERT G. GWIN

                                              ----------------------------------
                                             Robert G. Gwin
                                             Executive Vice President and Chief
                                             Financial Officer

                                          By:/s/ WILLIAM J. WERONICK

                                              ----------------------------------
                                             William J. Weronick
                                             Vice President, Finance

Dated: October 22, 2001

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on October 22, 2001.

        Signature                                Title
        ---------                                -----

  /s/ JERRELL M. BAIRD   Chief Executive Officer and Chairman of the Board
 -----------------------   (Principal Executive Officer)
    Jerrell M. Baird

   /s/ ROBERT G. GWIN    Executive Vice President and Chief Financial Officer
 -----------------------   (Principal Financial Officer)
     Robert G. Gwin

 /s/ WILLIAM J. WERONICK Vice President, Finance (Principal Accounting Officer)
 -----------------------
   Willam J. Weronick

  /s/ J.R. HOLLAND, JR.  Director
 -----------------------
    J.R. Holland, Jr.

   /s/ EDWARD M. WALSH   Director
 -----------------------
      Edward Walsh

   /s/ JEFFREY G. KORN   Director
 -----------------------
     Jeffrey G. Korn

  /s/ J. WILLIAM FULLER  Director
 -----------------------
    J. William Fuller

 /s/ CHARLES P. MCCUSKER Director
 -----------------------
    Charles McCusker

                                      35

<PAGE>

                     PROSOFTTRAINING.COM AND SUBSIDIARIES

                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                           Deduction
                                  Balance at  Charged to Acquired through write-offs, Balance at
                                 beginning of costs and      Business       net or      end of
                                     year      expenses   Combination(1)  recoveries     year
                                 ------------ ---------- ---------------- ----------- ----------
                                                         (In thousands)
<S>                              <C>          <C>        <C>              <C>         <C>
Allowance for doubtful accounts:
   Year ended July 31, 2001.....     $251        $799           --           $ (47)     $1,003
   Year ended July 31, 2000.....     $199        $ 93          $65           $(106)     $  251
   Year ended July 31, 1999.....     $330        $197           --           $(328)     $  199
</TABLE>

--------
(1)Acquired through the acquisition of ComputerPREP in July 2000.

                                      36

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
  No.                                         Description of Exhibits
-------                                       -----------------------
<C>     <S>
 2      Agreement and Plan of Reorganization dated March 26, 1996 between the Company, Pro-Soft
          Development Corp. and the shareholders of Pro-Soft Development Corp. Filed as Exhibit 2 to the
          Company's Registration Statement on Form S-1 (No. 333-11247) ("Registration Statement No.
          333-11247") and incorporated herein by reference.

 3.1    Restated Articles of Incorporation of the Company, as amended. Filed as Exhibit 3.1 to Registration
          Statement No. 333-53000 and incorporated herein by reference.

 3.2    Amended and Restated Bylaws of the Company. Filed as Exhibit 3.2 to Registration Statement No.
          333-11247 and incorporated herein by reference.

 4.1    Specimen Stock Certificate. Filed as Exhibit 4 to Registration Statement No. 333-11247 and
          incorporated herein by reference

 4.2    Rights Agreement dated as of June 27, 2001, between the Company and Interwest Transfer Company,
          Inc., which includes the form of Right Certificate as Exhibit A and the Summary of Rights as
          Exhibit B. Filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated June 28, 2001
          and incorporated herein by reference.

 10.1   Pro-Soft Development Corp. 1996 Stock Option Plan. Filed as Exhibit 10.1 to Registration Statement
          No. 333-11247 and incorporated herein by reference.

 10.2   ProSoft I-Net Solutions, Inc. Amended 1996 Stock Option Plan. Filed as Exhibit 10.2 to Registration
          Statement No. 333-35249 and incorporated herein by reference.

 10.3   Form of Indemnification Agreement between the Company and its Directors and Officers. Filed as
          Exhibit 10.13 to Registration Statement No. 333-11247 and incorporated herein by reference.

 10.4   Registration Rights Agreement dated as of December 2, 1998 among the Company and various
          investors. Filed as Exhibit 10.20 to Registration Statement No. 333-35249 and incorporated herein
          by reference.

 10.5   Accounts Receivable Purchase Agreement dated as of November 6, 1998 by and between the
          Company and Silicon Valley Financial Services (a division of Silicon Valley Bank). Filed as
          Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
          January 31, 1999 and incorporated herein by reference.

 10.6   Employment Agreement dated February 1, 2000 between the Company and David I. Perl. Filed as
          Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
          April 30, 2000 and incorporated herein by reference.

 10.7   Employment Agreement dated February 1, 2000 between the Company and Jerrell M. Baird. Filed as
          Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
          April 30, 2000 and incorporated herein by reference.

 10.8   Securities Purchase Agreement dated as of November 22, 1999 among the Company and Hunt Capital
          Growth Fund, II L.P. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
          the quarterly period ended October 31, 1999 and incorporated herein by reference.

 10.9   Registration Rights Agreement dated as of November 22, 1999 among the Company and Hunt Capital
          Growth Fund, II L.P. Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
          the quarterly period ended October 31, 1999 and incorporated herein by reference.

 10.10  Warrant Agreement dated as of November 22, 1999 among the Company and Hunt Capital Growth
          Fund, II L.P. Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
          quarterly period ended October 31, 1999 and incorporated herein by reference.
</TABLE>

                                      37

<PAGE>

<TABLE>
<CAPTION>
Exhibit
  No.                                        Description of Exhibits
-------                                      -----------------------
<C>     <S>

 10.11  Stock Purchase Agreement dated as of June 27, 2000 by and among the Company, Drake Personnel
          (New Zealand) Limited and ComputerPREP, Inc. Filed as Exhibit 2.1 to the Company's Current
          Report on Form 8-K dated June 27, 2000 and incorporated herein by reference.

 10.12  Registration Rights Agreement dated as of June 27, 2000 by and among the Company and Drake
          Personnel (New Zealand) Limited. Filed as Exhibit 10.1 to the Company's Current Report on Form
          8-K dated June 27, 2000 and incorporated herein by reference.

 10.13  Common Stock Purchase Warrant dated June 27, 2000 to purchase 300,000 shares issued to Drake.
          Filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated June 27, 2000 and
          incorporated herein by reference.

 10.14  Common Stock Purchase Warrant dated June 27, 2000 to purchase 300,000 shares issued to Drake.
          Filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated June 27, 2000 and
          incorporated herein by reference.

 10.15  Securities Purchase Agreement dated June 27, 2000 by and among the Company and various
          investors. Filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated June 27, 2000
          and incorporated herein by reference.

 10.16  Registration Rights Agreement dated June 27, 2000 by and among the Company and various
          investors. Filed as Exhibit 10.5 to the Company's Current Report on Form 8-K dated June 27, 2000
          and incorporated herein by reference.

 10.17  Employment Agreement dated July 17, 2000 between the Company and Robert S. Gwin. Filed as
          Exhibit 10.25 to the Company's Annual Report on Form 10-K dated October 25, 2000 and
          incorporated herein by reference.

 10.18  Employment Agreement dated April 21, 2000 between the Company and Jeffrey Korn. Filed as
          Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
          January 31, 2001 and incorporated herein by reference.

 10.19  Prosofttraining.com 2000 Stock Incentive Plan. Filed as Exhibit 99.1 to the Company's Registration
          Statement on Form S-8 (333-51360) and incorporated herein by reference.

 10.20  Prosofttraining.com 2000 Employee Stock Purchase Plan. Filed as Exhibit 99.2 to the Company's
          Registration Statement on Form S-8 (333-51360) and incorporated herein by reference.

 10.21  Subordinated Secured Convertible Note dated as of October 16, 2001 among the Company and Hunt
          Capital Growth Fund II, L.P. Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K
          dated October 16, 2001 and incorporated herein by reference.

 10.22  Security Agreement dated as of October 16, 2001 among the Company and Hunt Capital Growth
          Fund II, L.P. Filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated October
          16, 2001 and incorporated herein by reference.

 10.23  Securities Agreement dated as of October 16, 2001 among the Company and Hunt Capital Growth
          Fund II, L.P. Filed as Exhibit 10.3 to the Company's Current Report on Form 8-K dated October
          16, 2001 and incorporated herein by reference.

 10.24  Rights Agreement dated as of October 16, 2001 among the Company and Hunt Capital Growth Fund
          II, L.P. Filed as Exhibit 10.4 to the Company's Current Report on Form 8-K dated October 16,
          2001 and incorporated herein by reference.

 10.25  First Amendment to Registration Rights Agreement dated as of October 16, 2001 among the
          Company and Hunt Capital Growth Fund II, L.P. Filed as Exhibit 10.5 to the Company's Current
          Report on Form 8-K dated October 16, 2001 and incorporated herein by reference.
</TABLE>

                                      38

<PAGE>

<TABLE>
<CAPTION>
Exhibit
  No.                                      Description of Exhibits
-------                                    -----------------------
<C>     <S>

 10.26  First Amendment to Securities Purchase Agreement dated as of October 16, 2001 among the
          Company and Hunt Capital Growth Fund II, L.P. Filed as Exhibit 10.6 to the Company's Current
          Report on Form 8-K dated October 16, 2001 and incorporated herein by reference.

 10.27  Separation Agreement dated October 16, 2001, between the Company and David I. Perl. Filed as
          Exhibit 10.7 to the Company's Current Report on Form 8-K dated October 16, 2001 and
          incorporated herein by reference.

 10.28  Separation Agreement dated October 16, 2001, between the Company and Jeffrey G. Korn. Filed as
          Exhibit 10.8 to the Company's Current Report on Form 8-K dated October 16, 2001 and
          incorporated herein by reference.

 21     Subsidiaries of the Company.

 23.1   Consent of Grant Thornton LLP.
</TABLE>

                                      39