<PAGE>   1

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1999

                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            ------------------------

                             SKILLSOFT CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             7372                            02-0496115
 (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)      CLASSIFICATION CODE NUMBER)           IDENTIFICATION NUMBER)
</TABLE>

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

                             SKILLSOFT CORPORATION

                            20 INDUSTRIAL PARK DRIVE
                          NASHUA, NEW HAMPSHIRE 03062
                                 (603) 324-3000
         (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
            AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                CHARLES E. MORAN

                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            20 INDUSTRIAL PARK DRIVE
                          NASHUA, NEW HAMPSHIRE 03062
                                 (603) 324-3000
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------

                                   COPIES TO:

<TABLE>
<S>                                                 <C>
             PATRICK J. RONDEAU, ESQ.                             LAWRENCE D. LEVIN, ESQ.
                 HALE AND DORR LLP                                 KATTEN MUCHIN & ZAVIS
                  60 STATE STREET                           525 WEST MONROE STREET, SUITE 1600
            BOSTON, MASSACHUSETTS 02109                           CHICAGO, ILLINOIS 60661
             TELEPHONE: (617) 526-6000                           TELEPHONE: (312) 902-5200
             FACSIMILE: (617) 526-5000                           FACSIMILE: (312) 902-1061
</TABLE>

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

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]

    If this form is post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement of
the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registrations statement
of the same offering.  [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
                                                                PROPOSED MAXIMUM
                 TITLE OF EACH CLASS OF                        AGGREGATE OFFERING                AMOUNT OF
              SECURITIES TO BE REGISTERED                           PRICE(1)                  REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                           <C>
Common Stock, $.001 par value...........................          $46,000,000                     $12,788
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of computing the amount of registration fee
    pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                 SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1999

                                               Shares

                                   SKILLSOFT

[Skillsoft Corp. LOGO]            Common Stock

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

     SkillSoft Corporation is selling shares of its common stock. Prior to this
offering, there has been no public market for the common stock. The initial
public offering price is expected to be between $          and $          per
share. We will make application to list our common stock on the Nasdaq National
Market under the symbol "SKIL."

     The underwriters have an option to purchase a maximum of
               additional shares to cover over-allotments of shares.

     INVESTING IN THIS COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.

<TABLE>
<CAPTION>
                                                                    UNDERWRITING     PROCEEDS TO
                                                    PRICE TO        DISCOUNTS AND     SKILLSOFT
                                                     PUBLIC          COMMISSIONS     CORPORATION
                                                    --------        -------------    -----------
<S>                                              <C>                <C>              <C>
Per Share....................................      $                 $               $
Total........................................      $                 $               $
</TABLE>

     Delivery of the shares of common stock will be made on or about
            , 1999.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON
                       BANC OF AMERICA SECURITIES LLC
                                            THOMAS WEISEL PARTNERS LLC

               The date of this prospectus is             , 1999
<PAGE>   3

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
PROSPECTUS SUMMARY....................  1
RISK FACTORS..........................  5
SPECIAL NOTE REGARDING FORWARD-
  LOOKING STATEMENTS..................  13
USE OF PROCEEDS.......................  13
DIVIDEND POLICY.......................  13
CAPITALIZATION........................  14
DILUTION..............................  15
SELECTED FINANCIAL DATA...............  16
MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.......................  17
BUSINESS..............................  23
</TABLE>

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
MANAGEMENT............................  39
CERTAIN TRANSACTIONS..................  45
PRINCIPAL STOCKHOLDERS................  46
DESCRIPTION OF CAPITAL STOCK..........  48
SHARES ELIGIBLE FOR FUTURE SALE.......  50
UNDERWRITING..........................  52
NOTICE TO CANADIAN RESIDENTS..........  55
LEGAL MATTERS.........................  56
EXPERTS...............................  56
WHERE YOU CAN FIND ADDITIONAL
  INFORMATION.........................  56
INDEX TO FINANCIAL STATEMENTS.........  F-1
</TABLE>

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

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

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

     UNTIL                      (25 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

                                        i
<PAGE>   4

                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the common stock. You should read the entire prospectus
carefully. Unless otherwise specified, all information in this prospectus:
assumes no exercise of the underwriters' over-allotment option; reflects the
automatic conversion into common stock of all outstanding shares of preferred
stock that will occur upon the closing of this offering; and reflects the
reclassification of all outstanding shares of Class A common stock into common
stock that will occur prior to the closing of this offering.

     We are a leading provider of Web-based training resources for Global 2000
companies that cover a variety of professional effectiveness and business topics
(commonly called "soft skills"). All of our courses and support tools have been
specifically designed to take advantage of the benefits offered by the internet
and the Web-based environments of our customers. This enables the users of our
products to access the material they need, with the specificity or breadth that
they require, anytime or anywhere that they may need it. Our customers receive
comprehensive training and support solutions for their employees, comprised of:

     - our library of 126 courses, which encompasses a wide array of
       professional effectiveness skills, such as management, leadership,
       communication, project management and customer service, as well as
       business topics such as finance, marketing, sales and strategy; and

     - our Web-based online performance support tools, such as: Search-and-Learn
       technology, which permits users to perform online searches of their
       company's entire library of SkillSoft courses for a specific training
       topic and to directly access only what they need; Online Mentoring, which
       enables users to interact via e-mail with experts on a topic from any Web
       connection; and Online Job Aids, which consist of approximately 380
       topical refreshers and worksheets that are accessible online.

     Our training resources are designed to increase the competitive strength
and productivity of organizations by improving employee performance with
immediate, universally accessible skill enhancers and job support tools. We
believe that our courses appeal to a broader range of employees than do courses
on information technology and other specialized topics, and assist in improving
employee retention by sending a positive message to employees that they are
valued. We market our courses primarily to Global 2000 companies and other large
businesses, governmental organizations and educational institutions. As of
August 31, 1999, we had 27 customers, including Adobe, Citibank, Dayton Hudson,
EMC, Ernst & Young, Fluor Daniel, GTE, IBM and National Car Rental.

     According to TRAINING magazine, domestic corporations with over 100
employees budgeted approximately $60.7 billion for training in 1998 (including
the costs of internal training). There are a number of problems that make it
increasingly difficult for traditional classroom instruction to address the
training needs of many larger corporations, such as: travel costs; scheduling
difficulties; the opportunity costs of employees' time; and the inability of
classroom instruction to deliver training at the time and place an employee most
needs it -- such as right before the employee needs to apply the skill in the
workplace. As a result, companies are increasingly utilizing technology-based
training solutions to meet the educational needs of their employees.

     To date, companies have typically relied upon CD-ROMs and other
technology-based forms of instruction to alleviate the shortcomings of
instructor-led training. We believe, however, that our
                                        1
<PAGE>   5

Web-based training solution provides a number of significant advantages over
other technology-based training products including:

     - more flexible and cost-efficient deployment of courses, enabling users to
       access our training materials anywhere, anytime and only in the amounts
       they need;

     - online performance support tools, such as Search-and-Learn technology,
       Online Mentoring and Online Job Aids, that enable users to tailor our
       educational resources to their individual needs and pace and to obtain
       specific, real-time assistance when they need it most;

     - easier to use products that incorporate intuitive navigational concepts;

     - improved means of product and user support through Web distribution; and

     - increased ability for administrators to monitor use and effectiveness of
       courses.

     By applying new technological capabilities of the internet, such as search
engine architecture and hypertext links, we believe that our training resources
will transform corporate training from a distinct event, often off-site and
limited in scope, to a process of continuous learning and improvement that will
inherently maximize time utilization and employee effectiveness. Our courses and
support tools are developed using cross-platform technologies such as Java (a
programming language), HTML (a Web document formatting language) and JavaScript
(a scripting language). To reduce the risk of technical problems that would
limit access to our training materials, our products do not use
platform-dependent proprietary plug-in technologies. Our detailed Web-based
architecture enables users to perform intelligent searches of their company's
entire library of SkillSoft courses to identify relevant training materials on
specific topics. In addition, our products all employ advanced techniques for
compression and caching of text, graphics and audio to deliver high-quality
performance within the bandwidth limitations of most corporate intranets and the
internet.

     Our objective is to be the leading global provider of high-quality
Web-based learning and performance support products. To achieve this objective,
we are continuing to expand our library of courses and to integrate new
Web-based technologies that address the needs of our customers and make our
products easier to use and more effective. We are also increasing our domestic
sales force and developing an international sales organization, while leveraging
our blue-chip client relationships to deepen our penetration within those
companies and in the market. Finally, we are continuing to increase our reseller
network and are expanding our strategic alliances with educational institutions
to further diversify our distribution channels.

                                 OUR MANAGEMENT

     Our executive management team, led by our President and Chief Executive
Officer, Charles E. Moran, has over 70 years of combined experience in the
technology and education industries. Mr. Moran's prior experience includes
National Education Training Group (NETg), where Mr. Moran served as President
and Chief Executive Officer from 1995 through 1997 following its sale to
Harcourt General, and Softdesk, Inc., a software company where Mr. Moran served
as Chief Operating Officer and Chief Financial Officer and helped lead its
initial public offering in February 1994. Other members of our management team
have prior experience at technology-based learning and other technology
companies such as CBT Group, Compaq, NETg and Motorola.
                                        2
<PAGE>   6

                                  OUR ADDRESS

     Our principal executive offices are located at 20 Industrial Park Drive,
Nashua, New Hampshire 03062, and our telephone number at that location is (603)
324-3000. Our Web site is located at www.skillsoft.com. We were incorporated in
Delaware in October 1997. Unless the context otherwise requires, any reference
to "SkillSoft," "we," "our," and "us" in this prospectus refers to SkillSoft
Corporation and its subsidiaries.

     SkillSoft has applied for federal registration of some of its trademarks,
including "NetPlay" and "NetUniversity." Other trademarks or service marks
appearing in this prospectus are the property of their respective holders.

                                  THE OFFERING

Common stock offered..........             shares

Common stock to be outstanding
  after the offering..........             shares

Use of proceeds...............   For general corporate purposes, including
                                 working capital. See "Use of Proceeds."

Proposed Nasdaq National
Market symbol.................   SKIL

     The number of shares of common stock to be outstanding after the offering
is based on the number of shares outstanding on September 1, 1999. This number
does not include 881,965 shares of common stock issuable upon the exercise of
stock options outstanding on September 1, 1999.
                                        3
<PAGE>   7

                             SUMMARY FINANCIAL DATA
                                 (IN THOUSANDS)

     You should read this summary information with the discussion in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes to those statements included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                       PERIOD FROM                                  SIX MONTHS ENDED
                                      INCORPORATION             YEAR ENDED              JULY 31,
                                   (OCTOBER 15, 1997)          JANUARY 31,         ------------------
                                   TO JANUARY 31, 1998             1999             1998       1999
                                -------------------------    ----------------      -------    -------
                                                                                      (UNAUDITED)
<S>                             <C>                          <C>                   <C>        <C>
STATEMENTS OF OPERATIONS DATA:
  Revenue.....................            $  --                  $    --           $    --    $ 1,088
  Cost of revenue.............               --                       --                --        254
                                          -----                  -------           -------    -------
  Gross profit................               --                       --                --        834
  Total operating expenses....              827                    8,609             2,848      8,595
  Interest income.............                3                      336               120        119
                                          -----                  -------           -------    -------
  Net loss....................            $(824)                 $(8,273)          $(2,728)   $(7,642)
                                          =====                  =======           =======    =======
</TABLE>

     The following balance sheet table presents our balance sheet as of July 31,
1999 on an actual basis, on a pro forma basis giving effect to the conversion of
all outstanding convertible preferred stock into common stock, and on a pro
forma as adjusted basis giving effect to the sale of                shares of
common stock offered hereby at an assumed initial public offering price of
$     per share, after deducting estimated underwriting discounts and
commissions and offering expenses.

<TABLE>
<CAPTION>
                                                                AS OF JULY 31, 1999
                                                        ------------------------------------
                                                                                  PRO FORMA
                                                        ACTUAL     PRO FORMA     AS ADJUSTED
                                                        -------    ----------    -----------
                                                                    (UNAUDITED)
<S>                                                     <C>        <C>           <C>
BALANCE SHEETS DATA:
  Cash, cash equivalents, and short-term
     investments......................................  $   524      $  524
  Working capital.....................................      183         183
  Total assets........................................    2,558       2,558
  Long-term liabilities...............................       --          --
  Convertible preferred stock.........................   16,951          --
  Stockholders' equity................................      630         630
</TABLE>

                                        4
<PAGE>   8

                                  RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL PERFORMANCE

OUR LIMITED OPERATING HISTORY MAY IMPEDE YOUR ABILITY TO EVALUATE OUR BUSINESS
AND ITS FUTURE PROSPECTS

     We commenced operations in January 1998 and commercially released our first
product in March 1999. One customer accounted for 51% of our limited revenue
through July 31, 1999. Your evaluation of the risks and uncertainties of our
business will be difficult because of our limited operating history and could
cause you to overpay for our common stock.

WE EXPECT TO INCUR SUBSTANTIAL LOSSES IN THE FUTURE AND MAY NOT BE ABLE TO
ACHIEVE OR MAINTAIN PROFITABILITY

     Since we began operations in January 1998, we have incurred losses in every
fiscal period. Our accumulated deficit through July 31, 1999 was $16,738,888. We
expect to continue to incur substantial losses through at least the fiscal year
ending January 31, 2001, and we cannot be certain if or when we will become
profitable. If we do not become profitable within the timeframe expected by
investors, the market price of our common stock may be adversely affected. We
have generated relatively small amounts of revenue while increasing expenditures
in all areas in order to develop our business. We expect to continue to incur
significant expenses, particularly in sales and marketing, in an effort to
develop our business. As a result, we will need to generate significant revenue
to achieve and maintain profitability. Even if we do achieve profitability, we
cannot assure you that we can sustain or increase profitability on a quarterly
or annual basis in the future.

WE AND SEVERAL OF OUR EXECUTIVES ARE INVOLVED IN LITIGATION WHICH MAY BE COSTLY
AND DIVERT THE EFFORTS OF OUR MANAGEMENT

     SkillSoft, several of our executives and one of our key employees are
involved in a lawsuit brought by National Education Training Group, Inc. (NETg),
the former employer of several of our executives. Named as defendants in the
lawsuit (as amended), in addition to SkillSoft, are Charles E. Moran, our
President and Chief Executive Officer, Jerald A. Nine, Jr., our Vice President,
Sales and Marketing, Mark A. Townsend, our Vice President, Product Development,
Lee A. Ritze, our Senior Director, Professional Marketing and Services, and
Warburg, Pincus Ventures, L.P., our largest investor. NETg alleges in substance
that the defendants breached their fiduciary obligations to NETg in connection
with the organization and operation of SkillSoft, misappropriated trade secrets
from NETg and intentionally interfered with NETg's business and employees. The
claims seek injunctive relief against SkillSoft and Messrs. Moran, Nine,
Townsend and Ritze demanding the return, and no future use by these defendants,
of the alleged trade secrets. The claims also seek compensatory damages in an
amount to be determined and punitive damages in excess of $10,000,000.

     SkillSoft and the other defendants are vigorously defending themselves
against those allegations, and we believe that both SkillSoft and the other
defendants have meritorious defenses to the claims made in the lawsuit. However,
the lawsuit is still in discovery and we are not yet able to assess the

                                        5
<PAGE>   9

potential liability of SkillSoft or the other defendants. Our failure to prevail
in this litigation could significantly affect our business and financial
performance as a result of:

     - injunctive relief issued against SkillSoft and our officers, which could
       restrict our ability to conduct our business;

     - an adverse judgment against us for monetary damages;

     - a settlement on unfavorable terms; or

     - obligations we have to indemnify our employees for liabilities and
       expenses they incur in connection with the lawsuit.

     In addition, this litigation, regardless of its outcome, will continue to
result in significant expenses in defending the lawsuit and may divert the
efforts and attention of our management team from normal business operations.
See "Business -- Legal Proceedings."

OUR OPERATING RESULTS ARE DIFFICULT TO FORECAST AND MAY FLUCTUATE FROM QUARTER
TO QUARTER

     As a result of our limited operating history, we do not have sufficient
historical financial data upon which to forecast quarterly revenue and operating
results. Our quarterly operating results may fluctuate as a result of a variety
of factors, including:

     - the early stage of development of the market for Web-based education and
       training, which makes it difficult for us to predict customer demand
       accurately;

     - the fact that we depend upon a relatively small number of customers for
       our revenue, so that a delay in any particular customer order beyond a
       fiscal quarter would have a significant impact on our revenue for that
       quarter;

     - our lengthy sales cycle;

     - seasonality -- we expect our revenue and operating results will generally
       be strongest in the fourth quarter of our fiscal year and weakest in the
       first quarter; and

     - the amount of hiring we do to support the anticipated growth of our
       business.

     Most of our expenses, such as rent and most employee compensation, do not
vary directly with revenue and are difficult to adjust in the short term. As a
result, if revenue for a particular quarter is below our expectations, we could
not proportionately reduce operating expenses for that quarter. Any such revenue
shortfall would therefore have a disproportionate effect on our expected
operating results for that quarter. In addition, we expect that a
disproportionate amount of our revenue each quarter will be recognized in the
final weeks of that quarter. As a result, any delays in receiving orders or
signing contracts may defer the associated revenue to the following quarter,
which would adversely affect our operating results for that quarter. If our
quarterly revenue or operating results fall below the expectations of investors
or securities analysts, the price of our common stock could fall substantially.

OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WEB-BASED EDUCATION AND TRAINING
PRODUCTS ARE NOT WIDELY ADOPTED

     Our Web-based products represent a new and emerging approach for the
corporate soft skills education and training market. Our success depends
substantially upon the widespread adoption of Web-based products for education
and training. The failure of this market to develop, or a delay in the
development of this market -- whether due to technological, competitive or other
reasons -- would adversely affect our business and financial performance.

                                        6
<PAGE>   10

INTENSE COMPETITION FROM OTHER EDUCATION AND TRAINING COMPANIES COULD ADVERSELY
AFFECT OUR BUSINESS AND FINANCIAL PERFORMANCE

     The market for soft skills education and training is fragmented and highly
competitive. We expect that competition in this market will increase
substantially in the future for the following reasons:

     - The expected growth of this market.

     - The low barriers to entry. In particular, we do not believe that
       proprietary technology is an important competitive factor in this market.

     - Our course content providers are often not prohibited from developing
       similar course content for other companies.

     - The fragmented nature of the competitive landscape, including many small
       competitors in the technology-based segment of the market.

     One source of competition for our products is the internal educational and
technological personnel of our potential customers. If an organization decides
to use external providers to supply some or all of its training, our principal
sources of competition are:

     - Providers of traditional classroom instruction. Many of the companies in
       this category are attempting to adapt their courses to a
       non-instructor-led format suitable for Web deployment.

     - Providers of CD-ROM training courses.

     - Suppliers of online information technology training courses that are
       attempting to take advantage of their current technology and customer
       base and expand into the soft skills market. Examples of competitors in
       this group are Harcourt General (through subsidiaries such as Drake Beam
       Morin, NETg and Knowledge Communications), CBT Group (through its
       Knowledge Well and Tarragon businesses) and McGraw Hill (through its
       Xebec subsidiary).

     There can be no assurance that we can maintain or improve our competitive
position. Many of our current and potential competitors have longer operating
histories, greater name recognition and greater financial, technical, sales,
marketing, support and other resources than we do. Increased competition may
result in lost sales and may force us to lower prices, which would adversely
affect our business and financial performance.

WE RELY ON A LIMITED NUMBER OF THIRD PARTIES TO PROVIDE US WITH EDUCATIONAL
CONTENT FOR OUR COURSES, AND THEY MAY NOT BE ABLE TO DEVELOP NEW COURSES OR
ENHANCE EXISTING COURSES ON A TIMELY BASIS

     To be competitive, we must develop and introduce on a timely basis new
course offerings which meet the needs of companies seeking to use our education
and training products. In addition, some of our courses may need to be updated
due to changes in educational doctrines or the evolving requirements of
educational institutions and certification organizations. We rely on independent
third parties to provide us with the educational content for our courses. Our
most important content provider is responsible for the development of more than
half of our courses. We do not have exclusive arrangements or long-term
contracts with any of these content providers, and some of our content providers
may compete with us. If one or more of our third-party content providers were to
stop working with us, we would have to rely on other parties to develop our
course content. We cannot predict whether new content or enhancements would be
available from reliable alternative sources on reasonable terms.

                                        7
<PAGE>   11

LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS

     Our future success depends to a significant degree on the skills and
efforts of Charles E. Moran, our founder, Chairman of the Board, President and
Chief Executive Officer. The loss of the services of Mr. Moran could have a
material adverse effect on our business and financial performance. We also
depend on the ability of our other executive officers and members of senior
management to work effectively as a team. The loss of one or more of our
executive officers or senior management members could also have a material
adverse effect on our business and financial performance.

OUR FUTURE GROWTH DEPENDS ON SUCCESSFUL HIRING AND RETENTION, AND WE MAY BE
UNABLE TO HIRE AND RETAIN THE SKILLED PERSONNEL WE NEED TO SUCCEED

     The growth of our business and revenue depends in large part upon our
ability to attract and retain sufficient numbers of highly skilled employees,
particularly sales and marketing personnel and product development personnel.
Qualified personnel are in great demand throughout the software industry. The
demand for qualified personnel is particularly acute in the New England area due
to the large number of software companies and the low unemployment rate in the
region. Our failure to attract and retain sufficient skilled personnel may limit
the rate at which we can grow or may otherwise harm our business and financial
performance.

THE LENGTHY SALES CYCLE FOR OUR PRODUCTS MAY MAKE OUR OPERATING RESULTS
UNPREDICTABLE AND VOLATILE

     The period between our initial contact with a potential customer and the
purchase of our products by that customer typically ranges from three to 12
months. Factors which may contribute to our long sales cycle include:

     - Our need to educate potential customers about the benefits of our
       Web-based training products;

     - Competitive evaluations by customers;

     - The customers' internal budgeting and approval processes;

     - The fact that some customers view training products as discretionary
       spending, rather than purchases essential to their business; and

     - The fact that we target Global 2000 companies, which often take longer to
       make purchasing decisions due to the size and complexity of the
       enterprise.

     Our long sales cycle makes it difficult for us to predict if and when a
potential sale will actually occur. In addition, if a sale is delayed from the
quarter in which we expect it to occur, our operating results for that quarter
would be adversely affected.

OUR FINANCIAL PERFORMANCE DEPENDS IN PART ON OUR ABILITY TO DEVELOP BRAND
AWARENESS, AND WE MAY NOT BE SUCCESSFUL IN DOING SO

     We believe that developing the SkillSoft brand within the corporate
training market is critical to achieving widespread acceptance of our products.
There are a number of factors which could prevent us from successfully
developing the SkillSoft brand, including the emergence of more successful
competitors, product performance problems or customer dissatisfaction, as well
as our failure to devote sufficient resources to marketing efforts.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH

     Our failure to properly manage our recent and anticipated growth could have
a material adverse effect on the quality of our products, our ability to retain
key personnel and our business and financial

                                        8
<PAGE>   12

performance. Our revenue increased 350% in the quarter ended July 31, 1999 from
the quarter ended April 30, 1999, the first quarter in which we generated
revenue. From January 1, 1999 to August 31, 1999, the number of our employees
increased from 45 to 87. This growth has strained, and our future growth may
continue to strain, our management, operational systems and other resources. To
manage our growth effectively, we must be able to maintain and enhance our
financial and accounting systems and controls, integrate new personnel and
manage expanded operations. There can be no assurance we will be able to do so.

OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO INTRODUCE NEW COURSES AND
TECHNOLOGIES ON A TIMELY BASIS OR IF NEW COURSES ARE UNSUCCESSFUL

     Our future success will depend significantly on whether we are able to
introduce new courses and enhance our Web-based technologies as planned. While
we have new courses and technology features scheduled for commercial launch, we
cannot assure you that we will be successful in releasing them as scheduled, or
that they will meet with market acceptance. We may not have sufficient resources
to develop the new courses and technology enhancements necessary to maintain or
improve our competitive position.

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

     Some companies may not view training products as critical to the success of
their business. If these companies experience disappointing operating results,
whether as a result of adverse economic conditions, competitive issues or other
factors, they may decrease or forego education and training expenditures before
limiting their other expenditures. As a result, our business and financial
performance may be damaged, more so than most companies, by adverse financial
conditions affecting our target customers or by a general weakening of the
economy.

WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY

     The market for Web-based education and training products is characterized
by rapidly changing technologies, frequent new product and service introductions
and evolving industry standards. The growth in the use of the Web and intense
competition in our industry exacerbate these market characteristics. Our future
success will depend on our ability to adapt to rapidly changing technologies and
customer demands by continually improving the features and performance of our
products.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS FAIL TO PERFORM
PROPERLY

     Software products such as ours may contain undetected errors, or bugs,
which result in product failures or poor product performance. Our products may
be particularly susceptible to bugs or performance degradation because of the
emerging nature of Web-based technologies and the stress that may be placed on
our products by the full deployment of our products to thousands of users.
Product performance problems could result in lost or delayed revenue, loss of
market share, failure to achieve market acceptance, diversion of development
resources or injury to our reputation, any of which could have a material
adverse effect on our business and financial performance.

WE MAY NOT BE ABLE TO GENERATE ENOUGH REVENUE FROM OUR PLANNED INTERNATIONAL
EXPANSION TO OFFSET THE COSTS ASSOCIATED WITH ESTABLISHING AND MAINTAINING
FOREIGN OPERATIONS

     A key component of our growth strategy is to expand our presence in foreign
markets. It will be costly to establish international operations, market our
products internationally and support and manage geographically dispersed
operations. Revenue from international operations is not likely to offset the
expense of establishing and maintaining these foreign operations in the
foreseeable future.

                                        9
<PAGE>   13

OUR PLANNED INTERNATIONAL BUSINESS WILL EXPOSE US TO RISKS WE HAVE NOT HAD TO
FACE IN THE PAST

     If we are successful in establishing international operations, we will have
to confront and manage a number of risks that we have not had to address in our
U.S. operations. These risks include:

     - expenses associated with customizing products for foreign countries;

     - challenges and costs inherent in managing geographically dispersed
       operations;

     - protectionist laws and business practices that favor local competitors;

     - economic or political instability in some international markets;

     - difficulties in finding and managing local resellers;

     - multiple, conflicting and changing governmental laws and regulations; and

     - foreign currency exchange rate fluctuations.

     We cannot assure you that we will be successful in managing these risks.

FACTORS ADVERSELY AFFECTING THE USE OF THE INTERNET COULD HARM OUR BUSINESS

     Some users access our courses over the public internet. Examples include
users who access courses from their company's intranet via remote access and
employees of companies that utilize our extranet hosting services and who
therefore access courses from SkillSoft-managed servers. Any factors that
adversely affect internet usage could disrupt the ability of those users to
access our courses, which would adversely effect customer satisfaction and
therefore our business. Among the factors that could disrupt internet usage are:

     - slow access and download times;

     - security concerns;

     - network problems or service disruptions that prevent users from accessing
       an internet server; and

     - delays in, or disputes concerning, the development and adoption of
       industry-wide internet standards and protocols.

ACQUISITIONS MAY DISRUPT OUR BUSINESS OR ADVERSELY AFFECT OUR FINANCIAL
PERFORMANCE

     Although acquisitions are not currently an important component of our
business strategy, we may from time to time acquire businesses in the future. We
may be unable to integrate those businesses successfully into our own operations
or to operate those businesses profitably. Any acquisitions we may make could
result in difficulties in assimilating the technologies and personnel of the
acquired company, diversion of our management's time and attention and one-time
charges relating to the acquisition and/or ongoing amortization of acquired
goodwill and other intangible assets.

OUR BUSINESS COULD BE HURT BY FAILURES OF OUR PRODUCTS OR SYSTEMS, OR THOSE OF
OUR CUSTOMERS AND SUPPLIERS, AS A RESULT OF THE YEAR 2000 TECHNOLOGY PROBLEMS

     Many existing software and computer systems do not properly recognize dates
after December 31, 1999. This Year 2000 problem could result in system failures,
erroneous results, data corruption and disruptions of operations. We may be
affected by Year 2000 problems relating to our products, our internal systems,
the systems of our vendors and our customers' systems, any of which could have a
material adverse effect on our business and financial performance.

                                       10
<PAGE>   14

     We believe that all of our products and our internal systems are Year 2000
compliant. However, because this is a unique problem that cannot be fully
assessed in advance of the Year 2000, it is possible that our products or our
internal systems may experience Year 2000 problems.

     We have not conducted a Year 2000 compliance review of our suppliers or
resellers. Year 2000 problems experienced by those parties could adversely
affect our business and financial performance.

     Year 2000 problems experienced by our customers and potential
customers -- whether in connection with their internal systems or in connection
with other products that operate in conjunction with our products -- could
result in delays in purchasing, or reduced resources available for purchasing,
products such as ours. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Compliance" for detailed
information on our state of readiness, potential risks and contingency plans.

WE COULD BE SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM
THIRD PARTIES

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

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE UPON THEIR COPYRIGHTS OR
PATENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION

     If any of our products violate the proprietary rights of third parties, we
may be required to reengineer our products or to obtain licenses to continue
offering our products without substantial reengineering. Any efforts to
reengineer our products or obtain licenses from third parties may not be
successful and, in any case, could substantially increase our costs and have a
material adverse effect on our business and financial performance. We do not
conduct comprehensive patent searches to determine whether the technologies used
in our products infringe upon patents held by others. In addition, product
development is inherently uncertain in a rapidly evolving technological
environment in which there may be numerous patent applications pending, many of
which are confidential when filed, with regard to similar technologies.

RISKS ASSOCIATED WITH THIS OFFERING

THE PRICE OF OUR COMMON STOCK AFTER THIS OFFERING MAY BE LOWER THAN THE PRICE
YOU PAY AND MAY BE EXTREMELY VOLATILE

     The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you pay. After this offering, an
active trading market in our stock might not develop or continue. If you
purchase shares of our common stock in this offering, you will pay a price that
was negotiated by us with the representatives of the underwriters and not a
price that was established in a competitive market. See "Underwriting" for more
information regarding how the initial public offering price was determined.

     The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly Web-related companies, have been extremely volatile and
have experienced fluctuations that have often been unrelated or disproportionate
to operating performance. These broad market fluctuations could adversely affect
the market price of our common stock.

                                       11
<PAGE>   15

THE SIGNIFICANT CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK WILL LIMIT YOUR
ABILITY TO INFLUENCE CORPORATE ACTIONS

     Immediately following this offering, Warburg, Pincus Ventures, L.P. will
own      % of our outstanding common stock and, together with our executive
officers and directors, will beneficially own approximately      % of our
outstanding common stock. As a result, those stockholders, if they act together,
will be able to control all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying, preventing or
deterring a change in control of SkillSoft, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of
SkillSoft and might affect the market price of our common stock.

SOME PROVISIONS OF OUR CHARTER AND BY-LAWS MAY DELAY OR PREVENT TRANSACTIONS
THAT MANY STOCKHOLDERS MAY FAVOR

     Some provisions of our certificate of incorporation and by-laws may
discourage, delay or prevent a merger or acquisition that our stockholders may
consider favorable, including transactions in which stockholders might otherwise
receive a premium for their shares. Some provisions of Delaware law may also
discourage, delay or prevent someone from acquiring us or merging with us. See
"Description of Capital Stock -- Delaware Anti-Takeover Law and Certain Charter
and Bylaw Provisions" for detailed information on these provisions.

FUTURE SALES OF OUR COMMON STOCK BY EXISTING STOCKHOLDERS COULD DEPRESS THE
MARKET PRICE OF OUR COMMON STOCK

     Once a trading market develops for our common stock, many of our
stockholders will have an opportunity to sell their common stock for the first
time. Sales of a substantial number of shares of common stock in the public
market, or the threat that substantial sales might occur, could cause the market
price of the common stock to decrease significantly. These factors could also
make it difficult for us to raise additional capital by selling stock. See
"Shares Eligible for Future Sale" for further details regarding the number of
shares eligible for public sale after this offering.

WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS FROM THIS OFFERING AND MAY
NOT USE THEM IN A MANNER STOCKHOLDERS WOULD PREFER

     We have not identified specific uses for most of the proceeds from this
offering, and we will have broad discretion in how we use them. In addition, we
are unable to determine how much of the proceeds will be used for any identified
purpose because circumstances regarding our planned uses of the proceeds may
change. You will not have the opportunity to evaluate the economic, financial or
other information on which we base our decisions on how to use the proceeds. The
failure of our management to apply the funds effectively could have a material
adverse effect on our business and financial performance.

                                       12
<PAGE>   16

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance, and are identified by terminology such as "may,"
"will," "should," "expects," "scheduled," "plans," "intends," "anticipates,"
"believes," "estimates," "potential," or "continue" or the negative of these
terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks and uncertainties. Actual events or results may
differ materially from those indicated by such forward-looking statements. In
evaluating those statements, you should consider the inherent risks and
uncertainties involved, including the risks outlined under "Risk Factors."

     Although we believe that the expectations reflected in those
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. Moreover, neither we nor any
other person assumes responsibility for updating any of those forward-looking
statements after the date of this prospectus.

                                USE OF PROCEEDS

     The net proceeds to SkillSoft from this sale of the                shares
of common stock are estimated to be approximately $          at an assumed
initial public offering price of $     per share, after deducting estimated
underwriting discounts and commissions and offering expenses payable by
SkillSoft. If the underwriters' over-allotment option is exercised in full,
SkillSoft will receive an additional $          . SkillSoft intends to use the
proceeds for general corporate purposes, including expansion of its sales and
marketing capabilities, product development, expansion of its international
operations and working capital. Pending these uses, the proceeds of this
offering will be invested in short-term, interest-bearing, investment-grade
securities, certificates of deposit or direct or guaranteed obligations of the
United States.

                                DIVIDEND POLICY

     SkillSoft has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends in the foreseeable future.
SkillSoft currently intends to retain future earnings, if any, to fund the
expansion and growth of its business. Payment of future dividends, if any, will
be at the discretion of SkillSoft's board of directors after taking into account
various factors, including SkillSoft's financial condition, operating results,
current and anticipated cash needs, plans for expansion and other factors that
the board deems relevant.

                                       13
<PAGE>   17

                                 CAPITALIZATION

     The following table sets forth the capitalization of SkillSoft as of July
31, 1999. Our capitalization is presented:

     - on an actual basis;

     - on a pro forma basis giving effect to the automatic conversion of all
       outstanding shares of preferred stock which will occur upon the closing
       of this offering into common stock and the reclassification of all
       outstanding shares of Class A common stock into common stock; and

     - on a pro forma as adjusted basis to reflect the sale by SkillSoft of
              shares of common stock offered hereby at an assumed initial public
       offering price of $     per share, after deducting estimated underwriting
       discounts and commissions and offering expenses.

This information should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes appearing elsewhere in this
prospectus.

<TABLE>
<CAPTION>
                                                            AS OF JULY 31, 1999
                                                  ----------------------------------------
                                                                              PRO FORMA AS
                                                   ACTUAL      PRO FORMA        ADJUSTED
                                                  --------    ------------    ------------
                                                     (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                               <C>         <C>             <C>
Stockholders' equity:
Convertible preferred stock, $.001 par value
  Series A -- 4,000,000 shares issued and
     outstanding actual; none issued and
     outstanding pro forma and pro forma as
     adjusted...................................  $  6,958    $         --
  Series B -- 4,761,905 shares issued and
     outstanding actual; none issued and
     outstanding pro forma and pro forma as
     adjusted...................................     9,994              --
Class A common stock, 4,106,062 issued and
  outstanding actual; none issued and
  outstanding pro forma and pro forma as
  adjusted......................................         4
Common stock, $.001 par value; none issued and
  outstanding actual; 12,867,967 shares issued
  and outstanding pro forma;        shares
  issued and outstanding pro forma as
  adjusted......................................        --              13
Additional paid-in capital......................     1,468          18,411
Deferred compensation...........................      (716)           (716)
Notes receivable from stockholders..............      (339)           (339)
Accumulated deficit.............................   (16,739)        (16,739)
                                                  --------    ------------
  Total stockholders' equity....................       630             630
                                                  --------    ------------
  Total capitalization..........................  $    630    $        630
                                                  ========    ============
</TABLE>

                                       14
<PAGE>   18

                                    DILUTION

     The pro forma net tangible book value of the common stock at July 31, 1999
was $630,390, or $.05 per share. Pro forma net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of common stock outstanding after giving effect to the
conversion of all shares of preferred stock. After giving effect to the sale of
       shares of common stock offered hereby by SkillSoft at an assumed initial
public offering price of $     per share and after deducting estimated
underwriting discounts and commissions and offering expenses, SkillSoft's pro
forma net tangible book value as of July 31, 1999 would have been approximately
$          , or $     per share. This represents an immediate increase in pro
forma net tangible book value of $     per share to existing stockholders and an
immediate dilution of $     per share to new investors purchasing shares of
common stock in this offering. The following table illustrates this dilution:

<TABLE>
<S>                                                           <C>        <C>
Assumed initial public offering price per share.............             $
Pro forma net tangible book value per share at July 31,
  1999......................................................      .05
Increase attributable to the sale of common stock in this
  offering..................................................  $
                                                              -------
Adjusted pro forma net tangible book value per share after
  this offering.............................................
                                                                         -------
Net tangible book value dilution per share to new investors
  in this offering..........................................             $
                                                                         =======
</TABLE>

     If the underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $     per
share, the decrease in net tangible book value per share to existing
stockholders would be $     per share and the dilution to individuals who
purchase shares in this offering would be $     per share.

     The following table summarizes, as of July 31, 1999, on the pro forma basis
described above, the total number of shares purchased, the consideration paid to
SkillSoft and the average price per share paid by the existing stockholders and
by new investors purchasing shares of common stock in this offering at an
assumed initial public offering price of $     per share before deducting the
estimated underwriting discounts and commissions and offering expenses:

<TABLE>
<CAPTION>
                                        SHARES PURCHASED      TOTAL CONSIDERATION     AVERAGE
                                      --------------------   ---------------------     PRICE
                                        NUMBER     PERCENT     AMOUNT      PERCENT   PER SHARE
                                      ----------   -------   -----------   -------   ---------
<S>                                   <C>          <C>       <C>           <C>       <C>
Shares owned by existing
  stockholders......................  12,867,967         %   $17,718,562          %   $ 1.38
Shares purchased in this offering...
                                      ----------    -----    -----------   -------
          Total.....................                100.0%   $               100.0%
                                      ==========    =====    ===========   =======
</TABLE>

     These tables do not give effect to the exercise of options to purchase
common stock outstanding at July 31, 1999. At July 31, 1999, there were 816,777
shares of common stock issuable upon exercise of outstanding stock options, at a
weighted average exercise price of $.29 per share. To the extent that these
options are exercised, there will be further dilution to new investors.

                                       15
<PAGE>   19

                            SELECTED FINANCIAL DATA

     The selected financial data set forth below should be read in conjunction
with SkillSoft's financial statements and notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," appearing elsewhere
in this prospectus. The statement of operations data for the period from
incorporation (October 15, 1997) to January 31, 1998 and for the fiscal year
ended January 31, 1999 and the balance sheet data as of January 31, 1998 and
January 31, 1999 are derived from, and are qualified by reference to, audited
financial statements included elsewhere in this prospectus. The statement of
operations data for the six months ended July 31, 1998 and 1999 and the balance
sheet data as of July 31, 1999 are derived from unaudited financial statements
of SkillSoft appearing elsewhere in this prospectus. The unaudited financial
statements have been prepared on the same basis as the audited financial
statements and, in the opinion of SkillSoft's management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The historical results
of operations are not necessarily indicative of the operating results to be
expected in the future.

<TABLE>
<CAPTION>
                                          PERIOD FROM
                                         INCORPORATION                        SIX MONTHS ENDED
                                      (OCTOBER 15, 1997)    YEAR ENDED            JULY 31,
                                        TO JANUARY 31,      JANUARY 31,   ------------------------
                                             1998              1999          1998         1999
                                      -------------------   -----------   ----------   -----------
                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                   <C>                   <C>           <C>          <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.............................       $     --         $       --    $       --   $     1,088
Cost of revenue.....................             --                 --            --           254
                                           --------         ----------    ----------   -----------
  Gross profit......................             --                 --            --           834
Operating expenses:
  Research and development..........            178              4,117         1,224         3,743
  Selling and marketing.............             --              1,671           179         2,849
  General and administrative........            649              2,821         1,445         1,965
  Amortization of deferred
     compensation...................             --                 --            --            38
                                           --------         ----------    ----------   -----------
          Total operating
             expenses...............            827              8,609         2,848         8,595
                                           --------         ----------    ----------   -----------
Interest income.....................              3                336           120           119
                                           --------         ----------    ----------   -----------
          Net loss..................       $   (824)        $   (8,273)   $   (2,728)  $    (7,642)
                                           ========         ==========    ==========   ===========
Net loss per share:
  Basic and diluted.................       $  (0.88)        $    (2.70)   $    (1.13)  $     (1.91)
                                           ========         ==========    ==========   ===========
  Basic and diluted weighted average
     common shares outstanding......        938,241          3,062,038     2,417,569     3,994,974
                                           ========         ==========    ==========   ===========
Pro forma net loss per share:
  Pro forma basic and diluted.......                        $    (1.01)                $     (0.61)
                                                            ==========                 ===========
  Pro forma basic and diluted
     weighted average common shares
     outstanding....................                         8,170,975                  12,546,408
                                                            ==========                 ===========
</TABLE>

<TABLE>
<CAPTION>
                                                          AS OF JANUARY 31,
                                                          ------------------    AS OF JULY 31,
                                                           1998       1999           1999
                                                          -------    -------    --------------
                                                                     (IN THOUSANDS)
<S>                                                       <C>        <C>        <C>
BALANCE SHEETS DATA:
Cash, cash equivalents and short-term investments.......  $7,022     $3,965         $  524
Working capital.........................................   6,319      2,726            183
Total assets............................................   7,022      4,551          2,558
Long-term liabilities...................................      --         --             --
Stockholders' equity....................................   6,319      3,195            630
</TABLE>

                                       16
<PAGE>   20

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis of the financial condition and
results of operations of SkillSoft should be read in conjunction with "Selected
Financial Data" and SkillSoft's financial statements and notes appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. SkillSoft's
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, but not limited to,
those set forth under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

     We are a leading provider of Web-based training resources for Global 2000
companies that cover a variety of professional effectiveness and business
topics. We commenced operations in January 1998 and until March 1999 devoted
substantially all of our efforts to product development, establishing a course
content developer and supplier base, building a direct sales and support
organization in the United States and a business application and network
infrastructure to support future growth. Since March 1999, we have devoted
substantial resources to sales and marketing activities as well as to continued
product development, and have recorded revenue, although we are not yet
profitable. We had an accumulated deficit of $16,738,888 as of July 31, 1999. We
expect to incur additional losses through at least the fiscal year ending
January 31, 2001, due primarily to substantial increases in sales and marketing
expenditures related to expanding our direct sales organization in the United
States, Europe and Australia and to increased personnel-related costs and
expenditures for travel, advertising, public relations, recruiting and other
activities. Research and development expenses will also contribute to losses
during this period as we continue to introduce new courses. Legal costs may also
increase due to the defense of a lawsuit filed against SkillSoft and certain of
our executives by NETg.

     We derive revenue primarily from license agreements under which customers
license our courses for periods of one, two or three years. The pricing for
licenses varies based upon the number of course titles licensed by a customer,
the number of users within the customer's organization and the length of the
license agreement. For example, a three-year license for 25 courses for 5,000
users would cost approximately $106,250 per year. Our license agreements permit
customers to exchange courses, generally on the contract anniversary date.
Customers may amend the license agreements, for an additional fee, to gain
access to additional courses and/or to increase the size of the user base.

     The annual license fee for the first year is generally billed in advance
and recognized as revenue at the time of delivery of products. In the event that
the customer does not initially specify the entire set of licensed courses to be
delivered or if some licensed courses are not immediately available for
delivery, the portion of the license revenue associated with those undelivered
courses is not recognized until those courses are delivered. License fees for
subsequent years of multi-year license agreements will be generally billed and
recognized on the anniversary date of the agreement, or if the customer
exchanges courses at the renewal date, upon delivery of the exchanged courses.
Revenue is recognized ratably over the license period if the customer is given
unlimited exchange privileges, exercisable other than on the contract
anniversaries, or if the customer licenses all courses currently available and
to be developed during a particular term. This license approach enables us to
build a backlog of future revenue streams. We also derive revenue from optional
complementary services such as extranet hosting and mentoring services, which
have been minimal to date. We may offer payment terms up to six months from the
initial shipment date or anniversary date for multi-year agreements.

     Our backlog at any given time represents the amount of license fees which
are due to us under existing license agreements but which have not yet been
recognized as revenue. This amount is comprised of license fees attributable to
licensed courses that have not yet been selected by the

                                       17
<PAGE>   21

customer or delivered by us and to future years of non-cancellable multi-year
license agreements. Our backlog as of July 31, 1999 was approximately
$2,200,000. Our backlog can vary based upon a number of factors, including the
timing of the execution of new license agreements, the timing of product
deliveries and the length of our license agreements. In particular, if customer
or competitive pressures cause us to change our business model from multi-year
license agreements to one-year license agreements, our backlog (although not
necessarily our revenue) would decrease. In addition, although we expect to
develop all licensed courses, and although our license agreements generally may
not be canceled by our customers unless we breach the agreement, there can be no
assurance that all of our backlog will be ultimately recognized as revenue.
Accordingly, our backlog as of any particular date should not be relied upon as
an indication of our actual revenue for any future period.

     Cost of revenue includes the cost of materials (such as CD-ROM media),
packaging, duplication, custom library CD production, internet hosting services,
the cost of Online Mentoring services and certain infrastructure and occupancy
expenses. In the future, cost of revenue is expected to include content
royalties, although we intend to minimize the use of such arrangements. These
costs of revenue are generally recognized as incurred. Research and development
expenses consist primarily of salaries and benefits, certain infrastructure and
occupancy expenses, fees to consultants and course content development fees.
Software development costs are accounted for in accordance with SFAS No. 86,
which requires the capitalization of certain computer software development costs
incurred after technological feasibility is established. To date, development
costs after establishment of technological feasibility have been immaterial, and
all software development costs have been expensed as incurred. Selling and
marketing expenses consist primarily of salaries, commissions and benefits,
advertising and promotion, travel and certain infrastructure and occupancy
expenses. General and administrative expenses consist primarily of salaries and
benefits, consulting and service expenses, legal expenses and certain
infrastructure and occupancy expenses.

     We recorded deferred compensation of $754,156 in the six months ended July
31, 1999, representing the difference between the exercise price of stock
options granted and the sale price of restricted common stock and the fair
market value of the underlying common stock at the date of grant. No such
deferred compensation was recorded for the fiscal year ended January 31, 1999.
The difference is recorded as a reduction of stockholders' equity and is being
amortized over the vesting period of the applicable options and restricted
common stock, which is typically four years. Of the total deferred compensation
amount, $38,345 had been amortized as of July 31, 1999. The amortization of
deferred compensation is recorded as an operating expense. We currently expect
to amortize the remaining $715,811 of deferred compensation as of July 31, 1999
in the periods indicated, as follows:

<TABLE>
<S>                                                           <C>
August 1, 1999 - January 31, 2000...........................  $ 97,276
February 1, 2000 - January 31, 2001.........................  $194,552
February 1, 2001 - January 31, 2002.........................  $194,552
February 1, 2002 - January 31, 2003.........................  $171,504
February 1, 2003 - January 31, 2004.........................  $ 57,927
                                                              --------
                                                              $715,811
                                                              ========
</TABLE>

RESULTS OF OPERATIONS

SIX MONTHS ENDED JULY 31, 1999 VERSUS SIX MONTHS ENDED JULY 31, 1998

     Revenue for the six months ended July 31, 1999 was $1,088,224, as compared
to no revenue for the six months ended July 31, 1998, insofar as we did not
begin recognizing revenue until

                                       18
<PAGE>   22

March 1999. This revenue was derived from customer license agreements closed and
products shipped under those agreements during the six months ended July 31,
1999.

     Cost of revenue was $254,455, or 23% of revenue, for the six months ended
July 31, 1999, as compared to $0 for the six months ended July 31, 1998.

     Research and development expenses were $3,743,121 for the six months ended
July 31, 1999, as compared to $1,224,356 for the six months ended July 31, 1998.
This increase was primarily due to increased personnel and course development
costs. We believe that a significant investment in research and development is
necessary to remain competitive, and we therefore expect research and
development expenses to continue to increase.

     Selling and marketing expenses were $2,849,386 for the six months ended
July 31, 1999, as compared to $178,585 for the six months ended July 31, 1998.
This increase was primarily due to increased personnel, commissions, marketing
and travel costs. We believe that a significant investment in selling and
marketing to expand our distribution channel worldwide is required to remain
competitive, and we therefore expect selling and marketing expenses to continue
to increase.

     General and administrative expenses were $1,964,517 for the six months
ended July 31, 1999, as compared to $1,444,876 for the six months ended July 31,
1998. This increase was primarily due to increased personnel costs and legal
fees incurred in connection with the NETg lawsuit. We anticipate that general
and administrative expense will increase due to increases in headcount in
management information services and accounting, additional expenses associated
with operating as a public company and the legal fees relating to the NETg
lawsuit.

     Interest income was consistent from period to period and totalled $119,686
for the six months ended July 31, 1999, as compared to $120,308 for the six
months ended July 31, 1998.

YEAR ENDED JANUARY 31, 1999 VERSUS PERIOD FROM INCORPORATION (OCTOBER 15, 1997)
TO JANUARY 31, 1998

     We commenced operations in January 1998 and had no revenue until March
1999. We did not incur significant operating expenses during the period ended
January 31, 1998.

     Research and development expenses were $4,117,187 for the year ended
January 31, 1999. We had 18 research and development personnel and had not yet
completed development of any courses as of January 31, 1999.

     Selling and marketing expenses were $1,671,225 for the year ended January
31, 1999. We had 36 selling and marketing personnel as of January 31, 1999.

     General and administrative expenses were $2,820,646 for the year ended
January 31, 1999. We had nine general and administrative personnel as of January
31, 1999.

                                       19
<PAGE>   23

QUARTERLY OPERATING RESULTS

<TABLE>
<CAPTION>
                                                          QUARTER ENDED
                                                 -------------------------------
                                                 APRIL 30, 1999    JULY 31, 1999
                                                 --------------    -------------
<S>                                              <C>               <C>
Revenue........................................   $   197,822       $   890,402
Cost of revenue................................       126,779           127,676
                                                  -----------       -----------
  Gross profit.................................        71,043           762,726
                                                  -----------       -----------
Operating expenses:
  Research and development.....................     1,917,181         1,825,940
  Selling and marketing........................     1,281,092         1,568,294
  General and administrative...................     1,063,685           900,832
  Amortization of deferred compensation........         9,874            28,471
                                                  -----------       -----------
  Total operating expenses.....................   $ 4,271,832       $ 4,323,537
                                                  -----------       -----------
Interest income................................        64,478            55,208
                                                  -----------       -----------
     Net loss..................................   $(4,136,311)      $(3,505,603)
                                                  ===========       ===========
</TABLE>

     Revenue increased from $197,822 for the quarter ended April 30, 1999 to
$890,402 for the quarter ended July 31, 1999, due primarily to 13 new customers.
Research and development expenses decreased from $1,917,181 for the quarter
ended April 30, 1999 to $1,825,940 for the quarter ended July 31, 1999,
primarily as a result of a reduction in the use of outside contractors and lower
recruiting expenses. General and administrative expenses decreased from
$1,063,685 for the quarter ended April 30, 1999 to $900,832 for the quarter
ended July 31, 1999 due primarily to lower legal fees incurred in connection
with the NETg lawsuit. Interest income decreased from $64,478 for the quarter
ended April 30, 1999 to $55,208 for the quarter ended July 31, 1999, due to
lower cash balances.

     As a result of our limited operating history, we do not have sufficient
historical financial data upon which to forecast quarterly revenue and operating
results. Our quarterly operating results may fluctuate as a result of a variety
of factors. Please see "Risk Factors -- Our operating results are difficult to
forecast and may fluctuate from quarter to quarter" for a detailed description
of the factors that may affect our operating results.

LIQUIDITY AND CAPITAL RESOURCES

     From inception, we have been funded primarily through preferred stock
financings with Warburg Pincus and other minority investors. The net proceeds
from these financings through July 31, 1999 were approximately $16,951,435. In
addition, we raised approximately $3,761,000 of net proceeds from a preferred
stock financing in August 1999.

     We have a revolving line of credit with GreyRock Capital. The line of
credit permits borrowings of up to the lesser of $5,000,000 or the sum of 80% of
eligible accounts receivable and $1,000,000. Borrowings are secured by all of
our assets and bear interest at an annual rate of 4.875% over LIBOR. This
agreement expires on June 30, 2000 but is automatically renewable for additional
one-year terms. There are no outstanding borrowings under this line of credit.

     Capital expenditures from inception through July 31, 1999 were $627,683.
These expenditures related primarily to the corporate office server network,
furniture and fixtures and the office telephone system.

                                       20
<PAGE>   24

     We had cash, cash equivalents and short-term investments totalling $524,002
as of July 31, 1999 and $2,619,707 as of August 31, 1999. We believe that the
net proceeds of this offering, together with our current cash, cash equivalents
and short-term investments and our credit facility with GreyRock Capital, will
be sufficient to satisfy our funding needs for at least the next 18 months.

YEAR 2000 COMPLIANCE

     The Year 2000 issue refers generally to the problems that some software and
computer systems may have in determining the correct century for the years after
1999. For example, software and computer systems with date-sensitive functions
that are not Year 2000 compliant may not be able to distinguish whether "00"
means 1900 or 2000, which may result in system failures or erroneous results.

     We have defined "Year 2000 compliant" as the ability to:

     - correctly handle date information after December 31, 1999;

     - function according to the product documentation provided for this date
       change, without changes in operation resulting from the advent of a new
       century, assuming correct configuration;

     - where appropriate, respond to two-digit date input in a way that resolves
       the ambiguity as to century in a disclosed, defined, and predetermined
       manner;

     - if the date elements in interfaces and data storage specify the century,
       store and provide output of date information in ways that are unambiguous
       as to century; and

     - recognize the year 2000 as a leap year.

     We believe that we have four general areas of potential exposure with
respect to the Year 2000 problem:

     - Our own products;

     - Our internal information systems and equipment-related systems;

     - The effects of compliance efforts of our suppliers, resellers and other
       third parties; and

     - Year 2000 problems experienced by our customers.

     All of our current courses and software products are Year 2000 compliant.
Our courses are presented through the medium of Web browsers. Date information
is supplied to our programs by the Web browser and the user's operating system.
If the Web browser and the operating system are Year 2000 compliant and pass
correct, unambiguous date information to our software, we believe that our
software will process it correctly.

     Since we began our business in January 1998, we have implemented and will
continue to implement enterprise-wide business software. This software is
represented by its vendors as being fully Year 2000 compliant. We have completed
our assessment of all critical business systems, and have found that where
software updates are required, they have been provided by the vendors and will
be installed and tested by the middle of October 1999. Because we purchased all
software and hardware we use during 1998 and 1999, we do not believe there will
be any material problems or costs relating to such software or hardware
associated with the Year 2000 problem.

     The third aspect of our Year 2000 compliance analysis involves evaluating
the Year 2000 efforts of third parties, including suppliers, resellers and
producers of software which interact with our programs. To date, we have not
conducted a Year 2000 compliance review of our suppliers or resellers. We are
currently evaluating the need to conduct a complete review of our suppliers' and

                                       21
<PAGE>   25

resellers' Year 2000 compliance issues. We are currently focusing all our Year
2000 efforts on our products and our internal business systems' Year 2000
readiness. If a supplier or reseller experiences a material Year 2000 compliance
problem, we plan to change suppliers and resellers. We cannot assure you that we
will be successful in finding alternatives and that our business will not incur
significant supplier transfer costs as well as lost revenue from our resellers.
With respect to third-party software which interacts with our programs, we have
identified several databases, Web servers and Web browsers which are Year 2000
compliant. If some of our customers do not use our programs with one of these
systems, it is possible that they may experience difficulties related to
third-party software, which may affect the performance of our products and lead
to adverse results such as an unusually high number of calls to our technical
support department or other unusual requests for information or assistance.
Responding to these requests may divert resources from pursuing our business
strategy. Furthermore, failure of third-party software or products used with our
products may reduce the value of our products, decrease or delay revenues,
tarnish our brand, give rise to breach of warranty claims or divert resources,
any of which could materially adversely affect our business, results of
operations and financial condition.

     We have not evaluated and are not able to evaluate our customers' Year 2000
compliance strategies that might impact our business, such as an intranet
"lockdown" by any such customer, which could delay sales cycles or cause delays
in evaluations or decisions requiring the customer access to their intranet. Any
lockdowns could materially impact our revenue expectations during the periods in
which they occur.

     We currently anticipate that the Year 2000 problem, insofar as it relates
to our products and internal systems, will not have a material adverse effect on
our financial position or results of our operations. We can give no assurance,
however, that the systems of other companies or government entities, on which we
rely for supplies, payments and future business, will be Year 2000 compliant or
that a failure to be Year 2000 compliant by another company or government entity
would not have a material adverse effect on our business. If third party
suppliers, service providers, resellers and customers are impacted by Year 2000
compliance problems, our business may suffer.

     Our most likely worst case Year 2000 scenario would be that products and
software from third parties fail in the Year 2000, resulting in a decreased
demand for our products and damage to our brand. In the event of a Year 2000
failure of our products or systems, we would devote resources to correct it. We
believe we will be able to respond promptly to any failures that occur. The
costs of a response and the diversion of resources, however, could have a
material adverse effect on our business, results of operation and financial
condition.

     Because our products are, and our internal systems are or are soon expected
to be, Year 2000 compliant, we have not formulated any contingency plans with
regard to Year 2000 compliance. Furthermore, we have not expended a material
amount of capital resources on Year 2000 compliance and do not anticipate future
expenditures to be material to our business, results of operations and financial
condition. We have not hired additional personnel to address Year 2000
compliance issues specifically, and we do not expect to do so.

                                       22
<PAGE>   26

                                    BUSINESS

COMPANY OVERVIEW

     We are a leading provider of Web-based training resources for Global 2000
companies that cover a variety of professional effectiveness and business topics
(commonly called soft skills). All of our courses and support tools have been
specifically designed to take advantage of the benefits offered by the internet
and the Web-based environments of our customers. This enables the users of our
products to access the material they need, with the specificity or breadth that
they require, anytime or anywhere that they may need it. Our customers receive
comprehensive training and support solutions for their employees, comprised of:

     - our library of 126 courses, which encompasses a wide array of
       professional effectiveness skills, such as management, leadership,
       communication, project management and customer service, as well as
       business topics such as finance, marketing, sales and strategy; and

     - our Web-based online performance support tools, such as: Search-and-Learn
       technology, which permits users to perform online searches of their
       company's entire library of SkillSoft courses for a specific training
       topic and to directly access only what they need; Online Mentoring, which
       enables users to interact via e-mail with experts on a topic from any Web
       connection; and Online Job Aids, which consist of approximately 380
       topical refreshers and outlines that are accessible online.

     Our Web-based training solution offers several advantages over traditional
instructor-led training, such as the elimination of travel and scheduling
difficulties and a reduction in lost employee time. In addition, we provide a
number of significant advantages over other technology-based training products,
including:

     - more flexible and cost-efficient deployment of courses, enabling users to
       access our training materials anywhere, anytime and only in the amounts
       they need;

     - online performance support tools, such as Search-and-Learn technology,
       Online Mentoring and Online Job Aids, that enable users to tailor our
       educational resources to their individual needs and pace and to obtain
       specific, real-time assistance when they need it;

     - easier to use products that incorporate intuitive navigational concepts;

     - improved means of product and user support through Web distribution; and

     - increased ability for administrators to monitor use and effectiveness of
       courses.

In addition, all of our courses are developed using our Instructional Design
model, which is based on proven concepts for performance-oriented learning and
is designed to maximize learner attention and retention through the use of rich
color and graphics, audio, behavioral modelling, role-playing and substantial
user interaction.

     Our objective is to be the leading global provider of high-quality
Web-based learning and performance support products that enable business
organizations to achieve competitive advantage through superior enterprise-wide
knowledge and skills. We market our courses primarily to Global 2000 companies
and other large businesses, governmental organizations and educational
institutions. As of August 31, 1999, we had 27 customers, including Adobe,
Citibank, Dayton Hudson, EMC, Ernst & Young, Fluor Daniel, GTE, IBM and National
Car Rental. Many of our courses have received approvals from educational
institutions and certification organizations for college degree credit,
continuing education requirements or professional certification. In addition, we
have recently established a strategic relationship with The Wharton School of
the University of Pennsylvania under which The Wharton School will contribute to
our development of a series of courses focusing on financial statements.

                                       23
<PAGE>   27

     We are led by Charles Moran, our President and CEO, along with a team of
executives who together bring over 70 years of experience in the technology and
education industries. Our library has grown to 126 courses as of August 31,
1999, and we expect to offer more than 200 courses by the end of our fiscal
year. During the six months ended July 31, 1999, we generated $1,088,224 in
revenue and incurred a $7,641,914 net loss. Our backlog of unrecognized revenue
was approximately $2,200,000 as of July 31, 1999.

MARKET OPPORTUNITY

     The increasing acceptance of the internet coupled with the proliferation of
Web browsers at work, at home and in laptop computers have dramatically changed
many businesses and business processes, creating exciting opportunities to serve
customers better, faster and more cost-effectively. We believe that new
technological capabilities of the internet, such as search engines and hypertext
links, coupled with dramatically increased connectivity for workers, have
created an opportunity to comprehensively change the way that organizations and
their employees view and implement training and education. By providing
real-time accessibility and user-focused specificity, we believe that Web-based
training will change the training and education process from a distinct
event -- often off-site and limited in scope -- to a process of continuous
learning for employees. Given the rising needs for training in increasingly
complex working environments, we believe that a properly designed and deployed
Web-based training resource can effectively address the needs of companies
seeking a comprehensive, enterprise-wide training solution.

  The Corporate Training and Soft Skills Market

     The corporate training market is large and growing. According to TRAINING
magazine, domestic corporations with over 100 employees budgeted approximately
$60.7 billion for training in 1998 (including the costs of internal training),
compared to $48.2 billion in 1993. A significant portion of the corporate
training market is comprised of soft skills training. We believe that the growth
in corporate training in general and soft skills training in particular is being
driven by:

     - the evolution of our economy to a service-based and knowledge-based
       economy, in which the skills of the workforce often represent the most
       important corporate assets;

     - the increasing recognition by businesses that it is imperative to
       continually improve the skills of their employees in order to remain
       competitive;

     - the rapidly evolving business environment, which in turn necessitates
       continual training and education of the employee base; and

     - the increased competition in today's economy for skilled employees and
       the recognition that effective training can be used to recruit and retain
       employees.

     The corporate training market is also characterized by an increasing use of
external providers to supplement or replace internal training efforts, in order
to obtain a more comprehensive and consistent training solution than is
available internally and in order to allow businesses to focus on their core
competencies. We believe that the corporate training industry is highly
fragmented, with a large number of smaller competitors but no dominant
competitor. Many companies within this industry serve niche markets or provide a
limited range of products and services that do not adequately address the
training needs of large organizations.

  Technology-Based and Web-Based Training

     Accompanying the trend toward increased training, largely through the use
of external training providers, has been an equally powerful trend toward the
use of technology-based training. Technology-based training includes CD-ROMs,
satellite broadcasts, client/server applications --

                                       24
<PAGE>   28

which allow personal computers, called client computers, to exchange data with
more powerful computers, called servers, shared by multiple users -- and
Web-based training. Simba Information estimates that technology-based training
accounted for 24% of the corporate training market in 1998, up from 19% in 1997.
We believe the growth in technology-based training is being driven by the
increased recognition by many companies that traditional classroom instruction
is inadequate to meet their enterprise-wide training needs. Among the problems
of classroom instruction that can be addressed by traditional technology-based
training solutions such as CD-ROMs, satellite broadcasts and client/server
applications are travel costs, scheduling difficulties and the opportunity costs
of employees' time.

     However, traditional technology-based training addresses only some of the
shortcomings of classroom instruction. We believe that Web-based training
products can dramatically alter the manner in which courses are deployed and
used and can provide a number of significant advantages over traditional
instructor-based and technology-based training. Web-based training products can
be deployed more flexibly and cost-effectively, enabling users to access the
material they need anytime or anywhere that they may need it in the exact amount
they demand. In addition, Web-based training products enable self-directed
learning, which refers to a training process in which individuals initiate their
own training, customize it to their own needs, and master material at their own
pace. Other advantages of Web-based training products are ease of use, improved
means of product and user support, and enhanced administrative capabilities. We
believe that a Web-based training solution, when properly designed and deployed,
can provide a comprehensive, enterprise-wide training solution that is more
flexible, effective and cost-efficient than classroom instruction and
traditional technology-based training. International Data Corporation estimates
that the Web-based component of information technology training will grow at an
85% compound annual rate from 1997 to 2002, and we believe that Web-based soft
skills training will also experience rapid growth.

THE SKILLSOFT ADVANTAGE

     We address the enterprise-wide training needs of business organizations by
providing Web-based training resources that cover a variety of professional
effectiveness and business topics. We believe our courses and support tools
offer the following advantages:

  Comprehensive Offering of High-Quality Products

     We believe that a key advantage we offer our customers is the comprehensive
range of our training solutions. Our courses cover a wide range of professional
effectiveness and business expertise subjects, and we believe that our 126
courses, as of August 31, 1999, represent the largest number of consistently
designed, Web-deployable courses in the soft skills training industry. By
January 31, 2000, we expect to have over 200 courses in our library. We believe
that our courses appeal to a broader range of employees within an organization
than do courses on information technology and other specialized topics. In
addition, our courses are designed to be utilized without customization across a
wide range of industries, including technology, financial services,
telecommunications and manufacturing. See "-- Products."

  Web-Based Performance Support

     Our Web-based architecture and deployment strategy enables us to provide a
number of Web-enabled features designed to continuously support users in their
working environment, providing immediate, focused training solutions to improve
employee effectiveness. Our Web-based performance support tools provide
anywhere, anytime accessibility to the thousands of topical lessons available in
our course library, as well as task-related refreshers and online feedback from
experts -- all at the level of detail specified by the user. Our
Search-and-Learn technology permits users to perform keyword-based, intelligent
searches for topics across their company's entire library of licensed
                                       25
<PAGE>   29

SkillSoft courses, in the same manner as one would use an internet search
engine. We also offer Online Mentoring, which enables a user to ask questions
relating to course materials or subject matter and receive e-mail responses from
experts in the field. See "-- Products -- Web-Based Performance Support."

[PICTURE OF JOB AID]

  State-of-the-Art Web-Based Deployment Strategy

     All of our courses are developed and deployed through an architecture built
entirely on new Web technologies and standards. We believe that our Web-based
architecture offers a number of advantages over conventional instructor-led
training as well as other technology-based training media, including:

     - More effective deployment -- Users of our courses can access them via a
       Web browser while at work, at home or while travelling, and can access
       them whenever they desire. Our courses can be accessed online through
       intranets or remotely through the internet, and may be downloaded -- in
       whole or in part -- for localized playing on laptops or other independent
       computers. Our deployment technologies are fully scalable to address the
       expanding training needs of large organizations.

     - Advanced Web technologies -- Our products incorporate emerging Web
       technologies that we believe substantially improve product performance.
       For example, by designing our products using cross-platform technologies
       such as Java (a programming language), HTML (a Web document formatting
       language) and JavaScript (a scripting language), our users avoid the need
       for proprietary plug-in technologies, which reduces the risk of technical
       problems and enhances network security. In addition, our products employ
       advanced techniques for compression and caching of text, graphics and
       audio to deliver high-quality performance within the bandwidth
       limitations of most corporate intranets.

     - Easier updating -- Because our courses generally reside on a centralized
       server accessible by users connected to the network -- rather than
       distributed on personal computers throughout the organization or on
       multiple CD-ROMs -- updating or adding courses can be done more quickly
       and cost-effectively. See "-- Products -- Web-Based Deployment."

  Instructional Design Model

     All SkillSoft courses are developed using our Instructional Design model,
which is based on proven concepts for performance-oriented learning. Our
Instructional Design model draws heavily from adult learning theory and
emphasizes motivation, topic relevance, self-management, problem solving,
mastery learning and role-playing. Users work at their own pace, learn by
observing and modeling the actions and attitudes of others, and take tests to
assess their mastery of the selected skills. The learner remains actively
engaged through interactive instruction, practice, reinforcement and feedback.
We believe that our consistent use of this model in designing our courses not
only improves the efficacy of our courses, but also makes the development of
additional courses more efficient. See "-- Products -- The SkillSoft
Instructional Design Model."

  Customer-Focused Approach

     We strive to maintain a customer-focused approach throughout all aspects of
our organization that is aimed at making it easy and productive for our
customers to do business with us. Our application engineers work with our
customers to help ensure optimal performance of our products on the customer's
network. We maintain an Advisory Board, which is comprised of senior executives
of several of our customers who meet with us two or three times per year to
discuss ways to improve

                                       26
<PAGE>   30

our products. We also plan to introduce a broader Client Advisory Forum to
encourage direct customer input on our products, services and marketing plans. A
key component of our management philosophy is to enable all of our employees to
acquire SkillSoft common stock. We believe that this helps instill a "co-owner"
mindset in our employees and encourages a focus on customer satisfaction,
customer responsiveness, high-quality work, innovation, integrity, respect for
all our business partners and teamwork.

  Experienced and Proven Management Team

     Our executive management team, led by our President and Chief Executive
Officer, Charles E. Moran, has over 70 years of combined experience in the
technology and education industries. Mr. Moran's prior experience includes
National Education Training Group (NETg), where Mr. Moran served as President
and Chief Executive Officer from 1995 through 1997 following its sale to
Harcourt General, and Softdesk, Inc., a software company where Mr. Moran served
as Chief Operating Officer and Chief Financial Officer and helped lead its
initial public offering in February 1994. Other members of our management team
have prior experience at technology-based learning and other technology
companies such as CBT Group, Compaq, NETg and Motorola. We believe that our
management team and board of directors has proven itself to be exceptionally
skilled at responding quickly and effectively to changing market conditions,
which is especially important for technology-based companies offering Web-based
products or services. See "Management -- Executive Officers, Directors and Other
Key Employees."

SKILLSOFT GROWTH STRATEGY

     Our objective is to be the leading global provider of high-quality
Web-based learning and performance support products that enable business
organizations to achieve competitive advantage through superior enterprise-wide
knowledge and skills. To achieve this objective, we are pursuing the following
strategies:

  Expand Library of Courses

     We plan to expand our library of courses to provide an even more
comprehensive educational solution for our customers. Our goal is to increase
the number of courses we offer from 126 as of August 31, 1999 to more than 200
by January 31, 2000, and to add over 200 new courses per year for the next
several years. We believe that continuing to expand and update our library will
both enhance our appeal to a greater number of customers within our target
market and generate additional revenue from existing customers through increases
in the number of licensed courses and/or licensed users within the organization.
In addition to introducing new courses within our current educational topics, we
are considering the development of courses specifically targeted at certain
industries, such as e-commerce, healthcare and financial services.

  Enhance Web-Based Technologies

     We believe that developing new technologies and incorporating emerging Web
technologies and standards will enable us to continue to increase our appeal to
a broader base of customers. We are focused on developing and incorporating new
technologies that address the needs of our customers and make our products
easier to use and more effective, which we believe will generate increased
revenue from both existing and new customers. Among the projects we have
targeted are:

     - enhancing our Web-based performance support tools, including increasing
       the number of our Online Job Aids from approximately 380 as of August 31,
       1999 to our goal of over 700 by January 31, 2000;

     - extending the interoperability of our courses with third-party learning
       management software;

                                       27
<PAGE>   31

     - developing interfaces between administrative tools and third-party human
       resource database software;

     - continuing to improve course start-up times when used over low-speed
       network connections; and

     - developing new role play simulations and other interactive instructional
       features.

  Increase Domestic and International Sales and Marketing Efforts

     We will continue to expand our direct sales force by hiring experienced
professionals with existing relationships in the Global 2000 market. We
currently have 31 sales professionals as well as one person focusing on
strategic relationships with educational institutions. We intend to continue to
aggressively expand our sales and marketing efforts by hiring additional
professionals to increase penetration of our target market of the largest 2000
companies around the world.

     In addition to our domestic sales efforts, we also intend to expand into
selected international markets. To date, substantially all of our revenue has
been generated within the United States. We recently opened an office in the
United Kingdom, which will serve as the hub of our international operations, and
we plan to open an office in Australia by January 31, 2000. Although we expect
to employ a direct sales force in the United Kingdom and Australia, our strategy
is to address other international markets -- such as continental Europe and the
Far East -- primarily through resellers, with the goal of penetrating
English-speaking markets in those areas. We are in the process of developing a
version of some of our courses for use in the United Kingdom and other English-
speaking markets (such as Australia and South Africa) that is modified based on
the style of English spoken and local business customs in those markets.

  Leverage and Expand Blue-Chip Client Relationships

     We have secured multiple-year contracts with a number of blue-chip
companies in our target market. Our customers currently include Adobe, Citibank,
Dayton Hudson, EMC, Ernst & Young, Fluor Daniel, GTE, IBM and National Car
Rental. We believe that we have achieved this success both because of the high
quality of our product offerings and the relationships developed by our
executive officers and sales personnel with key decision-makers within these
organizations. We believe that those customer relationships provide us with
significant credibility in establishing ourselves as a leader in our market, and
we intend to use those relationships in marketing our products to other
potential customers. In addition, we plan to leverage our initial contacts and
success within specific departments of an organization, such as human resources
or sales, in seeking to increase the number of both licensed courses and
licensed users within other departments of that organization.

  Expand Strategic Alliances

     Our strategic partners are critical to our success because they permit us
to leverage our internal competencies with their expertise in complementary
areas. We have established strategic relationships with a number of resellers of
our products, including Asymetrix, KnowledgeSoft, Syscom and FirstClass Systems.
We have established and are developing reseller arrangements with internet
commerce sites focused on training and education, such as Headlight.com and
Fatbrain.com, and plan to develop reseller arrangements with internet portals
such as AltaVista. As of August 31, 1999, we had signed reseller agreements with
23 companies, and we plan to increase our reseller network significantly over
the next year.

     In addition, our courses have received approvals from a number of
educational institutions and certification organizations for college degree
credit, continuing education requirements or professional certification. Many of
our courses are approved by the University of Phoenix for college degree credit,

                                       28
<PAGE>   32

and all of our courses are approved by George Mason University for continuing
education credit. We expect that our courses will be approved by additional
educational institutions for degree credit and continuing education credit in
the future. Some of our sales and marketing courses are expected to be approved
later this year as study materials for new ISO certifications relating to sales
and marketing personnel, and we intend to develop additional business expertise
courses that adhere to the certification standards of other professional
certification organizations, such as the Project Management Institute and the
National Association of State Boards of Accountancy. In addition, we have
recently established a strategic relationship with The Wharton School of the
University of Pennsylvania under which The Wharton School will contribute to our
development of a series of courses focusing on financial statements.

PRODUCTS

  Courses

     Our comprehensive library of Web-based courses encompasses a wide array of
professional effectiveness skills and business topics. We offered 126 courses as
of August 31, 1999. Our courses are currently divided into two categories:
Professional Effectiveness and Business Expertise. Within these categories, we
offer courses on the following curricula:

<TABLE>
<CAPTION>
PROFESSIONAL EFFECTIVENESS   BUSINESS EXPERTISE
--------------------------  --------------------
<S>                         <C>
Management                  Finance
Leadership                  Marketing
Team Building               Sales
Communication               Strategic Planning
Personal Development        Human Resources
Customer Service            Knowledge Management
Project Management          Operations
</TABLE>

     Each of these curricula includes a number of series of courses. For
example, within the Project Management curriculum are series entitled
"Professional Project Management," "Advanced Risk Assessment for Project
Management" and "Advanced Project Scope, Time and Cost Management." Each series
is in turn comprised of three to eight individual courses, which are generally
two to three hours in length. Courses cover a number of different lessons, and
each lesson encompasses a number of different topics. All of our courses are
organized in a modular format, allowing users to take the entire course, or only
those portions of it that are relevant to them.

     Our courses are currently available in English. We are in the process of
developing a localized version of some of our courses for use in the United
Kingdom and other English-speaking markets (such as Australia and South Africa).

  The SkillSoft Instructional Design Model

     All SkillSoft courses are developed using our Instructional Design model,
which is based on proven concepts for performance-oriented learning. Our
Instructional Design model draws heavily from adult learning theory and
emphasizes motivation, topic relevance, self-management, problem solving,
mastery learning and role-playing. We believe that our consistent use of this
model in designing our courses not only improves the efficacy of our courses,
but also makes the development of additional courses more efficient.

                                       29
<PAGE>   33

     The key components of our Instructional Design model are:

     - Consistent, intuitive graphical user interface -- Our courses employ a
       graphical user interface, consistent across all of our courses, that
       emphasizes simplicity and clarity to help ensure that employees can take
       our courses with minimal assistance. Our graphical user interface
       incorporates intuitive navigational concepts and makes rich use of color,
       illustrations and photographs.

     - Variety of instructional media -- Our courses all include audio
       instruction, which can increase attention and retention for many users.
       Audio is especially important for our behavior modeling and RolePlay
       simulations. Our courses also incorporate photographs, charts and other
       graphics where appropriate to support and clarify the instruction and
       focus attention on key training points.

     - Practice and interaction -- Our courses engage users by requiring them to
       perform practice exercises and providing them with feedback on their
       performance. Our courses also include self-evaluation strategies that
       engage the learner with the course content on a more individualized
       level.

     - Integrated assessment strategy -- Our testing strategy includes both
       pre-assessment and post-assessment components. Pre-assessment features
       are placed at the beginning of each lesson and are designed to quickly
       identify the content the learner already knows. Post-assessment, or
       mastery, occurs at the end of each lesson and evaluates the learner's
       mastery of the objectives after instruction.

     - Behavior modeling -- We believe that observing and modeling the
       behaviors, skills and attitudes of others is a key ingredient in learning
       soft skills such as leadership and customer service. Our courses present
       examples, or "models," of behaviors and then ask users to rehearse these
       new behaviors through practice exercises and case studies.

     - RolePlay simulations -- Our innovative RolePlay feature, which we
       incorporate into some courses where behavioral practice is particularly
       relevant, presents users with realistic interactive simulations of
       everyday workplace situations. Each simulation has multiple possible
       outcomes, depending upon the user's responses.

     - Accelerated Path -- This feature enables users of our courses to create
       an individualized learning sequence through the course content based on
       their demonstrated mastery of topic objectives. This helps ensure that
       users do not spend time on topics for which they do not need training.

     - Performance-oriented instruction -- Our courses focus on achieving
       defined outcomes that are stated in terms of cognitive and affective
       objectives. Instructional strategies are chosen to support achievement of
       those objectives and assessments are used to evaluate learner achievement
       of those objectives.

  Web-Based Performance Support

     Our products include a number of Web-enabled features to support users in
their learning. Examples include:

     - Search-and-Learn technology, which adapts the concept of Web search
       engines to our training resources. Using Search-and-Learn technology,
       users can perform keyword-based, intelligent searches covering their
       company's entire library of licensed SkillSoft courses. Our software
       presents them with a list of the specific courses and topics that match
       their identified training needs, enabling them to directly access that
       information -- when and where they need it. This

                                       30
<PAGE>   34

       intelligent search capability is designed to locate the relevant sections
       of course content rather than every mention of the word in any course.

     - Online Job Aids, which are primers or sample documents that are
       accessible online and can be used both to supplement the basic course
       content or as "refresher" materials. Our customers can easily modify our
       Online Job Aids using word processors and HTML editors to customize them
       to meet the specific needs of the customer or its employees.

     - Online Mentoring, which enables a user to ask questions relating to
       either the course materials or the general subject matter of the course
       and receive e-mail responses (generally within 24 hours) from experts in
       the field.

     - NetUniversity, which is a Web-based software application that permits
       course users to access a wide variety of learning resources over the Web
       and enables training administrators to control, monitor and generate
       reports on the use of training courses -- either ours or those of other
       vendors -- by employees throughout the enterprise.

  Web-Based Deployment

     Our products incorporate the latest Web technologies that we believe
substantially improve our product performance. Our courses and support tools are
developed using cross-platform technologies such as Java (a programming
language), HTML (a Web document formatting language) and JavaScript (a scripting
language). To reduce the risk of technical problems that would limit access to
our training materials, our products do not use platform-dependent proprietary
plug-in technologies. In addition, our products all employ advanced techniques
for compression and caching of text, graphics and audio to deliver high-quality
performance within the bandwidth limitations of most corporate intranets and the
internet. Our technology enables us to provide these advantages to all users,
not just those with the most powerful computers, quickest modems and highest
resolution monitors.

     We have created a number of different options for customers to deploy our
courses throughout their organization, which are designed to address the needs
of a customer, regardless of its network structure or the location and network
access of its employees. Users of our courses can access them via a Web browser
while at work, at home or while traveling, and can access them whenever, and for
as long as, they desire. Our deployment technologies are fully scalable to
address the expanding training needs of large organizations. Deployment options
include:

     - NetPlay, for users with browser access over a corporate intranet.

     - NetDownload, which allows users to select either an entire course, or
       desired portions of it, download it to their personal computer and take
       the course off-line.

     - NetPlay with Local Player, which permits users to download our course
       player and access the licensed library from their local computers outside
       of their corporate network. Local Player is designed to optimize delivery
       for users with slower home internet connections while also enabling those
       users to take advantage of our Web-based performance support tools.

     - CD-ROMs, for users without access to a network.

We also offer extranet hosting services for companies who prefer to have users
access our courses from SkillSoft-managed servers rather than host the courses
on their own intranet. For many customers, this option can significantly
simplify and shorten the implementation process.

                                       31
<PAGE>   35

  Course Content and Development

     We develop all of our courses in cooperation with outside organizations
that provide content and assemble the courses. We generally work with three to
six outside content providers. These organizations supply the content of our
courses based upon a jointly defined outline and assemble courses using our
course development toolkit and following our Instructional Design model. The
course development process is a collaborative exercise between SkillSoft and our
outside content providers, and the development of a series of six courses
typically takes 18 to 20 weeks.

     Our course development toolkit is a key element of our business strategy.
By requiring that our content providers use our own toolkit rather than
commercially available authoring and development software, we ensure that all
our courses -- even those being developed by different content
providers -- incorporate our Instructional Design model, our "look-and-feel"
standards and the Web-based deployment features that we require in our courses.
This toolkit also enables our content providers to develop courses more quickly,
which improves our speed-to-market and lowers our course development costs.
Owning our course development toolkit technology enables us to enhance our
toolkit whenever and however we see fit as we respond to large customer
opportunities, potential competitive threats and changing market conditions.

  Product Pricing

     The pricing for our courses varies based upon the number of course titles
licensed by a customer, the number of users within the customer's organization
and the length of the license agreement (generally one, two or three years). Our
license agreements permit customers to exchange course titles, generally on the
contract anniversary date. Some of our features, such as Online Mentoring and
extranet hosting, are separately licensed for an additional fee.

SERVICES AND SUPPORT

     We offer a broad range of support and services to our customers through our
professional services organization. We believe that providing a high level of
customer service and technical support is necessary to achieve rapid product
implementation, customer satisfaction and continued revenue growth.

     Installation support.  We have application engineers available to assist
customers with the installation of our products. These engineers test the
software and courses within the customer's network to ensure that they run
successfully both on the network and at employees' computers.

     Implementation consulting.  We employ implementation consultants to assist
customers in planning and implementing their training programs. These
individuals offer expertise in establishing training success criteria, planning
internal marketing programs and communicating with course users. These
implementation consultants work in close coordination with our application
engineers and sales representatives and are an important component of our
efforts to monitor and ensure customer satisfaction.

     Technical support.  We also provide telephone support to our customers
through our technical support engineers. They are available to assist customers
seven days per week between the hours of 6:00 a.m. and midnight, Eastern time.

     Given the nature of our product offerings, these services and support do
not require significant resources. As of August 31, 1999, our professional
services organization consisted of eight persons.

                                       32
<PAGE>   36

SALES AND MARKETING

     We use a multi-prong sales strategy, consisting of

     - a direct sales force for larger accounts;

     - a telesales force for smaller accounts and lead generation; and

     - resellers for mid-sized accounts and some international markets.

We believe this strategy enables us to focus our resources on the largest sales
opportunities, while simultaneously leveraging the contacts and employees of our
resellers to address opportunities that may not be cost-effective for us to
pursue directly.

     As of August 31, 1999 we employed 26 sales professionals who have
individual sales quotas. Each of our account executives reports to a regional
sales vice president who is responsible for revenue growth and expense control
for his or her area. We presently employ two regional sales vice presidents in
the United States, a Director of Channel Sales and a Vice President/Managing
Director of International Sales and Marketing, each of whom reports to our Vice
President, Worldwide Sales and Marketing. We also have a sales executive focused
exclusively on educational institutions. Our sales professionals have
backgrounds at companies such as CBT Group, NETg, Xebec, PeopleSoft and
Ziff-Davis, as well as extensive contacts at the Global 2000 companies that we
target. Our goal is to increase the number of our quota-carrying sales persons
to approximately 50 by January 31, 2000. The sales process for an initial sale
to a Global 2000 customer typically ranges from three to twelve months and often
involves a coordinated effort among a number of groups within our organization.

     We use sophisticated salesforce automation software to track each prospect
and customer through a sales cycle covering the following seven stages:
prospect, qualify, discovery, evaluation, proposal, negotiate and close. Each
step of the sales cycle has certain exit criteria that must be satisfied before
the prospect can progress to the next stage. Our senior sales executives meet
once each quarter with our regional sales vice presidents and their account
executives to assess their 90-day forecast, 120-day pipeline development and
longer term territory strategy. Our regional sales vice presidents and their
account executives typically meet weekly throughout the quarter to review
progress toward quarterly goals and longer term business objectives and for
coaching sessions.

     Our products are resold by a number of leading education technology
vendors, including Asymetrix, KnowledgeSoft, Syscom and FirstClass Systems. We
have established and are developing reseller arrangements with internet commerce
sites focused on training and education, such as Headlight.com and Fatbrain.com,
and plan to develop reseller arrangements with internet portals such as
AltaVista. As of August 31, 1999, we had signed reseller agreements with 23
companies, and we plan to increase our reseller network significantly over the
next year.

     To date, substantially all of our revenue has been generated within the
United States. We recently opened an office in the United Kingdom, which will
serve as the hub of our international operations, and we plan to open an office
in Australia by January 31, 2000. Although we expect to employ a direct sales
force in the United Kingdom and Australia, our strategy is to address other
international markets -- such as continental Europe and the Far
East -- primarily through resellers, with the goal of penetrating
English-speaking markets in those areas.

     Our marketing organization utilizes a variety of programs to support our
sales team. As of August 31, 1999, our marketing organization consisted of six
employees. Our marketing programs include:

     - telemarketing;

     - product and strategy updates with industry analysts;

                                       33
<PAGE>   37

     - articles in the trade press;

     - public relations activities and speaking engagements;

     - printed promotional materials;

     - promotional materials on our Web site;

     - "roadshow" tours, seminars and trade shows; and

     - monthly online discussions, using "chat room" technology, on subjects
       such as the successful implementation of Web-based training programs.

CUSTOMERS

     We market our courses primarily to Global 2000 companies and other large
businesses, governmental organizations and educational institutions. We believe
the subject matter of our courses has appeal across a wide range of business
sectors, including technology, financial services, telecommunications and
manufacturing. The following is a partial list of our customers:

<TABLE>
<S>            <C>
Adobe          Fluor Daniel
Avnet          Fujitsu
BEA Systems    General American Life
Citibank       GTE
Dayton-Hudson  Highmark BC/BS
Duke Energy    IBM
EMC            Kurt Salmon
Ernst & Young  National Car Rental
Finova
</TABLE>

     We have established and are developing reseller arrangements with internet
commerce sites focused on training and education and are developing reseller
arrangements with internet portals to reach markets beyond our target customer
base.

PRODUCT DEVELOPMENT

     We devote substantial resources to the development of new and innovative
technologies that increase the effectiveness of our courses and that support
emerging Web standards. Our future success will depend in part on our ability to
anticipate and respond to changes in technologies and customer demands, enhance
the technological features of our courses, and develop and introduce new course
titles.

     Our product development efforts are focused primarily on enhancing our
Web-based architecture and technologies and our Instructional Design model that
underlies the development and structure of all of our courses.

     The content for our courses is supplied by outside parties working in
cooperation with our product development personnel. The course development
process is a collaborative exercise between SkillSoft and our outside content
providers, and the development of a series of six courses typically takes 18 to
20 weeks.

     As of August 31, 1999, we had 21 employees engaged in product development
and production activities. We also utilize independent contractors for some
product development work. Our research and development expenditures for the
fiscal year ended January 31, 1999 and the six months ended

                                       34
<PAGE>   38

July 31, 1999 were approximately $4,117,000 and $3,743,000, respectively. We
expect to continue to commit significant resources to research and development
in the future. To date, all research and development expenses have been expensed
as incurred.

COMPETITION

     The market for soft skills education and training products is fragmented
and highly competitive. We expect that competition in this market will increase
substantially in the future for the following reasons:

     - The expected growth of this market.

     - The low barriers to entry. In particular, we do not believe that
       proprietary technology is an important competitive factor in this market.

     - Our course content providers are often not prohibited from developing
       similar course content for other companies.

     - The fragmented nature of the competitive landscape, including many small
       competitors in the technology-based segment of the market.

     One source of competition for our products is the internal educational and
technological personnel of our potential customers. If an organization decides
to use external providers to supply some or all of its training, our principal
sources of competition are:

     - Providers of traditional classroom instruction. Many of the companies in
       this category are attempting to adapt their courses to a
       non-instructor-led format suitable for Web deployment.

     - Providers of CD-ROM training courses.

     - Suppliers of online information technology training courses that are
       attempting to take advantage of their current technology and customer
       base and expand into the soft skills market. Examples of competitors in
       this group are Harcourt General (through subsidiaries such as Drake Beam
       Morin, NETg and Knowledge Communications), CBT Group (through its
       Knowledge Well and Tarragon businesses) and McGraw Hill (through its
       Xebec subsidiary).

     We believe that the principal competitive factors in the soft skills
training market include:

     - the breadth and depth of the course content;

     - performance support and other features of the training solution;

     - adaptability, flexibility and scalability of the training products
       offered;

     - the deployment options offered to customers;

     - customer service and support;

     - price/value relationship;

     - relationships with the customer; and

     - corporate reputation.

     Although we believe that we currently compete favorably with respect to
those factors, there can be no assurance that we can maintain or improve our
competitive position. Many of our current and potential competitors have longer
operating histories, greater name recognition and greater financial, technical,
sales, marketing, support and other resources than we do. Increased competition
may result

                                       35
<PAGE>   39

in lost sales and may force us to lower prices, which would adversely affect our
business and financial performance.

PROPRIETARY RIGHTS

     We do not believe that proprietary technology forms an important or
valuable part of our product offerings. We believe that the creative skills of
our personnel in developing new products and technologies, our ability to
develop and introduce new products rapidly and our responsiveness to customer
demands are more important than the availability of legal protections for
proprietary rights.

     We attempt to avoid infringing upon intellectual property and proprietary
rights of third parties in our product development efforts. However, we do not
conduct patent searches to determine whether the technology used in our products
infringes patents held by third parties. In addition, product development is
inherently uncertain in a rapidly evolving technological environment in which
there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. If our products
violate third-party proprietary rights, we could be liable for substantial
damages. In addition, we may be required to reengineer our products or seek to
obtain licenses to continue offering the products, and there can be no assurance
that those efforts would be successful.

     We currently license from third parties some technology and most course
content that we incorporate into our products. There can be no assurance that
this technology and content will continue to be available to us on commercially
reasonable terms, if at all. The loss of this technology or content could result
in delays in development and introduction of new products or product
enhancements, which could have a material adverse effect on our business and
financial performance. Moreover, we may face claims from others that the
third-party technology or content incorporated in our products violates
proprietary rights held by those claimants. We may also face claims for
indemnification from our customers resulting from infringement claims against
them based on the incorporation of third-party technology or content in our
products. Although we are generally indemnified against such claims, in some
cases the scope of that indemnification is limited. Even if we receive broad
indemnification, third party indemnitors are not always well capitalized and may
not be able to indemnify us in the event of infringement. In addition, such
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources in addition to potential product
redevelopment costs and delays, all of which could materially adversely affect
our business.

     We have trademark applications pending in the United States for some of our
trademarks, including NetPlay and NetUniversity.

EMPLOYEES

     As of August 31, 1999, we had 87 employees, of whom 42 were engaged in
sales and marketing, 8 were engaged in customer service and support, 20 were
engaged in product development, one was engaged in product production and 16
were engaged in executive management, finance and administration. None of our
employees is subject to a collective bargaining agreement. We believe that our
relations with our employees are good.

FACILITIES

     Our headquarters are located in approximately 10,000 square feet of office
space in Nashua, New Hampshire under a lease that expires in February 2001. We
also lease a sales office in the Dallas area and in the United Kingdom. We
expect to lease additional space within our headquarters building in October
1999. We believe that our existing facilities are adequate to meet our current

                                       36
<PAGE>   40

needs and that suitable additional or substitute space will be available on
commercially reasonable terms when needed.

LEGAL PROCEEDINGS

     SkillSoft, several of our executives, one of our key employees and our
largest investor are named as defendants in a lawsuit brought on or about May 6,
1998 in the United States District Court for the Northern District of Illinois
by National Education Training Group, Inc. (NETg), the former employer of
several of those individuals. Upon leaving the employment of NETg, and after
receiving letters from NETg expressing NETg's dissatisfaction with their
departure, these individuals filed an action on April 17, 1998 against NETg in
the Superior Court for Hillsborough County, State of New Hampshire, in which
SkillSoft and Messrs. Moran and Townsend sought a declaratory judgment that they
were free to hire NETg employees who had no enforceable post-employment covenant
not-to-compete and that they otherwise had not breached any duty to NETg. NETg
subsequently brought this lawsuit in the State of Illinois. The NETg lawsuit
alleges in substance that:

     - Charles E. Moran, as the former President of NETg, breached his fiduciary
       obligations to NETg by usurping NETg's corporate opportunities, by
       commencing a rival business while still employed by NETg and by
       soliciting NETg personnel to join his rival business while still employed
       by NETg;

     - Jerald A. Nine, as the former Vice President of Sales and Marketing of
       NETg, breached his fiduciary duty to NETg by assisting Mr. Moran in the
       creation, commencement and operation of the rival concern prior to Mr.
       Nine's resignation from NETg, by assisting Mr. Moran in the usurpation of
       corporate opportunities, by failing to inform his superiors at NETg of
       Mr. Moran's plans to form a rival business and by otherwise failing to
       use his best efforts on behalf of NETg while still employed there;

     - SkillSoft, Mr. Moran, Mr. Nine, Mark A. Townsend and Lee A. Ritze
       misappropriated trade secrets of NETg, and SkillSoft, Mr. Moran and Mr.
       Nine intentionally interfered with NETg's "prospective economic
       advantage"; and

     - Warburg, Pincus Ventures, L.P., our largest investor, intentionally
       interfered with NETg's employment relationships with "at-will" employees,
       including Mr. Townsend, by offering those employees financial incentives
       to leave NETg and join SkillSoft, engaged in unfair competition through
       that same conduct and intentionally interfered with Mr. Moran's and Mr.
       Nine's fiduciary duty to NETg.

The claims seek injunctive relief against SkillSoft and Messrs. Moran, Nine,
Townsend and Ritze demanding the return, and no future use by these defendants,
of the alleged trade secrets. The claims also seek compensatory damages in an
amount to be determined and punitive damages in excess of $10,000,000.

     None of the defendants in this lawsuit were bound by written
non-competition or non-solicitation agreements with NETg. SkillSoft and the
other defendants are vigorously defending themselves against NETg's allegations,
and we believe that both SkillSoft and the other defendants have meritorious
defenses to the claims made in the lawsuit. However, the lawsuit is still in
discovery and we are not yet able to assess the potential liability of SkillSoft
or the other defendants. Our failure to prevail in this litigation could
significantly affect our business and financial performance as a result of:

     - injunctive relief issued against SkillSoft and our officers, which could
       restrict our ability to conduct our business;

     - an adverse judgment against us for monetary damages;

     - a settlement on unfavorable terms; or

                                       37
<PAGE>   41

     - obligations we have to indemnify our employees for liabilities and
       expenses they incur in connection with the lawsuit.

In addition, this litigation, regardless of its outcome, will continue to result
in significant expenses in defending the lawsuit and may divert the efforts and
attention of our management team from normal business operations.

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

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<PAGE>   42

                                   MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES

   The directors and executive officers of SkillSoft are as follows:

<TABLE>
<CAPTION>
NAME                                        AGE                       POSITION
----                                        ---                       --------
<S>                                         <C>   <C>
Charles E. Moran..........................  44    Chairman of the Board, President and Chief
                                                  Executive Officer
Thomas J. McDonald........................  49    Chief Financial Officer, Vice President,
                                                  Operations, Treasurer and Secretary
Mark A. Townsend..........................  46    Vice President, Product Development
Jerald A. Nine, Jr. ......................  41    Vice President, Worldwide Sales and Marketing
James Adkisson*...........................  51    Director
C. Samantha Chen*.........................  30    Director
William T. Coleman III**..................  51    Director
Stewart K.P. Gross**......................  40    Director
*  Member of the audit committee.
** Member of the compensation committee.

   Other key employees of SkillSoft include:
Dennis E. Brown...........................  47    Director of Marketing Communications
Eric W. Ertel.............................  37    Director of Software Development
David L. Eubanks..........................  42    Vice President of Western Regional Sales
Kristina E. Johnson.......................  36    Director of Creative Design
Charles E. King...........................  42    Vice President of Eastern Regional Sales
Steven A. Lichtman........................  43    Director of Channel Sales
Lee A. Ritze..............................  46    Senior Director of Marketing and Professional
                                                  Services
Sally H. Welsh............................  48    Director of Instructional Design
Kevin T. Young............................  46    Vice President/Managing Director of International
                                                  Sales and Marketing
</TABLE>

     Charles E. Moran is a founder of SkillSoft and has served as its Chairman
of the Board, President and Chief Executive Officer since January 1998. Before
founding SkillSoft, Mr. Moran served as President and Chief Executive Officer of
National Education Training Group, Inc. (NETg), a computer-based information
technology training company, from May 1995 until November 1997. From July 1994
to May 1995, Mr. Moran was an independent consultant. From October 1993 until
July 1994, Mr. Moran served as Chief Financial Officer and Chief Operating
officer of Softdesk, Inc., a developer of computer-assisted design and drafting
software. Mr. Moran is also a director of Workgroup Technology Corporation.

     Thomas J. McDonald is a founder of SkillSoft and has served as its Chief
Financial Officer and Vice President of Operations since February 1998. From
September 1994 to November 1997, Mr. McDonald served as Chief Financial Officer
and Vice President of Operations at NETg. From February 1990 to August 1994, Mr.
McDonald served as Chief Financial Officer and Vice President of Bear
Automotive. He previously held senior financial and operational positions with
SPX Corporation, U.S. Industries and Cenco, Inc.

                                       39
<PAGE>   43

     Mark A. Townsend is a founder of SkillSoft and has served as its Vice
President of Product Development since January 1998. From February 1996 to
December 1997, Mr. Townsend served as Vice President of Advanced Technology at
NETg. From March 1994 until February 1996, Mr. Townsend served as Vice President
of Engineering at Sytron Corporation, a software data storage management
company.

     Jerald A. Nine, Jr. is a founder of SkillSoft and has served as its Vice
President of Worldwide Sales and Marketing since April 1998. From July 1995 to
February 1998, Mr. Nine served as the Vice President of Sales and Marketing at
NETg. From September 1992 until July 1995, Mr. Nine served as Vice President of
Sales and Marketing at Sytron Corporation.

     James Adkisson has served as director of SkillSoft since January 1998.
Since 1992, Mr. Adkisson has been a Partner at Growth Resources International,
an investment advisory services company.

     C. Samantha Chen has served as director of SkillSoft since June 1999. Ms.
Chen has been an associate at E.M. Warburg, Pincus & Co., LLC since September
1997. From April 1992 to June 1995, Ms. Chen served as an analyst at Bessemer
Venture Partners. From September 1995 to June 1997, Ms. Chen attended the
Stanford Graduate School of Business, where she obtained her MBA.

     William T. Coleman III has served as director of SkillSoft since August
1999. Since January 1995, Mr. Coleman has served as Chairman of the Board and
Chief Executive Officer of BEA Systems Inc., a provider of software solutions
for enterprise e-commerce applications. From December 1985 to January 1995, Mr.
Coleman served as Vice President and General Manager and Vice President of
Software at Sun Microsystems. Mr. Coleman is also a director of Portal Software,
Inc.

     Stewart K.P. Gross has served as director of SkillSoft since January 1998.
Mr. Gross is a Managing Director of E.M. Warburg, Pincus & Co., LLC, where he
has been employed since July 1987. Mr. Gross is a director of BEA Systems, Inc.,
IA Corporation and several privately held companies.

     In accordance with the terms of SkillSoft's certificate of incorporation,
the terms of office of the members of the board of directors are divided into
three classes. Messrs. Moran and Gross serve as Class I Directors (whose term
expires in 2000), Ms. Chen and Mr. Coleman serve as Class II Directors (whose
term expires in 2001) and Mr. Adkisson serves as a Class III Director (whose
term expires in 2002). At each annual meeting of stockholders, the successors to
directors whose terms then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election.
Additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible, each
class will consist of one-third of the total number of directors. The
classification of the board of directors may have the effect of delaying or
preventing changes in control or management of SkillSoft.

     Each officer is appointed by, and serves at the discretion of, the board of
directors. There are no family relationships among any of the directors,
officers or key employees of SkillSoft.

COMMITTEES OF THE BOARD OF DIRECTORS

     The SkillSoft compensation committee consists of Messrs. Coleman and Gross.
It reviews and evaluates the salaries and incentive compensation of management
and key employees of SkillSoft and makes recommendations concerning these
matters to the board of directors. The SkillSoft compensation committee also
administers SkillSoft's stock option plans.

     The SkillSoft audit committee consists of Mr. Adkisson and Ms. Chen. It
reviews the results and scope of audits and other services provided by
SkillSoft's independent public accountants and reviews SkillSoft's system of
internal accounting and financial controls. The SkillSoft audit committee

                                       40
<PAGE>   44

also reviews such other matters with respect to the accounting, auditing and
financial reporting practices and procedures of SkillSoft as it may find
appropriate or may be brought to its attention.

DIRECTOR COMPENSATION

     Non-employee directors will be reimbursed for their reasonable
out-of-pocket expenses incurred in attending meetings of the board of directors.
No director will receive cash compensation for services rendered as a director.
Non-employee directors (other than those currently serving on the board of
directors) will also eligible for participation in SkillSoft's 1999 Non-Employee
Director Stock Option Plan. See "Management -- Stock Plans."

EXECUTIVE COMPENSATION

     The following Summary Compensation Table sets forth the total compensation
paid or accrued for the year ended January 31, 1999 for each of the executive
officers of SkillSoft.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                               LONG TERM
                                                                             COMPENSATION
                                                                            ---------------
                                                                                AWARDS
                                                    ANNUAL COMPENSATION     ---------------
                                                    --------------------      RESTRICTED
NAME AND PRINCIPAL POSITION                          SALARY      BONUS      STOCK AWARDS(1)
---------------------------                         --------    --------    ---------------
<S>                                                 <C>         <C>         <C>
Charles E. Moran, Chairman of the Board, President
  and Chief Executive Officer.....................  $250,000          --       $      --
Thomas J. McDonald, Chief Financial Officer, Vice
  President, Operations and Treasurer.............  $135,000    $100,000       $      --
Mark A. Townsend, Vice President, Product
  Development.....................................  $145,000          --       $      --
Jerald A. Nine, Jr., Vice President Worldwide
  Sales and Marketing(2)..........................  $117,115          --       $      --
</TABLE>

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

(1) Long term compensation consisted of restricted stock granted under
    SkillSoft's 1998 Stock Incentive Plan and vests in 36 equal monthly
    installments commencing the month following the date of grant. Amounts shown
    above represent the value of the restricted stock award, based on the fair
    market value of the common stock on the date of grant less the purchase
    price paid. The number of shares of restricted stock granted to Messrs.
    Moran, McDonald, Nine and Townsend in the fiscal year ended January 31, 1999
    was 0; 300,000; 700,000 and 600,000, respectively. The number of shares of
    restricted stock held by each of the executive officers as of January 31,
    1999 and its value as of January 31, 1999, based on a fair market value of
    $.175 per share, was as follows: Mr. Moran: none; Mr. McDonald: 300,000
    shares, $52,500; Mr. Townsend: 600,000 shares, $105,000; and Mr. Nine:
    700,000 shares, $122,500.

(2) Mr. Nine joined SkillSoft in April 1998 and thus received compensation for
    only part of the fiscal year.

OPTION GRANTS DURING FISCAL YEAR

     SkillSoft did not grant any options or stock appreciation rights during the
fiscal year ended January 31, 1999 to any of its executive officers.

                                       41
<PAGE>   45

OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

     None of the executive officers of SkillSoft exercised any options to
purchase stock of SkillSoft during the fiscal year ended January 31, 1999 or
held any such options as of January 31, 1999.

EMPLOYMENT AGREEMENTS

     SkillSoft is a party to an employment agreement with Mr. Moran entered into
in December 1997. Under the terms of this employment agreement, Mr. Moran is
entitled to receive an annual base salary of $250,000, which may be increased in
accordance with SkillSoft's regular salary review practices. Mr. Moran is also
entitled to be paid a signing bonus of $600,000 upon the earliest of (1) the end
of the second consecutive quarter that SkillSoft achieves quarterly revenue in
excess of $1,000,000, (2) the fourth anniversary of the date of the employment
agreement or (3) a sale of SkillSoft following which SkillSoft's stockholders
own less than 50% of the equity securities of the surviving company. Mr. Moran
is also entitled to participate in any bonus plan that SkillSoft may establish
for its senior executives. Either SkillSoft or Mr. Moran may terminate the
employment agreement at will for any reason, upon three months' prior notice in
the case of termination by SkillSoft, or upon two months' prior notice in the
case of termination by Mr. Moran. If SkillSoft terminates Mr. Moran's employment
without cause, or if Mr. Moran terminates his employment for good reason (as
defined in the employment agreement), then SkillSoft will be required to pay Mr.
Moran his base salary and benefits for a period of twelve months following
termination. In addition, in the event of such a termination, Mr. Moran's stock
options will continue to vest and be exercisable if he performs consulting
services for SkillSoft of up to ten hours per month during the twelve months
following termination.

     SkillSoft is a party to an employment agreement with Mr. McDonald, dated
February 2, 1998. Under the terms of the employment agreement, Mr. McDonald is
entitled to receive an annual base salary of $135,000, which may be increased in
accordance with SkillSoft's regular salary review practices. In addition,
SkillSoft agreed to sell Mr. McDonald 300,000 shares of its restricted common
stock, which vest in 36 equal monthly installments. Mr. McDonald is entitled to
participate in any bonus plan that SkillSoft may establish for its senior
executives. Either SkillSoft or Mr. McDonald may terminate the employment
agreement at will for any reason, upon three months' prior notice in the case of
termination by SkillSoft, or upon two months' prior notice in the case of
termination by Mr. McDonald. If SkillSoft terminates Mr. McDonald's employment
without cause, or if Mr. McDonald terminates his employment for good reason (as
defined in the employment agreement), then SkillSoft will be required to pay Mr.
McDonald his base salary and benefits for a period of six months following
termination. In addition, in the event of such a termination, Mr. McDonald's
stock options will continue to vest and be exercisable if he performs consulting
services for SkillSoft of up to ten hours per week during the six months
following termination.

     SkillSoft is also a party to employment agreements with Messrs. Townsend
and Nine, dated January 12, 1998 and April 9, 1998, respectively. Under these
employment agreements, Messrs. Nine and Townsend are each entitled to receive a
base salary of $145,000, which may be increased in accordance with SkillSoft's
regular salary review practices. In addition, SkillSoft agreed to sell Messrs.
Townsend and Nine 600,000 and 700,000 shares, respectively, of its restricted
common stock, which vest in 36 equal monthly installments. Messrs. Townsend and
Nine are also entitled to participate in any bonus plans that SkillSoft may
establish for its senior executives. These employment agreements provide for the
same termination provisions and severance benefits as Mr. McDonald.

                                       42
<PAGE>   46

STOCK PLANS

  1998 Stock Incentive Plan

     General.  SkillSoft's 1998 Stock Incentive Plan provides for the grant of
incentive stock options, nonstatutory stock options, restricted stock awards and
other awards. The Incentive Plan authorizes the issuance of a maximum of
4,690,000 shares of common stock. As of September 1, 1999, 2,231,874 shares had
been issued under the Incentive Plan and 881,965 shares were subject to
outstanding options under the Incentive Plan. The Incentive Plan is administered
by the board of directors and the compensation committee.

     Eligibility to Receive Awards.  Employees, directors and consultants of
SkillSoft and its subsidiaries are eligible to be granted awards under the
Incentive Plan. Under present law, however, incentive stock options qualifying
under Section 422 of the Internal Revenue Code may only be granted to employees.

     Incentive Stock Options and Nonstatutory Stock Options.  Stock options
entitle the holder to purchase a specified number of shares of common stock at a
specified option price, subject to the other terms and conditions contained in
the option grant. SkillSoft may grant options at an exercise price equal to or
greater than 85% of the fair market value of the common stock on the date of
grant. Under present law, however, incentive stock options and options intended
to qualify as performance-based compensation under Section 162(m) of the
Internal Revenue Code may not be granted at an exercise price less than the fair
market value of the common stock on the date of grant (or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power of SkillSoft). Options may not be
granted for a term in excess of ten years. The board of directors or the
compensation committee determines:

     - the number of shares subject to each option granted,

     - the exercise price of the option,

     - the vesting schedule of the option (generally over four years),

     - the duration of the option (generally ten years, subject to earlier
       termination in the event of the termination of the optionee's employment
       or consulting arrangement), and

     - the manner of payment of the exercise price of the option (including
       payment by cash, check or promissory note or through a "cashless
       exercise").

     Restricted Stock Awards.  Restricted stock awards entitle recipients to
acquire shares of common stock, subject to the right of SkillSoft to repurchase
all or part of such shares from the recipient in the event of the termination of
the recipient's employment or consulting arrangement prior to the end of the
vesting period for such award or if other conditions specified in the award are
not satisfied. The board of directors or the compensation committee determines:

     - the number of shares subject to each restricted stock award granted,

     - the purchase price of the restricted stock award,

     - the vesting schedule of the restricted stock award (generally over three
       years), and

     - the manner of payment of the purchase price for the restricted stock
       award (including payment by cash, check or promissory note).

     Acquisition of SkillSoft.  In the event of an acquisition of SkillSoft,
outstanding options, restricted stock and other awards under the Incentive Plan
will either be assumed by the acquiring company, accelerated in full or
terminated.

                                       43
<PAGE>   47

  1999 Non-Employee Director Stock Option Plan

     In September 1999, SkillSoft's board of directors adopted and SkillSoft's
stockholders approved the 1999 Non-Employee Director Stock Option Plan. The
Director Plan authorizes the grant of options to purchase up to 240,000 shares
of common stock to non-employee directors of SkillSoft. No options have been
granted to date under the Director Plan.

     Under the Director Plan, each non-employee director of SkillSoft (other
than current directors) will be granted a stock option to purchase 60,000 shares
of common stock on the date he or she is first elected to the board of
directors. The exercise price for all options granted under the Director Plan
will be equal to the fair market value of the common stock on the date of grant.
The options granted will become exercisable in four equal annual installments on
each anniversary of the date of grant, provided that the optionee remains a
director, and will become exercisable in full upon a change in control of
SkillSoft. Each option will expire on the earlier of ten years from the date of
grant or on the first anniversary of the date on which the optionee ceases to be
a director of SkillSoft.

401(K) PLAN

     SkillSoft maintains a 401(k) plan qualified under Section 401(k) of the
Internal Revenue Code. Under the 401(k) plan, a participant may contribute a
maximum of 20% of his or her pre-tax salary, commissions and bonuses through
payroll deductions, up to the statutorily prescribed annual limit of $10,000 in
calendar year 1999. The percentage elected by more highly compensated
participants may be required to be lower. In addition, at the discretion of the
board of directors, SkillSoft may make discretionary matching or profit-sharing
contributions into the 401(k) plan for all eligible employees. During the years
ended January 31, 1998 and 1999, SkillSoft made no matching or profit-sharing
contributions to the 401(k) plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Prior to the establishment of the compensation committee in September 1999,
compensation decisions were made by the board of directors, including Mr. Moran,
an executive officer of SkillSoft. Since its establishment, the compensation
committee, comprised of Messrs. Coleman and Gross, has been responsible for
executive compensation decisions. No executive officer of SkillSoft has served
as a director or member of the compensation committee of any other entity whose
executive officers served as a director or member of the SkillSoft compensation
committee.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

     SkillSoft's certificate of incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director for monetary damages for breach
of his or her fiduciary duties as a director, except for liability (1) for any
breach of their duty of loyalty to the corporation or its stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (4) for any transaction from which the director
derived an improper personal benefit.

     SkillSoft's certificate of incorporation provides that SkillSoft will
indemnify its directors and officers to the fullest extent permitted by law.
SkillSoft's certificate of incorporation permits SkillSoft to advance expenses
incurred by an indemnified director or officer in connection with the defense of
any action or proceeding arising out of such director's or officer's status or a
director or officer of SkillSoft upon an undertaking by such director or officer
to repay such advances if it is ultimately determined that the director or
officer is not entitled to such indemnification.

     SkillSoft has also purchased directors and officers liability insurance.
                                       44
<PAGE>   48

                              CERTAIN TRANSACTIONS

     SkillSoft has engaged in the following transactions with the following
directors, executive officers and stockholders who beneficially own more than 5%
of the outstanding capital stock of SkillSoft and affiliates of these directors,
executive officers and 5% stockholders.

     On December 10, 1997, SkillSoft sold 1,900,000 shares of restricted common
stock, at a purchase price of $.175 per share, to Charles E. Moran in exchange
for a cash payment of $166,250 and a promissory note in the original principal
amount of $166,250. This promissory note bears interest at a rate of 6.2% per
year and is due and payable on the earlier of December 10, 2002 or the date on
which Mr. Moran ceases to be an employee of SkillSoft. Mr. Moran pledged 950,000
shares as collateral for the promissory note.

     On December 10, 1997, SkillSoft sold 100,000 shares of its common stock to
James Adkisson, a director of SkillSoft, at a purchase price of $.175 per share.

     On January 8, 1998, SkillSoft sold an aggregate of 4,000,000 shares of its
Series A preferred stock to two purchasers at a purchase price of $1.75 per
share. Warburg, Pincus Ventures, L.P. purchased 3,600,000 of these shares. On
August 14, 1998 and February 16, 1999, SkillSoft issued and sold an aggregate of
4,761,905 shares of its Series B preferred stock to Warburg, Pincus Ventures,
L.P. at a purchase price of $2.10 per share. Mr. Gross and Ms. Chen, directors
of SkillSoft, are managing director and associate, respectively, of E.M.
Warburg, Pincus & Co., LLC, the manager of Warburg, Pincus Ventures, L.P.

     On June 19, 1998, June 24, 1998 and June 26, 1998, SkillSoft sold 700,000,
300,000 and 600,000 shares of restricted common stock, at a purchase price of
$.175 per share, to Messrs. Nine, McDonald and Townsend, respectively, in
exchange for cash payments of $61,250, $26,250, and $52,500, respectively, and
promissory notes in the original principal amounts of $61,250, $26,250, and
$52,500, respectively. These promissory notes bear interest at a rate of 5.77%
per year and are due and payable in June 2003. Messrs. Nine, McDonald and
Townsend each pledged half of the shares issued to them as collateral for the
promissory notes.

     On March 13, 1999 and March 15, 1999, SkillSoft sold 50,000 and 100,000
shares of restricted common stock, at a purchase price of $.175 per share, to
Messrs. Nine and McDonald, respectively, in exchange for cash payments of $4,375
and $8,750, respectively, and promissory notes in the principal amounts of
$4,375 and $8,750, respectively. These promissory notes bear interest at a rate
of 4.83% per year and are due and payable in March 2004. Messrs. Nine and
McDonald each pledged half of the shares issued to him as collateral for the
promissory notes.

     On March 31, 1999, SkillSoft sold 150,000 and 50,000 shares of restricted
common stock, at a purchase price of $.175 per share, to Messrs. Moran and
Townsend, respectively, in exchange for cash payments of $13,125 and $4,375,
respectively, and promissory notes in the principal amounts of $13,125 and
$4,375, respectively. These promissory notes bear interest at a rate of 4.83%
per year and are due and payable in March 2004. Messrs. Moran and Townsend each
pledged half of the shares issued to him as collateral for the promissory notes.

     On August 5, 1999, SkillSoft issued and sold an aggregate of 1,195,238 of
its Series C preferred stock to five purchasers at a purchase price of $3.15 per
share. William Coleman III and James Adkisson, directors of SkillSoft, each
purchased 31,746 of these shares. Warburg, Pincus Ventures, L.P. purchased
952,381 of these shares.

     On August 31, 1999 and September 1, 1999, SkillSoft sold 60,000 shares of
restricted common stock to each of Messrs. Coleman and Adkisson at a purchase
price of $1.00 per share pursuant to its 1998 stock incentive plan.

     SkillSoft believes that all transactions set forth above were made on terms
no less favorable to it than it would have obtained from unaffiliated third
parties.

                                       45
<PAGE>   49

                             PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information regarding beneficial
ownership of SkillSoft's common stock as of September 1, 1999, and as adjusted
to reflect the sale of the shares of common stock offered by this prospectus,
by:

     - each person known by SkillSoft to be the beneficial owner of more than 5%
       of its common stock;

     - each executive officer;

     - each of SkillSoft's directors; and

     - all executive officers and directors of SkillSoft as a group.

Unless otherwise noted below, to the knowledge of SkillSoft, each person has
sole voting and investment power over the shares shown as beneficially owned
except to the extent authority is shared by spouses under applicable law and
except as set forth in the footnotes to the table. The number of shares of
common stock outstanding used in calculating the percentage ownership for each
person listed includes the shares of common stock underlying options held by
such person that are exercisable within 60 days after September 1, 1999, but
excludes shares of common stock underlying options held by any other person.
Percentage ownership is based on 14,199,017 shares of common stock outstanding
as of September 1, 1999, and an additional           shares of common stock to
be outstanding upon completion of this offering.

<TABLE>
<CAPTION>
                                                                          PERCENTAGE OF COMMON
                                                                           STOCK OUTSTANDING
                                                                          --------------------
                                                     NUMBER OF SHARES      BEFORE      AFTER
NAME OF BENEFICIAL OWNER                            BENEFICIALLY OWNED    OFFERING    OFFERING
------------------------                            ------------------    --------    --------
<S>                                                 <C>                   <C>         <C>
Warburg, Pincus Ventures, L.P.(1).................       9,314,286          65.6%
Stewart K.P. Gross(2).............................       9,314,286          65.6
Charles E. Moran(3)...............................       2,050,000          14.4
Jerald A. Nine(4).................................         750,000           5.3
Mark A. Townsend..................................         650,000           4.6
Thomas J. McDonald................................         400,000           2.8
James Adkisson....................................         191,746           1.4
William T. Coleman III(5).........................          91,746             *
C. Samantha Chen(6)...............................              --            --
All executive officers and directors as a group
  (eight persons)(7)..............................      13,447,778          94.7
</TABLE>

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

 *  Less than 1%.

(1) The address for Warburg, Pincus Ventures, L.P. is 466 Lexington Avenue, 10th
    Floor, New York, New York 10017-3147.

(2) Consists of shares beneficially owned by Warburg, Pincus Ventures, L.P.
    Warburg, Pincus & Co. is the sole general partner of Warburg, Pincus
    Ventures, L.P. Warburg, Pincus Ventures, L.P. is managed by E.M. Warburg,
    Pincus & Co., LLC. Lionel I. Pincus is the managing partner of Warburg
    Pincus & Co. and the managing member of E.M. Warburg, Pincus & Co., LLC, and
    may be deemed to control both entities. Mr. Gross, a director of SkillSoft,
    is a managing director and member of E.M. Warburg, Pincus & Co., LLC and a
    general partner of Warburg

                                       46
<PAGE>   50

    Pincus & Co. Mr. Gross disclaims beneficial ownership of these shares. Mr.
    Gross' address is c/o Warburg, Pincus Ventures L.P., 466 Lexington Avenue,
    10th Floor, New York, New York 10017-3147.

(3) Consists of 1,100,000 shares beneficially owned by Mr. Moran and a total of
    950,000 shares of common stock beneficially owned by Mr. Moran's wife, as
    trustee of various trusts for the benefit of Mr. Moran's children. Mr. Moran
    disclaims beneficial ownership of the shares held in trust. Excluding these
    shares, Mr. Moran beneficially owns a total of 1,100,000 shares of common
    stock, or 7.7% of the outstanding common stock prior to this offering. Mr.
    Moran's address is c/o SkillSoft Corporation, 20 Industrial Park Drive,
    Nashua, New Hampshire 03062.

(4) Mr. Nine's address is c/o SkillSoft Corporation, 20 Industrial Park Drive,
    Nashua, New Hampshire 03062.

(5) Consists of shares beneficially owned by the Coleman Family Trust, of which
    Mr. Coleman is trustee.

(6) Excludes shares beneficially owned by Warburg, Pincus Ventures, L.P. Ms.
    Chen is an associate of E.M. Warburg, Pincus & Co., LLC, the manager of
    Warburg, Pincus Ventures, L.P.

(7) See Notes 2, 3, 5 and 6.

                                       47
<PAGE>   51

                          DESCRIPTION OF CAPITAL STOCK

     Upon the closing of this offering, the authorized capital stock of
SkillSoft will consist of 50,000,000 shares of common stock, $0.001 par value
per share, and 5,000,000 shares of preferred stock, $0.001 par value per share.
As of September 1, 1999, there were outstanding 14,199,017 shares of common
stock held by 25 stockholders of record and options to purchase an aggregate of
881,965 shares of common stock.

     The following summary of certain provisions of our securities and various
provisions of our certificate of incorporation and bylaws is not intended to be
complete and is qualified by reference to the provisions of applicable law and
to our certificate of incorporation and bylaws included as exhibits to the
Registration Statement of which this prospectus is a part. See "Where You Can
Find Additional Information."

COMMON STOCK

     Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends declared by the board of directors, subject to any
preferential dividend rights of outstanding preferred stock. Upon the
liquidation, dissolution or winding up of SkillSoft, the holders of common stock
are entitled to receive ratably the net assets of SkillSoft available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are, and the shares offered by SkillSoft in this offering will be, when
issued and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to the rights of the holders
of shares of any series of preferred stock which SkillSoft may designate and
issue in the future. Certain holders of common stock have the right to require
SkillSoft to register their shares of common stock under the Securities Act in
certain circumstances. See "Shares Eligible for Future Sale."

PREFERRED STOCK

     Under the terms of our certificate of incorporation, the board of directors
is authorized to designate and issue shares of preferred stock in one or more
series without stockholder approval. The Board has discretion to determine the
rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock.

     The purpose of authorizing the board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could make it more difficult for a third party to
acquire, or could discourage a third party from attempting to acquire, a
majority of the outstanding voting stock of SkillSoft. SkillSoft has no present
plans to issue any shares of preferred stock.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

     SkillSoft is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved by the board of directors and/or stockholders
of SkillSoft in a prescribed

                                       48
<PAGE>   52

manner. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years did own,
15% or more of the corporation's voting stock.

     SkillSoft's certification of incorporation and bylaws provide for the
division of the board of directors into three classes as nearly equal in size as
possible with staggered three-year terms. Any vacancy on the board of directors,
including a vacancy resulting from an enlargement of the board of directors, may
only be filled by vote of a majority of the directors then in office. The
classification of the board of directors and the limitation on filling of
vacancies could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, control of SkillSoft.

     SkillSoft's bylaws also provide that any action required or permitted to be
taken by the stockholders of SkillSoft at an annual meeting or special meeting
of stockholders may only be taken if it is properly brought before such meeting
and may not be taken by written action in lieu of a meeting. The bylaws further
provide that special meetings of the stockholders may only be called by the
Chairman of the Board, the President or the board of directors. In order for any
matter to be considered "properly brought" before a meeting, a stockholder must
comply with certain requirements regarding advance notice and provide certain
information to SkillSoft. These provisions could have the effect of delaying
until the next stockholders meeting stockholder actions which are favored by the
holders of a majority of the outstanding voting securities of SkillSoft. These
provisions could also discourage a third party from making a tender offer for
the common stock, because even if it acquired a majority of the outstanding
voting securities of SkillSoft, it would be able to take action as a stockholder
(such as electing new directors or approving a merger) only at a duly called
stockholders' meeting and not by written consent.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services L.L.C.

                                       49
<PAGE>   53

                        SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering, there has been no market for SkillSoft's common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect prevailing market prices from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering because of contractual and legal restrictions on resale described
below, sales of substantial amounts of common stock of SkillSoft in the public
market after the restrictions lapse could adversely affect the prevailing market
price and the ability of SkillSoft to raise equity capital in the future.

     Based on shares outstanding at September 1, 1999, upon completion of this
offering SkillSoft will have outstanding an aggregate of                shares
of common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants. Of these shares, the
               shares sold in this offering will be freely tradable without
restrictions or further registration under the Securities Act, unless the shares
are purchased by an existing affiliate of SkillSoft, as that term is defined in
Rule 144 under the Securities Act.

     The remaining 14,199,017 shares of common stock held by existing
stockholders are restricted shares or are subject to the contractual
restrictions described below. Restricted shares may generally be sold in the
public market only if registered or if they qualify for an exception from
registration under Rule 144 promulgated under the Securities Act, which is
summarized below. Of these restricted shares, 7,594,250 shares will be available
for resale in the public market in reliance on Rule 144 and Rule 701 beginning
90 days following the closing of this offering. However, all of these 7,594,250
shares are subject to lock-up agreements. The remaining 6,604,767 shares become
eligible for resale in the public market at various dates thereafter, of which
               shares are subject to lock-up agreements.

     All of the officers and directors and some of the stockholders and
optionholders of SkillSoft are bound by lock-up agreements in favor of the
underwriters. As a result, these individuals and entities are not permitted to
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock or publicly disclose the intention
to make any such offer, sale, pledge or disposition for a period of 180 days
after the date of this prospectus, without the prior written consent of Credit
Suisse First Boston. Credit Suisse First Boston currently has no plans to
release any portion of the securities subject to lock-up agreements. When
determining whether or not to release shares from the lock-up agreements, Credit
Suisse First Boston will consider, among other factors, the stockholder's
reasons for requesting the release, the number of shares for which the release
is being requested and market conditions at the time.

     In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year would be entitled to sell a certain number of
shares within any three-month period. That certain number of shares cannot
exceed the greater of one percent of the number of shares of common stock then
outstanding, which will equal approximately                shares immediately
after this offering, or the average weekly trading volume of the common stock on
the Nasdaq National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to manner of sale provisions, notice requirements and the availability
of current public information about SkillSoft. Rule 144 also provides that
affiliates of SkillSoft who are selling shares of common stock that are not
restricted shares must nonetheless comply with the same restrictions applicable
to restricted shares with the exception of the holding period requirement.

     Under Rule 144(k), a person who is not deemed to have been an affiliate of
SkillSoft at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be

                                       50
<PAGE>   54

sold for at least two years, is entitled to sell those shares without complying
with the manner of sale, public information, volume limitation or notice
provisions of Rule 144.

     Rule 701 may be relied upon with respect to the resale of shares of common
stock originally purchased from SkillSoft under its stock option plan, so long
as the option was granted prior to the date of this prospectus. Shares issued in
reliance on Rule 701 are restricted shares and, subject to the lock-up
agreements described above, beginning 90 days after the date of this prospectus,
may be sold by persons other than affiliates, subject only to the manner of sale
provisions of Rule 144, and may be sold by affiliates under Rule 144 without
compliance with its one-year minimum holding period requirement.

     SkillSoft has agreed not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of common stock or any securities convertible into or exercisable
or exchangeable for common stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, for a period of 180 days after
the date of this prospectus, without the prior written consent of Credit Suisse
First Boston, subject to limited exceptions such as issuances under its stock
plans or in connection with an acquisition of a business.

     Following this offering, SkillSoft intends to file registration statements
under the Securities Act covering approximately 2,698,126 shares of common stock
issuable upon the exercise of stock options or reserved for issuance under
SkillSoft's 1998 Stock Incentive Plan and 1999 Non-Employee Director Stock
Option Plan. The shares registered under these registration statements will,
subject to Rule 144 provisions applicable to affiliates, be available for sale
in the open market, except to the extent that the shares are subject to
SkillSoft's vesting restrictions or the lock-up agreements described above. See
"Management -- Stock Plans."

     In addition, following this offering, under specified conditions and
subject to customary exceptions, holders of 9,957,143 shares of common stock
will have demand registration rights with respect to their shares of common
stock, subject to the 180 day lock-up period described above, to require
SkillSoft to register their shares of common stock under the Securities Act, and
they will have the right to participate in future registrations of securities by
SkillSoft. SkillSoft is not required to effect a registration within six months
after the closing of this offering and it is not required to effect more than
three demand registrations on behalf of these holders. SkillSoft is generally
required to bear all of the expenses of all registrations. Registration of any
of the shares of common stock would result in these shares becoming freely
tradeable without restriction under the Securities Act upon effectiveness of the
registration statement.

                                       51
<PAGE>   55

                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated              , we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC and Thomas Weisel Partners LLC are acting as representatives, the
following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
                                                               NUMBER
                        UNDERWRITER                           OF SHARES
                        -----------                           ---------
<S>                                                           <C>
Credit Suisse First Boston Corporation......................
Banc of America Securities LLC..............................
Thomas Weisel Partners LLC..................................
                                                              ---------
          Total.............................................
                                                              =========
</TABLE>

     The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that, if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

     We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to                additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.

     The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

     The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
                                           PER SHARE                             TOTAL
                                --------------------------------    --------------------------------
                                   WITHOUT             WITH            WITHOUT             WITH
                                OVER-ALLOTMENT    OVER-ALLOTMENT    OVER-ALLOTMENT    OVER-ALLOTMENT
                                --------------    --------------    --------------    --------------
<S>                             <C>               <C>               <C>               <C>
Underwriting discounts and
  commissions paid by us......    $                 $                 $                 $
Expenses payable by us........    $                 $                 $                 $
</TABLE>

     The underwriters have informed us that they do not expect sales to accounts
over which any underwriter exercises discretionary authority to exceed 5% of the
shares of common stock being offered.

     Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 63 filed
public offerings of equity securities, of which 33 have been completed, and has
acted as a syndicate member in an additional 32 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors, or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering.

     Credit Suise First Boston Corporation, one of the representatives of the
underwriters in this Offering, is an indirect subsidiary of Credit Suisse Group,
which indirectly holds a 19.9% passive

                                       52
<PAGE>   56

minority interest in Warburg, Pincus & Co., the general partner of Warburg,
Pincus Ventures, L.P. Warburg, Pincus Ventures, L.P. is a stockholder of
SkillSoft.

     We have a line of credit agreement with GreyRock Capital. GreyRock Capital
is a division of Banc of America Commercial Finance Corporation. Both Banc of
America Commercial Finance Corporation and Banc of America Securities LLC are
subsidiaries of Bank of America Corporation.

     We and each of our directors and officers and some of our stockholders and
optionholders have agreed not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our common stock, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus
except, in our case, issuances pursuant to the exercise of employee stock
options outstanding on the date hereof or pursuant to our stock option plans.

     The underwriters have reserved for sale, at the initial public offering
price, up to                shares of the common stock for employees, directors
and certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in this offering will be reduced to the extent those
persons purchase reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

     We will make application to list the shares of common stock on The Nasdaq
Stock Market's National Market.

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors considered in
determining the public offering price will include:

     - the information set forth in this prospectus and otherwise available to
       the representatives;

     - the history of, and the prospects for, SkillSoft and the industry in
       which it competes;

     - an assessment of our management;

     - the prospects for, and the timing of, future earnings of SkillSoft;

     - the present state of SkillSoft's development and its current financial
       condition;

     - the general condition of the securities markets at the time of the
       offering;

     - the recent market prices of, and the demand for, publicly-traded common
       stock of companies in businesses similar to those of SkillSoft;

     - market conditions for initial public offerings; and

     - other relevant factors.

     The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

     - Over-allotment involves syndicate sales in excess of the offering size,
       which creates a syndicate short position.

                                       53
<PAGE>   57

     - Stabilizing transactions permit bids to purchase the underlying security
       so long as the stabilizing bids do not exceed a specified maximum.

     - Syndicate covering transactions involve purchases of the common stock in
       the open market after the distribution has been completed in order to
       cover syndicate short positions.

     - Penalty bids permit the representatives to reclaim a selling concession
       from a syndicate member when the common stock originally sold by that
       syndicate member is purchased in a stabilizing transaction or in a
       syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.

                                       54
<PAGE>   58

                          NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchases are advised to seek legal advice prior to any resale of the
common stock.

REPRESENTATIONS OF PURCHASERS

     Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities law to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canada courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities commission a report within ten days of the sales of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                       55
<PAGE>   59

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for SkillSoft by Hale and Dorr LLP, Boston, Massachusetts. Certain legal
matters will be passed upon for the underwriters by Katten Muchin & Zavis,
Chicago, Illinois.

                                    EXPERTS

     The financial statements of SkillSoft as of January 31, 1998 and 1999 and
for each of the periods then ended, which are included in this prospectus and
registration statement, have been so included in reliance on the report of
Arthur Andersen LLP, independent public accountants, given on the authority of
said firm as experts in auditing and accounting.

                   WHERE YOU CAN FIND ADDITIONAL INFORMATION

     SkillSoft has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. For further information
with respect to SkillSoft and the common stock, reference is made to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of the contract
or document filed as an exhibit to the registration statement, and each such
statement is qualified in all respects by reference to such exhibit. Copies of
the registration statement may be examined without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661
and World Trade Center, Thirteenth Floor, New York, New York 10048. Copies of
all or any portion of the registration statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, or by calling the Commission at
1-800-SEC-0330, at prescribed rates. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy, registration and information
statements and other information regarding registrants, such as SkillSoft, that
make electronic filings with the Commission.

     SkillSoft intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm.

                                       56
<PAGE>   60

                             SKILLSOFT CORPORATION

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................  F-2
Balance Sheets as of January 31, 1998 and 1999 and July 31,
  1999 (Unaudited)..........................................  F-3
Statements of Operations for the Period from Incorporation
  (October 15, 1997) to January 31, 1998 and for the Year
  Ended January 31, 1999 and the Six Months Ended July 31,
  1998 and 1999 (Unaudited).................................  F-4
Statements of Stockholders' Equity for the Period from
  Incorporation (October 15, 1997) to January 31, 1998 and
  for the Year Ended January 31, 1999 and the Six Months
  Ended July 31, 1999 (Unaudited)...........................  F-5
Statements of Cash Flows for the Period from Incorporation
  (October 15, 1997) to January 31, 1998 and for the Year
  Ended January 31, 1999 and for the Six Months Ended July
  31, 1998 and 1999 (Unaudited).............................  F-6
Notes to Financial Statements...............................  F-7
</TABLE>

                                       F-1
<PAGE>   61

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SkillSoft Corporation:

     We have audited the accompanying balance sheets of SkillSoft Corporation (a
Delaware corporation) as of January 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for the period
from incorporation (October 15, 1997) to January 31, 1998 and for the year ended
January 31, 1999. 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 generally accepted auditing
standards. 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 financial position of SkillSoft Corporation as of
January 31, 1998 and 1999, and the results of its operations and its cash flows
for the period from incorporation (October 15, 1997) to January 31, 1998 and for
the year ended January 31, 1999 in conformity with generally accepted accounting
principles.

                                                                          Arthur
Andersen LLP
Boston, Massachusetts
March 26, 1999

                                       F-2
<PAGE>   62

                             SKILLSOFT CORPORATION

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 JANUARY 31,                 JULY 31, 1999
                                                           ------------------------   ---------------------------
                                                                                                      PRO FORMA
                                                              1998         1999          ACTUAL      (NOTE 2(C))
                                                           ----------   -----------   ------------   ------------
                                                                                              (UNAUDITED)
<S>                                                        <C>          <C>           <C>            <C>
                                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents..............................  $2,650,637   $   623,322   $     25,442   $     25,442
  Short-term investments.................................   4,371,333     3,341,702        498,560        498,560
  Accounts receivable....................................          --            --        887,368        887,368
  Prepaid expenses and other current assets..............          --       116,144        699,695        699,695
                                                           ----------   -----------   ------------   ------------
         Total current assets............................   7,021,970     4,081,168      2,111,065      2,111,065
PROPERTY AND EQUIPMENT, AT COST:
  Computer equipment.....................................          --       357,719        425,427        425,427
  Furniture and fixtures.................................          --       173,456        178,312        178,312
  Leasehold improvements.................................          --        23,944         23,944         23,944
                                                           ----------   -----------   ------------   ------------
                                                                   --       555,119        627,683        627,683
  Less -- Accumulated depreciation and amortization......          --        85,726        180,747        180,747
                                                           ----------   -----------   ------------   ------------
                                                                   --       469,393        446,936        446,936
                                                           ----------   -----------   ------------   ------------
                                                           $7,021,970   $ 4,550,561   $  2,558,001   $  2,558,001
                                                           ==========   ===========   ============   ============
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable.......................................  $   78,537   $   210,741   $    421,000   $    421,000
  Accrued expenses.......................................     624,592     1,144,703      1,255,417      1,255,417
  Deferred revenue.......................................          --            --        251,194        251,194
                                                           ----------   -----------   ------------   ------------
         Total current liabilities.......................     703,129     1,355,444      1,927,611      1,927,611
                                                           ----------   -----------   ------------   ------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)

STOCKHOLDERS' EQUITY:
  Series A convertible preferred stock, $.001 par
    value --
    Authorized, issued and outstanding -- 4,000,000
      shares at January 31, 1998 and 1999 and July 31,
      1999, no shares pro forma (liquidation preference
      of $7,596,822 at January 31, 1999).................   6,957,774     6,957,774      6,957,774             --
  Series B convertible preferred stock, $.001 par
    value --
    Authorized -- 4,761,905 shares
    Issued and outstanding -- 2,380,953 and 4,761,905
      shares at January 31, 1999 and July 31, 1999,
      respectively, no shares pro forma (liquidation
      preference of $5,153,426 at January 31, 1999)......          --     4,993,767      9,993,661             --
  Class A common stock, $.001 par value --
    Authorized -- 26,000,000 shares
    Issued and outstanding -- 2,010,000, 3,696,000 and
      4,106,062 shares at January 31, 1998 and 1999 and
      July 31, 1999, respectively, no shares pro forma...       2,010         3,696          4,106             --
  Common stock, $.001 par value --
    Issued and outstanding -- no shares at January 31,
      1998 and 1999 and July 31, 1999, 12,867,967 shares
      pro forma (see Note 2(c))..........................          --            --             --         12,868
  Additional paid-in capital.............................     349,740       643,104      1,468,611     18,411,284
  Deferred compensation..................................          --            --       (715,811)      (715,811)
  Notes receivable from stockholders.....................    (166,250)     (306,250)      (339,063)      (339,063)
  Accumulated deficit....................................    (824,433)   (9,096,974)   (16,738,888)   (16,738,888)
                                                           ----------   -----------   ------------   ------------
         Total stockholders' equity......................   6,318,841     3,195,117        630,390        630,390
                                                           ----------   -----------   ------------   ------------
                                                           $7,021,970   $ 4,550,561   $  2,558,001   $  2,558,001
                                                           ==========   ===========   ============   ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-3
<PAGE>   63

                             SKILLSOFT CORPORATION

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                           PERIOD FROM
                                          INCORPORATION
                                           (OCTOBER 15,
                                             1997) TO        YEAR ENDED     SIX MONTHS ENDED JULY 31,
                                           JANUARY 31,      JANUARY 31,     -------------------------
                                               1998             1999           1998          1999
                                          --------------    ------------    -----------   -----------
                                                                                   (UNAUDITED)
<S>                                       <C>               <C>             <C>           <C>
REVENUE...............................      $      --       $        --     $        --   $ 1,088,224
COST OF REVENUE.......................             --                --              --       254,455
                                            ---------       -----------     -----------   -----------
       Gross profit...................             --                --              --       833,769
                                            ---------       -----------     -----------   -----------
OPERATING EXPENSES:
  Research and development............        177,836         4,117,187       1,224,356     3,743,121
  Selling and marketing...............             --         1,671,225         178,585     2,849,386
  General and administrative..........        649,404         2,820,646       1,444,876     1,964,517
  Amortization of deferred
     compensation.....................             --                --              --        38,345
                                            ---------       -----------     -----------   -----------
          Total operating expenses....        827,240         8,609,058       2,847,817     8,595,369
INTEREST INCOME.......................          2,807           336,517         120,308       119,686
                                            ---------       -----------     -----------   -----------
       Net loss.......................      $(824,433)      $(8,272,541)    $(2,727,509)  $(7,641,914)
                                            =========       ===========     ===========   ===========
NET LOSS PER SHARE (Note 2(e)):
  Basic and diluted...................      $   (0.88)      $     (2.70)    $     (1.13)  $     (1.91)
                                            =========       ===========     ===========   ===========
  Basic and diluted weighted average
     common shares outstanding........        938,241         3,062,038       2,417,569     3,994,974
                                            =========       ===========     ===========   ===========
PRO FORMA NET LOSS PER SHARE (Note
  2(e)):
  Pro forma basic and diluted.........                      $     (1.01)                  $     (0.61)
                                                            ===========                   ===========
  Pro forma basic and diluted weighted
     average common shares
     outstanding......................                        8,170,975                    12,546,408
                                                            ===========                   ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-4
<PAGE>   64

                             SKILLSOFT CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                           CONVERTIBLE PREFERRED STOCK
                               ---------------------------------------------------          CLASS A
                                       SERIES A                   SERIES B                COMMON STOCK
                               ------------------------   ------------------------   ----------------------
                               NUMBER OF     CARRYING     NUMBER OF     CARRYING     NUMBER OF    $.001 PAR
                                 SHARES        VALUE        SHARES        VALUE        SHARES       VALUE
                               ---------     --------     ---------     --------     ---------    ---------
<S>                            <C>          <C>           <C>          <C>           <C>          <C>
INCORPORATION (OCTOBER 15,
 1997).......................         --    $        --          --    $        --          --     $    --
 Initial capitalization......         --             --          --             --   2,010,000       2,010
 Issuance of Series A
   convertible preferred
   stock, net of issuance
   costs of $42,226..........  4,000,000      6,957,774          --             --          --          --
 Net loss....................         --             --          --             --          --          --
                               ----------   -----------   ----------   -----------   ----------    -------
BALANCE, JANUARY 31, 1998....  4,000,000      6,957,774          --             --   2,010,000       2,010
 Issuance of Class A
   restricted common stock...         --             --          --             --   1,686,000       1,686
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $6,234...........         --             --   2,380,953      4,993,767          --          --
 Net loss....................         --             --          --             --          --          --
                               ----------   -----------   ----------   -----------   ----------    -------
BALANCE, JANUARY 31, 1999....  4,000,000      6,957,774   2,380,953      4,993,767   3,696,000       3,696
 Issuance of Class A
   restricted common stock
   (unaudited)...............         --             --          --             --     390,000         390
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $106
   (unaudited)...............         --             --   2,380,952      4,999,894          --          --
 Deferred compensation
   related to grants of stock
   options and issuances of
   Class A restricted common
   stock (unaudited).........         --             --          --             --          --          --
 Amortization of deferred
   compensation (unaudited)..         --             --          --             --          --          --
 Exercise of stock options
   (unaudited)...............         --             --          --             --      20,062          20
 Net loss (unaudited)........         --             --          --             --          --          --
                               ----------   -----------   ----------   -----------   ----------    -------
BALANCE, JULY 31, 1999
 (UNAUDITED).................  4,000,000      6,957,774   4,761,905      9,993,661   4,106,062       4,106
 Conversion of Class A common
   stock into common stock
   (unaudited)...............         --             --          --             --   (4,106,062)    (4,106)
 Conversion of convertible
   preferred stock into
   common stock
   (unaudited)...............  (4,000,000)   (6,957,774)  (4,761,905)   (9,993,661)         --          --
                               ----------   -----------   ----------   -----------   ----------    -------
 PRO FORMA BALANCE, JULY 31,
   1999 (UNAUDITED)..........         --    $        --          --    $        --          --     $    --
                               ==========   ===========   ==========   ===========   ==========    =======

<CAPTION>

                                    COMMON STOCK                                            NOTES
                               ----------------------                                     RECEIVABLE
                               NUMBER OF    $.001 PAR     ADDITIONAL        DEFERRED         FROM       ACCUMULATED
                                 SHARES       VALUE     PAID-IN CAPITAL   COMPENSATION   STOCKHOLDERS     DEFICIT
                               ---------    ---------   ---------------   ------------   ------------   -----------
<S>                            <C>          <C>         <C>               <C>            <C>            <C>
INCORPORATION (OCTOBER 15,
 1997).......................         --     $    --      $        --      $      --      $      --     $        --
 Initial capitalization......         --          --          349,740             --       (166,250)             --
 Issuance of Series A
   convertible preferred
   stock, net of issuance
   costs of $42,226..........         --          --               --             --             --              --
 Net loss....................         --          --               --             --             --        (824,433)
                               ----------    -------      -----------      ---------      ---------     ------------
BALANCE, JANUARY 31, 1998....         --          --          349,740             --       (166,250)       (824,433)
 Issuance of Class A
   restricted common stock...         --          --          293,364             --       (140,000)             --
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $6,234...........         --          --               --             --             --              --
 Net loss....................         --          --               --             --             --      (8,272,541)
                               ----------    -------      -----------      ---------      ---------     ------------
BALANCE, JANUARY 31, 1999....         --          --          643,104             --       (306,250)     (9,096,974)
 Issuance of Class A
   restricted common stock
   (unaudited)...............         --          --           67,860             --        (32,813)             --
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $106
   (unaudited)...............         --          --               --             --             --              --
 Deferred compensation
   related to grants of stock
   options and issuances of
   Class A restricted common
   stock (unaudited).........         --          --          754,156       (754,156)            --              --
 Amortization of deferred
   compensation (unaudited)..         --          --               --         38,345             --              --
 Exercise of stock options
   (unaudited)...............         --          --            3,491             --             --              --
 Net loss (unaudited)........         --          --               --             --             --      (7,641,914)
                               ----------    -------      -----------      ---------      ---------     ------------
BALANCE, JULY 31, 1999
 (UNAUDITED).................         --          --        1,468,611       (715,811)      (339,063)    (16,738,888)
 Conversion of Class A common
   stock into common stock
   (unaudited)...............  4,106,062       4,106               --             --             --              --
 Conversion of convertible
   preferred stock into
   common stock
   (unaudited)...............  8,761,905       8,762       16,942,673             --             --              --
                               ----------    -------      -----------      ---------      ---------     ------------
 PRO FORMA BALANCE, JULY 31,
   1999 (UNAUDITED)..........  12,867,967    $12,868      $18,411,284      $(715,811)     $(339,063)    $(16,738,888)
                               ==========    =======      ===========      =========      =========     ============

<CAPTION>

                                   TOTAL
                               STOCKHOLDERS'
                                  EQUITY
                               -------------
<S>                            <C>
INCORPORATION (OCTOBER 15,
 1997).......................   $        --
 Initial capitalization......       185,500
 Issuance of Series A
   convertible preferred
   stock, net of issuance
   costs of $42,226..........     6,957,774
 Net loss....................      (824,433)
                                -----------
BALANCE, JANUARY 31, 1998....     6,318,841
 Issuance of Class A
   restricted common stock...       155,050
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $6,234...........     4,993,767
 Net loss....................    (8,272,541)
                                -----------
BALANCE, JANUARY 31, 1999....     3,195,117
 Issuance of Class A
   restricted common stock
   (unaudited)...............        35,437
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $106
   (unaudited)...............     4,999,894
 Deferred compensation
   related to grants of stock
   options and issuances of
   Class A restricted common
   stock (unaudited).........            --
 Amortization of deferred
   compensation (unaudited)..        38,345
 Exercise of stock options
   (unaudited)...............         3,511
 Net loss (unaudited)........    (7,641,914)
                                -----------
BALANCE, JULY 31, 1999
 (UNAUDITED).................       630,390
 Conversion of Class A common
   stock into common stock
   (unaudited)...............            --
 Conversion of convertible
   preferred stock into
   common stock
   (unaudited)...............            --
                                -----------
 PRO FORMA BALANCE, JULY 31,
   1999 (UNAUDITED)..........   $   630,390
                                ===========
</TABLE>

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

                                       F-5
<PAGE>   65

                             SKILLSOFT CORPORATION

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                PERIOD FROM
                                               INCORPORATION
                                               (OCTOBER 15,
                                                 1997) TO      YEAR ENDED    SIX MONTHS ENDED JULY 31,
                                                JANUARY 31,    JANUARY 31,   -------------------------
                                                   1998           1999          1998          1999
                                               -------------   -----------   -----------   -----------
                                                                                    (UNAUDITED)
<S>                                            <C>             <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...................................   $  (824,433)   $(8,272,541)  $(2,727,509)  $(7,641,914)
  Adjustments to reconcile net loss to net
     cash used in operating activities --
     Amortization of deferred compensation...            --             --            --        38,345
     Depreciation and amortization...........            --         85,726        39,000        95,021
     Changes in current assets and
       liabilities --
       Accounts receivable...................            --             --            --      (887,368)
       Prepaid expenses and other current
          assets.............................            --       (116,144)     (273,155)     (583,551)
       Accounts payable......................        78,537        132,204       372,135       210,259
       Accrued expenses......................       624,592        520,111       134,004       110,714
       Deferred revenue......................            --             --            --       251,194
                                                -----------    -----------   -----------   -----------
          Net cash used in operating
            activities.......................      (121,304)    (7,650,644)   (2,455,525)   (8,407,300)
                                                -----------    -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment........            --       (555,119)     (317,368)      (72,564)
  Purchases of short-term investments........    (4,371,333)    (3,341,702)   (2,910,357)   (9,868,310)
  Sales of short-term investments............            --      4,371,333     3,398,531    12,711,452
                                                -----------    -----------   -----------   -----------
          Net cash (used in) provided by
            investing activities.............    (4,371,333)       474,512       170,806     2,770,578
                                                -----------    -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of Series A convertible preferred
     stock, net of issuance costs............     6,957,774             --            --            --
  Issuance of Series B convertible preferred
     stock, net of issuance costs............            --      4,993,767            --     4,999,894
  Issuance of Class A common stock...........       185,500             --            --            --
  Issuance of Class A restricted common
     stock...................................            --        155,050       155,050        35,437
  Exercise of stock options..................            --             --            --         3,511
                                                -----------    -----------   -----------   -----------
          Net cash provided by financing
            activities.......................     7,143,274      5,148,817       155,050     5,038,842
                                                -----------    -----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS................................     2,650,637     (2,027,315)   (2,129,669)     (597,880)
CASH AND CASH EQUIVALENTS, BEGINNING OF
  PERIOD.....................................            --      2,650,637     2,650,637       623,322
                                                -----------    -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.....   $ 2,650,637    $   623,322   $   520,968   $    25,442
                                                ===========    ===========   ===========   ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
  TRANSACTIONS:
  Issuance of Class A restricted common stock
     for notes receivable from
     stockholders............................   $   166,250    $   140,000   $   140,000   $    32,813
                                                ===========    ===========   ===========   ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-6
<PAGE>   66

                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)

(1) OPERATIONS

     SkillSoft Corporation (the Company) was incorporated in Delaware on October
15, 1997. The Company commenced operations on January 8, 1998 in conjunction
with its initial round of financing. The Company is a provider of web-based
training resources that cover a variety of professional effectiveness and
business topics.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Management's Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (b) Interim Financial Statements

     The accompanying balance sheet as of July 31, 1999, the statements of
operations and cash flows for the six months ended July 31, 1998 and 1999 and
the statement of stockholders' equity for the six months ended July 31, 1999 are
unaudited, but in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of results
for these interim periods. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted, although management believes that the
disclosures included are adequate to make the information presented not
misleading. The results of operations for the six months ended July 31, 1999 are
not necessarily indicative of the results to be expected for the entire fiscal
year.

  (c) Unaudited Pro Forma Presentation

     Upon the closing of the Company's proposed initial public offering, the
Company will have a single class of common stock. All shares of Class A and
Class B common stock issued and outstanding will be converted into a new single
class of common stock in connection with this offering.

     The unaudited pro forma balance sheet as of July 31, 1999 and the pro forma
net loss per share for the six months ended July 31, 1999 reflect the automatic
conversion of all outstanding shares of Series A and Series B convertible
preferred stock into 8,761,905 shares of common stock, which will occur upon the
closing of the Company's proposed initial public offering.

  (d) Revenue Recognition

     The Company follows the provisions of the American Institute of Certified
Public Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue
Recognition, as amended by SOP 98-4. The Company derives revenue primarily
pursuant to license agreements under which customers license usage of delivered
products for a period of one, two or three years. On each anniversary date
during the term of multi-year license agreements, customers are generally
allowed to exchange any or all of the licensed products for an equivalent number
of alternative products within the Company's course library. The first year
license fee is generally billed in advance and recognized

                                       F-7
<PAGE>   67
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

as revenue at the time of delivery of the products, provided the Company's fees
are fixed or determinable and collections of accounts receivable are probable.
In the event that the customer does not initially specify the entire set of
licensed courses to be delivered or if some licensed courses are not immediately
available for delivery, the portion of the license revenue associated with those
undelivered courses is not recognized until those courses are delivered.
Subsequent annual license fees for multi-year agreements will be generally
billed and recognized on each anniversary date or, if the customer exchanges
courses at the renewal date, upon delivery of the exchanged courses, provided
the Company's fees are fixed or determinable and collections of accounts
receivable are probable. Revenue from license agreements providing unlimited
product exchange rights exercisable other than on each anniversary date during
the term of the agreement or providing for licenses of all courses currently
available and to be developed during a specified period is recognized ratably
over the license term. The Company also derives revenue from extranet hosting
and online mentoring services, which is recognized as revenue as the service is
performed and have been minimal to date. The Company may offer payment terms
generally up to six months from the initial shipment date or anniversary date
for multi-year agreements to some of its customers. The cost of satisfying any
Post Contract Support (PCS) is accrued and included in deferred revenue at the
time revenue is recognized, as PCS fees are included in the annual license fee.
The estimated cost of providing PCS during the agreements is insignificant and
the Company does not offer it separately. Unspecified upgrades or enhancements
offered have been and are expected to be minimal and infrequent. For
multi-element agreements, vendor specific objective evidence exists to allocate
the total fee to the undelivered elements of the agreement. Deferred revenue
represents the undelivered portion of first year license fees and PCS for which
the Company has received payment.

  (e) Net Loss Per Share

     Basic and diluted net loss per common share was determined by dividing net
loss by the weighted average common shares outstanding during the period. Basic
and diluted net loss per share are the same, as outstanding common stock options
and convertible preferred stock are antidilutive, because the Company has
recorded a net loss for all periods presented. Options to purchase a weighted
total of 0, 157,447, 27,116 and 700,153 common shares have been excluded from
the computation of diluted weighted average shares outstanding for the period
from incorporation (October 15, 1997) to January 31, 1998, for the year ended
January 31, 1999 and for the six months ended July 31, 1998 and 1999,
respectively. Shares of common stock issuable upon the conversion of outstanding
convertible preferred stock have also been excluded for all periods presented.
In accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 98, Earnings Per Share in an Initial Public Offering, there were no
issuances of the Company's common stock at nominal consideration prior to the
Company's planned initial public offering.

     The calculation of pro forma net loss per common share assumes that all
Series A and Series B convertible preferred stock had been converted to common
stock as of the issuance date.

  (f) Cash, Cash Equivalents and Short-Term Investments

     The Company considers all highly liquid investments with original
maturities of 90 days or less at the time of purchase to be cash equivalents. At
January 31, 1998 and 1999 and July 31, 1999, cash equivalents consisted mainly
of money market funds. The Company accounts for its investments in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Under SFAS No. 115,
securities that the

                                       F-8
<PAGE>   68
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

Company has the positive intent and ability to hold to maturity are reported at
amortized cost, which approximates market value, and are classified as
held-to-maturity. At January 31, 1998 and 1999, the Company's investments
consisted of held-to-maturity securities that are investments in high grade
commercial paper instruments, short-term notes and U.S. Treasury bills. At July
31, 1999, the Company's investments consisted of a held-to-maturity security
invested in a short-term note. All of these investments are classified as
current assets in the accompanying balance sheets as they mature within one
year.

  (g) Prepaid Expenses and Other Current Assets

     As of July 31, 1999, prepaid expenses and other current assets consisted
primarily of approximately $488,000 of prepaid commissions paid to the Company's
salespeople. This asset will be charged to expense as the related revenue is
recognized and the commissions are earned during the fiscal year.

  (h) Depreciation and Amortization

     The Company provides for depreciation and amortization by charges to
operations in amounts estimated to allocate the cost of property and equipment
over their estimated useful lives, on a straight-line basis, as follows:

<TABLE>
<CAPTION>
                                                             ESTIMATED
                                                           USEFUL LIVES
                                                           -------------
<S>                                                        <C>
Computer equipment.......................................    2-3 years
Furniture and fixtures...................................     5 years
Leasehold improvements...................................  Life of lease
</TABLE>

  (i) Software Development Costs and Research and Development Expenses

     SFAS No. 86, Accounting for the Costs of Computer Software To Be Sold,
Leased or Otherwise Marketed, requires the capitalization of certain computer
software development costs incurred after technological feasibility is
established. Once technological feasibility of a software product has been
established, the additional development costs incurred to bring the product to a
commercially acceptable level has not been and is not expected to be
significant. As a result, the Company has not capitalized software development
costs as of January 31, 1998 and 1999 and July 31, 1999.

     The Company charges all research and development expenses, which include
course content development fees, to operations as incurred.

  (j) Comprehensive Loss

     In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 requires disclosure of all
components of comprehensive income on an annual and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions, other events and circumstances from nonowner sources.
The Company does not have any components of comprehensive loss other than its
reported net loss.

                                       F-9
<PAGE>   69
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

  (k) Fair Value of Financial Instruments

     Financial instruments consist mainly of cash and cash equivalents,
short-term investments accounts receivable and accounts payable. The carrying
amounts of these instruments approximate their fair value.

  (l) Concentrations of Credit Risk

     SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. The Company has no significant off-balance-sheet concentration
of credit risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements. The Company's accounts receivable credit risk is
concentrated domestically, because for the six months ended July 31, 1999 all
revenue was derived from domestic customers. For the six months ended and at
July 31, 1999, the Company had a customer that individually comprised 51% and
75% of the Company's total revenue and accounts receivable, respectively.

  (m) Disclosures About Segments of an Enterprise

     The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended January 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. The Company's chief operating decision makers,
as defined under SFAS No. 131, are the Chief Executive Officer and the Chief
Financial Officer. To date, the Company has viewed its operations and manages
its business as principally one operating segment. As a result, the financial
information disclosed herein represents all of the material financial
information related to the Company's principal operating segment.

  (n) Long-Lived Assets

     The Company follows the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of.
SFAS No. 121 requires that long-lived assets be reviewed for impairment by
comparing the fair value of the assets with the carrying amount. Any write-downs
are to be treated as permanent reductions in the carrying amount of the assets.
The Company believes that the carrying value of these assets is realizable and
to date has not recorded any impairment charges.

  (o) Recent Accounting Pronouncements

     In March 1998, the AICPA issued SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires
certain computer software costs associated with internal-use software to be
expensed as incurred until certain capitalization

                                      F-10
<PAGE>   70
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

criteria are met. The Company adopted SOP No. 98-1 beginning February 1, 1999.
Adoption of this statement did not have a material impact on the Company's
financial position or results of operations.

     In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-up Activities, which requires that all nongovernmental entities expense
the costs of start-up activities, including organizational costs, as those costs
are incurred. The Company has recorded all such costs as expenses in the period
incurred.

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for periods
beginning after June 15, 2000. SFAS No. 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Because the Company currently
holds no derivative financial instruments and does not currently engage in
hedging activities, the adoption of SFAS No. 133 is not expected to have a
material impact on the Company's financial condition or results of operations.

(3) NOTES RECEIVABLE FROM STOCKHOLDERS

     In January 1998, the Company issued 950,000 shares of Class A common stock
to a founder of the Company in exchange for a note receivable equal to the fair
market value of the shares. The note receivable accrues interest at a rate of
6.2% per annum and the principal and all outstanding interest are due upon the
maturity of the note in December 2002. The balance on this note receivable is
$166,250 at January 31, 1998 and 1999 and July 31, 1999, and is included as a
reduction of stockholders' equity in the accompanying balance sheets and
statements of stockholders' equity.

     During the fiscal year ended January 31, 1999, the Company issued a total
of 800,000 shares of Class A restricted common stock to three founders of the
Company in exchange for notes receivable equal to the fair market value of the
shares. The shares vest ratably on a monthly basis over three years (see Note
6(b)). The notes receivable accrue interest at a rate of 5.77% per annum and the
principal and all outstanding interest are due upon the maturity of the notes in
June 2003. The total balance of these notes receivable is $140,000 at January
31, 1999 and July 31, 1999 and is included as a reduction of stockholders'
equity in the accompanying balance sheets and statements of stockholders'
equity.

     During February 1999, the Company issued a total of 187,500 shares of Class
A restricted common stock to several officers of the Company in exchange for
notes receivable equal to the fair market value of the shares. The shares vest
ratably on a monthly basis over three years (see Note 6(b)). The notes
receivable accrue interest at a rate of 4.83% per annum and the principal and
all outstanding interest are due upon the maturity of the notes in March 2004.
The total balance of these notes receivable is $32,813 at July 31, 1999 and is
included as a reduction of stockholders' equity in the accompanying balance
sheets and statements of stockholders' equity.

(4) INCOME TAXES

     The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes. Under the liability
method specified by SFAS No. 109, a deferred tax asset or liability is
determined based on the difference between the financial statement and tax bases
of assets and liabilities, as measured by the enacted tax rates assumed to be in
effect

                                      F-11
<PAGE>   71
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

when these differences are expected to reverse. A deferred tax valuation
allowance is required if it is more likely than not that all or a portion of the
recorded deferred tax assets will not be realized.

     No provision for federal or state income taxes has been recorded, as the
Company incurred net operating losses for all periods presented. As of January
31, 1998 and 1999, the Company had net operating loss carryforwards of
approximately $164,000 and $3,741,000, respectively, available to reduce future
income taxes, if any. The Company also has available federal tax credit
carryforwards of approximately $120,000. If not utilized, these carryforwards
expire at various dates through the fiscal year ended January 31, 2019. If
substantial changes in the Company's ownership should occur, as defined by
Section 382 of the Internal Revenue Code (the Code), there could be annual
limitations on the amount of carryforwards which can be realized in future
periods. The Company has completed several financings since its inception and
has incurred ownership changes as defined under the Code. The Company does not
believe that these changes in ownership will have a material impact on its
ability to use its net operating loss and tax credit carryforwards.

     Net deferred tax assets consist of the following:

<TABLE>
<CAPTION>
                                                        JANUARY 31,
                                                  -----------------------
                                                    1998         1999
                                                  ---------   -----------
<S>                                               <C>         <C>
Net operating loss carryforwards................  $  56,000   $ 1,272,000
Nondeductible expenses and reserves.............    262,000     2,072,000
Tax credits.....................................         --       120,000
                                                  ---------   -----------
                                                    318,000     3,464,000
Less--Valuation allowance.......................   (318,000)   (3,464,000)
                                                  ---------   -----------
                                                  $      --   $        --
                                                  =========   ===========
</TABLE>

     Due to the Company's history of operating losses, there is significant
uncertainty surrounding the Company's ability to utilize its net operating loss
and tax credit carryforwards. Accordingly, the Company has provided a full
valuation allowance against its otherwise recognizable deferred tax assets as of
January 31, 1998 and 1999.

     A reconciliation of the federal statutory rate to the Company's effective
tax rate is as follows:

<TABLE>
<CAPTION>
                                                         JANUARY 31,
                                                        --------------
                                                        1998     1999
                                                        -----    -----
<S>                                                     <C>      <C>
Income tax provision at federal statutory rate........  (34.0)%  (34.0)%
Increase (decrease) in tax resulting from --
  State tax provision, net of federal benefit.........   (4.6)    (4.6)
  Increase in valuation allowance.....................   38.6     38.6
                                                        -----    -----
Effective tax rate....................................     --%      --%
                                                        =====    =====
</TABLE>

(5) COMMITMENTS AND CONTINGENCIES

  (a) Line-of-Credit with a Financial Institution

     In June 1999, the Company entered into a working capital credit facility
agreement with a financial institution, which expires on June 30, 2000 and is
automatically renewable for additional one-year terms. Under the working capital
line-of-credit, the Company may borrow up to the lesser of

                                      F-12
<PAGE>   72
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

$5,000,000 or the sum of 80% of eligible accounts receivable, as defined, and
$1,000,000. Borrowings bear interest at the LIBOR rate (5.19% at July 31, 1999)
plus 4.875%. The working capital line-of-credit is collateralized by
substantially all assets of the Company. The agreement contains certain
covenants, with which, as of July 31, 1999, the Company was in full compliance.
As of July 31, 1999, there were no amounts outstanding under the working capital
line-of-credit and approximately $2,582,000 was available for borrowing.

  (b) Leases

     The Company leases its facility and certain equipment and furniture under
operating lease agreements that expire at various dates through October 2001.
Included in the accompanying statements of operations is rent expense for the
leased facility and equipment of approximately $0, $55,000, $28,000 and $55,000
for the period from incorporation (October 15, 1997) to January 31, 1998, for
the year ended January 31, 1999 and for the six months ended July 31, 1998 and
1999, respectively.

     Future minimum lease payments under the operating lease agreements are
approximately as follows:

<TABLE>
<CAPTION>
               FISCAL YEAR
               -----------
<S>                                        <C>
2000.....................................  $232,000
2001.....................................   205,000
2002.....................................    22,000
                                           --------
                                           $459,000
                                           ========
</TABLE>

  (c) Litigation

     In May 1998, the former employer of three of the Company's executive
officers and one key employee filed a lawsuit against the Company, the three
executive officers and the key employee. The former employer claims in substance
that the Company's President and Chief Executive Officer breached his fiduciary
obligations to his former employer by misappropriating alleged trade secrets,
commencing a rival concern and interfering with employment relationships by
soliciting other employees to join the Company while employed by their former
employer; that the Company's Vice President, Worldwide Sales and Marketing
breached his fiduciary obligations to his former employer by assisting the
Company's President and Chief Executive Officer in these activities; that the
other individuals allegedly misappropriated alleged trade secrets; and that the
Company misappropriated alleged trade secrets and allegedly interfered with
employment relationships. The claims seek injunctive relief and compensatory
damages in an amount to be determined and punitive damages in excess of
$10,000,000. Management denies all allegations and believes that it has
meritorious defenses to all claims and intends to vigorously defend its
positions. It is not possible to predict the outcome of this litigation.
Regardless of the outcome, this litigation will continue to result in
significant expenses and may divert the efforts and attention of the Company's
management from normal business operations and may have a material adverse
impact on the Company's business, financial condition or results of operations.
In connection with this lawsuit, the Company has recorded as expense $416,717,
$0 and $989,392 for the fiscal year ended January 31, 1999 and the six months
ended July 31, 1998 and 1999, respectively, which is included in general and
administrative expenses in the accompanying statements of operations.

                                      F-13
<PAGE>   73
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

(6) STOCKHOLDERS' EQUITY

  (a) Convertible Preferred Stock

     The Company has authorized the issuance of 13,000,000 shares of convertible
preferred stock (the Preferred Stock), $.001 par value, of which 4,000,000,
4,761,905, and 3,174,603 shares have been designated as Series A, Series B and
Series C Preferred Stock, respectively. At July 31, 1999, 1,063,492 shares of
preferred stock are undesignated for a particular series.

     In January 1998, the Company issued 4,000,000 shares of Series A
convertible preferred stock for gross proceeds of approximately $7,000,000. In
August 1998, the Company issued 2,380,953 shares of Series B convertible
preferred stock for gross proceeds of approximately $5,000,000. In February
1999, the Company issued the remaining 2,380,952 shares of Series B convertible
preferred stock for gross proceeds of approximately $5,000,000. In August 1999,
the Company issued 1,195,238 shares of Series C convertible preferred stock for
gross proceeds of approximately $3,765,000.

     The rights, preferences and privileges of the Preferred Stock are as
follows:

     VOTING RIGHTS

          Each holder of outstanding shares of Preferred Stock shall be entitled
     to the number of votes equal to the number of whole shares of Class A
     common stock into which the shares of Series A, B and C Preferred Stock are
     then convertible.

     DIVIDENDS

          The holders of the Series A, B and C Preferred Stock shall be entitled
     to receive dividends of $0.14, $0.168 and $0.252 per share per annum,
     respectively, payable when and if declared by the Board of Directors of the
     Company. There were no dividends declared payable by the Board of Directors
     during the fiscal years ended January 31, 1998 and 1999 or the six months
     ended July 31, 1999.

     LIQUIDATION PREFERENCE

          In the event of any voluntary or involuntary liquidation, winding up
     or dissolution of the Company, the holders of the Company's Preferred Stock
     then outstanding are entitled to be paid out of the assets of the Company
     before any payment is made to common stockholders. The Series A, B and C
     preferred stockholders are entitled to be paid at a rate of $1.75, $2.10
     and $3.15 per share, respectively, plus any declared but unpaid dividends.
     In addition, the preferred stockholders are entitled to a liquidation
     dividend of an amount equal to 8% of the original issuance price for each
     year that the shares have been outstanding.

          After payment of all preferential amounts required to be paid to
     holders of the Preferred Stock as set forth above, upon the involuntary
     liquidation, winding up or dissolution of the Company, the remaining assets
     and funds of the Company will be distributed solely to the holders of the
     common stock.

                                      F-14
<PAGE>   74
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     CONVERSION

          Each share of Series A, B and C Preferred Stock is convertible, at the
     option of the holder, at any time into one share of common stock, subject
     to adjustment based on certain defined events.

          Shares of Preferred Stock will convert into Class A common stock,
     provided that the conversion shall not cause the holder to possess greater
     than 49.9% of the total Class A common stock then outstanding and any
     additional shares shall convert to Class B common stock.

          In connection with the sale of shares of common stock in a public
     offering, resulting in at least $20,000,000 of net proceeds to the Company
     and a $6.30 per share price to the public, all outstanding shares of
     Preferred Stock shall automatically be converted into shares of common
     stock.

  (b) Common Stock

     The Company has authorized the issuance of up to 33,000,000 shares of
common stock, $.001 par value, of which 26,000,000 and 7,000,000 shares have
been designated as Class A and Class B, respectively. The voting, dividend and
liquidation rights of the holders of the common stock are subject to, and
qualified by, the rights of the holders of the Preferred Stock. The Company has
reserved 3,990,000 shares of common stock to be issued as either restricted
stock awards or stock options under the 1998 Stock Incentive Plan discussed in
Note 6(c). An additional 4,000,000, 4,761,905 and 3,174,603 shares of common
stock have been reserved for issuance upon the conversion of the Series A, B and
C Preferred Stock, respectively.

     The holders of the Class A common stock shall be entitled to vote on all
corporate matters, and the holders of the Class B common stock shall not be
entitled to vote for any such matters except changes and amendments to the Class
B shareholder rights and preferences.

     In connection with the Company's proposed initial public offering, all
issued and outstanding shares of Class A and Class B common stock will be
converted to a new single class of common stock.

     The Company issued 2,010,000 shares of Class A common stock, which were not
part of the 1998 Stock Incentive Plan, to a founder of the Company and to
several private investors in January 1998. Of these shares, 950,000 were issued
to a founder of the Company in exchange for a full recourse note receivable (see
Note 3).

     During the fiscal year ended January 31, 1999, the Company issued an
additional 1,686,000 shares of Class A restricted common stock pursuant to the
1998 Stock Incentive Plan. Of these shares, 800,000 were issued to three
founders of the Company in exchange for full recourse notes receivable (see Note
3). These shares all vest ratably on a monthly basis over a three-year period;
unvested shares are subject to the right of repurchase by the Company at the
original sales price of the shares.

     During the six months ended July 31, 1999, the Company issued an additional
390,000 shares of Class A restricted common stock pursuant to the 1998 Stock
Incentive Plan. Of these shares, 187,500 were issued to several officers of the
Company in exchange for full recourse notes receivable (see Note 3). These
shares all vest over a three-year period; unvested shares are subject to the
right of repurchase by the Company at the original sales price of the shares.

                                      F-15
<PAGE>   75
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     As of July 31, 1999, a total of 1,250,472 shares of Class A restricted
common stock are subject to the right of repurchase by the Company.

  (c) Stock Option Plan

     In February 1998, the Company adopted the 1998 Stock Incentive Plan (the
Plan), pursuant to which up to 3,990,000 shares of common stock may be issued
over a 10-year period. Under the Plan, the Company may grant both incentive
stock options and nonqualified stock options, as well as award or sell shares of
common stock to employees, directors or outside consultants of the Company. All
option grants, prices and vesting periods are determined by the Board of
Directors. Incentive stock options may be granted at a price not less than 100%
of the fair market value of the common stock on the date of grant and not less
than 110% of the fair market value for a stockholder holding more than 10% of
the Company's voting common stock.

     All stock option activity under the Plan for the fiscal years ended January
31, 1998 and 1999 and for the six months ended July 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                                                             WEIGHTED
                                                                             AVERAGE
                                                           EXERCISE          EXERCISE
                                             OPTIONS        PRICE             PRICE
                                             -------    --------------    --------------
<S>                                          <C>        <C>               <C>
  Granted..................................  435,250     $      .175          $.175
                                             -------     -----------          -----
Outstanding, January 31, 1999..............  435,250            .175           .175
  Granted (unaudited)......................  413,750       .175-1.00            .41
  Exercised (unaudited)....................  (20,062)           .175           .175
  Canceled (unaudited).....................  (12,161)           .175           .175
                                             -------     -----------          -----
Outstanding, July 31, 1999 (unaudited).....  816,777     $ .175-1.00          $ .29
                                             =======     ===========          =====
Exercisable, January 31, 1999..............       --     $        --          $  --
                                             =======     ===========          =====
Exercisable, July 31, 1999 (unaudited).....   25,105     $      .175          $.175
                                             =======     ===========          =====
</TABLE>

     During August 1999, the Company granted options for the purchase of 98,500
shares of common stock at an exercise price of $1.00 per share.

     The following table summarizes certain information relating to the
outstanding and exercisable options as of July 31, 1999 (unaudited):

<TABLE>
<CAPTION>
                    OUTSTANDING
----------------------------------------------------
                         WEIGHTED                             EXERCISABLE
                         AVERAGE                       --------------------------
 RANGE                  REMAINING        WEIGHTED                     WEIGHTED
   OF       NUMBER     CONTRACTUAL       AVERAGE        NUMBER        AVERAGE
EXERCISE      OF           LIFE          EXERCISE         OF          EXERCISE
 PRICES     SHARES       (YEARS)          PRICE         SHARES         PRICE
--------   ---------   ------------   --------------   ---------   --------------
<S>        <C>         <C>            <C>              <C>         <C>
 $.175      700,277        9.3            $.175         25,105         $.175
  1.00      116,500        9.9             1.00             --            --
            -------                                     ------
            816,777                                     25,105
            =======                                     ======
</TABLE>

                                      F-16
<PAGE>   76
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     In connection with certain issuances of Class A restricted common stock and
stock option grants during the six months ended July 31, 1999, the Company
recorded deferred compensation of $754,156, which represents the aggregate
difference between the exercise or sale price and the fair market value of the
common stock as determined for accounting purposes. The deferred compensation
will be recognized as an operating expense over the vesting period of the
restricted common stock and the underlying stock options. The Company recorded
compensation expense of $38,345 in the six months ended July 31, 1999 related to
these restricted shares and options. In addition, the Company will record
additional deferred compensation of approximately $1,202,000 related to the sale
of 120,000 shares of Class A restricted common stock and to the grant of 98,500
options in August 1999, which also will be recognized as an operating expense
over the vesting period of the restricted common stock and the underlying stock
options.

  (d) Stock-Based Compensation

     In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 requires the measurement of the fair value of stock
options to employees to be included in the statements of operations or disclosed
in the notes to financial statements. The Company accounts for stock-based
compensation for its employees under Accounting Principles Board (APB) Opinion
No. 25 and elected the disclosure-only alternative under SFAS No. 123, which
requires disclosure of the pro forma effects on earnings as if the
fair-value-based method of accounting under SFAS No. 123 had been adopted, as
well as certain other information.

     The Company has computed the pro forma disclosures required under SFAS No.
123 for options granted in fiscal 1999 and the six months ended July 31, 1998
and 1999 using the Black-Scholes option pricing model prescribed by SFAS No.
123. The weighted average information and assumptions used for the grants is as
follows:

<TABLE>
<CAPTION>
                                                YEAR ENDED   SIX MONTHS ENDED JULY 31,
                                                JANUARY 31,  --------------------------
                                                   1999          1998          1999
                                                -----------  ------------  ------------
                                                                    (UNAUDITED)
<S>                                             <C>          <C>           <C>
Risk-free interest rates......................  4.18-5.52%   5.47-5.52%    5.01-6.02%
Expected dividend yield.......................      -             -             -
Volatility factor.............................      -             -             -
Expected lives................................   7 years       7 years       7 years
Weighted average fair value of options
  granted.....................................     $.05         $.06          $2.57
Weighted average remaining contractual life of
  outstanding options.........................  9.6 years     9.9 years     9.4 years
</TABLE>

                                      F-17
<PAGE>   77
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     Had compensation expense for the Plan been determined consistent with SFAS
No. 123, the Company's net loss and basic and diluted net loss per share would
have been increased to the following pro forma amounts:

<TABLE>
<CAPTION>
                                         YEAR ENDED     SIX MONTHS ENDED JULY 31,
                                         JANUARY 31,    --------------------------
                                            1999           1998           1999
                                         -----------    -----------    -----------
                                                               (UNAUDITED)
<S>                                      <C>            <C>            <C>
Net loss --
  As reported..........................  $(8,272,541)   $(2,727,509)   $(7,641,914)
  Pro forma............................   (8,274,806)    (2,727,744)    (7,695,590)
Basic and diluted net loss per share --
  As reported..........................        (2.70)         (1.13)         (1.91)
  Pro forma............................        (2.70)         (1.13)         (1.93)
</TABLE>

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

(7) ACCRUED EXPENSES

     Accrued expenses in the accompanying balance sheets consist of the
following:

<TABLE>
<CAPTION>
                                                   JANUARY 31,
                                              ----------------------     JULY 31,
                                                1998         1999          1999
                                              --------    ----------    -----------
                                                                        (UNAUDITED)
<S>                                           <C>         <C>           <C>
Accrued compensation........................  $622,788    $  654,430    $  691,875
Professional fees...........................        --       380,449       343,500
Sales tax...................................        --            --       132,018
Other.......................................     1,804       109,824        88,024
                                              --------    ----------    ----------
                                              $624,592    $1,144,703    $1,255,417
                                              ========    ==========    ==========
</TABLE>

(8) EMPLOYEE BENEFIT PLAN

     The Company has a 401(k) plan covering all employees of the Company who
have met certain eligibility requirements. Under the terms of the 401(k) plan,
the employees may elect to make tax-deferred contributions to the 401(k) plan.
In addition, the Company may match employee contributions, as determined by the
Board of Directors, and may make a discretionary contribution to the 401(k)
plan. No matching or discretionary contributions have been made to the 401(k)
plan in any period.

                                      F-18
<PAGE>   78

                                    PART II

                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:

<TABLE>
<S>                                                           <C>
SEC registration fee........................................  $12,788
NASD filing fee.............................................    5,100
Nasdaq National Market listing fee..........................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Transfer agent and registrar fees and expenses..............
Director and officer insurance..............................
                                                              -------
Miscellaneous...............................................
                                                              -------
          Total.............................................  $
                                                              =======
</TABLE>

SkillSoft will bear all expenses shown above.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     The Delaware General Corporation Law and SkillSoft's Certificate of
Incorporation provide for indemnification of SkillSoft's directors and officers
for liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of SkillSoft and, with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.

     The Underwriting Agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of SkillSoft against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").

     In addition, SkillSoft has purchased a directors and officers liability
insurance policy.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.

     In the three years preceding the filing of this registration statement,
SkillSoft has sold the following securities that were not registered under the
Securities Act:

          1. On December 10, 1997, SkillSoft issued and sold 1,900,000 shares of
     its common stock to Mr. Moran for an aggregate purchase price of $332,500.
     This issuance was made pursuant to Section 4(2) of the Securities Act.

          2. On December 10, 1997, SkillSoft issued and sold an aggregate of
     110,000 shares of its common stock to two purchasers for an aggregate
     purchase price of $19,250. This issuance was made pursuant to Section 4(2)
     of the Securities Act.

                                      II-1
<PAGE>   79

          3. On January 8, 1998, SkillSoft issued and sold an aggregate of
     4,000,000 shares of its Series A preferred stock to two purchasers for an
     aggregate purchase price of $7,000,000. These issuances were made pursuant
     to Section 4(2) of the Securities Act.

          4. On August 14, 1998 and February 16, 1999, SkillSoft issued and sold
     an aggregate of 4,761,905 shares of its Series B preferred stock to
     Warburg, Pincus Ventures, L.P. for an aggregate purchase price of
     $10,000,000. These issuances were made pursuant to Section 4(2) of the
     Securities Act.

          5. On August 5, 1999, SkillSoft issued and sold an aggregate of
     1,195,238 of its Series C preferred stock to five purchasers for an
     aggregate purchase price of $3,765,000. These issuances were made pursuant
     to Section 4(2) of the Securities Act.

          6. Between June 19, 1998 and September 1, 1999, SkillSoft issued a
     total of 2,231,874 shares of common stock to thirteen persons under its
     1998 Stock Incentive Plan for purchase prices between $0.175 and $1.00 per
     share. These shares were issued in reliance upon the exemption from
     registration under Rule 701 promulgated under the Securities Act.

     No underwriters were involved in the foregoing sales of securities.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

     (a) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
  NO.                               EXHIBIT
-------                             -------
<C>       <S>
 1.01*    Form of Underwriting Agreement.
 3.01     Amended and Restated Certificate of Incorporation of
          SkillSoft.
 3.02*    Form of Certificate of Amendment to Certificate of
          Incorporation of SkillSoft (to be filed prior to closing of
          the public offering).
 3.03*    Form of Amended and Restated Certificate of Incorporation of
          SkillSoft (to be filed following the closing of this public
          offering).
 3.04*    By-Laws of SkillSoft.
 4.01*    Specimen Certificate for shares of SkillSoft's Common Stock.
 5.01*    Legal Opinion of Hale and Dorr LLP.
10.01     1998 Stock Incentive Plan, as amended.
10.02*    1999 Non-Employee Director Stock Option Plan.
10.03     Employment Agreement between SkillSoft and Charles E. Moran
10.04     Security Agreement and Secured Promissory Note between
          SkillSoft and Charles E. Moran, each dated December 10,
          1997.
10.05     Employment Agreement dated January 12, 1998 between
          SkillSoft and Mark A. Townsend.
10.06     Employment Agreement dated February 2, 1998 between
          SkillSoft and Thomas J. McDonald.
10.07     Employment Agreement dated April 9, 1998 between SkillSoft
          and Jerald A. Nine.
10.08     Amended and Restated Registration and Investor Rights
          Agreement dated August 5, 1999 between SkillSoft and the
          Investors named therein.
21.01     Subsidiaries.
</TABLE>

                                      II-2
<PAGE>   80

<TABLE>
<CAPTION>
EXHIBIT
  NO.                               EXHIBIT
-------                             -------
<C>       <S>
23.01*    Consent of Hale and Dorr LLP (included in Exhibit 5.01).
23.02     Consent of Arthur Andersen LLP.
24.01     Power of Attorney (included on Page II-4).
27.01     Financial Data Schedule.
27.02     Financial Data Schedule.
27.03     Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

     (b) FINANCIAL STATEMENT SCHEDULES.

     All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17.  UNDERTAKINGS.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

     The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser, (2) that for
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497 (h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

                                      II-3
<PAGE>   81

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Nashua, New Hampshire
on September 9, 1999.

                                          SKILLSOFT CORPORATION

                                          By: /s/ CHARLES E. MORAN
                                            ------------------------------------
                                              Charles E. Moran
                                              President, Chief Executive Officer
                                              and Chairman of the Board

                               POWER OF ATTORNEY
                                 AND SIGNATURES

     We, the undersigned officers and directors of SkillSoft Corporation hereby
severally constitute and appoint Charles E. Moran, Thomas J. McDonald, Patrick
J. Rondeau and Scott E. Pueschel and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, with full powers of
substitution and resubstititon, to sign for us and in our names in the
capacities indicated below, the Registration statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement on Form S-1 filed herewith and any and all pre-effective
and post effective amendment to said Registration Statement, and any subsequent
Registration statement for the same offering which may be filed under Rule
462(b), and generally to do all such things in our names and on our behalf in
our capacities as officers and directors to enable SkillSoft Corporation to
comply with the provision of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney, or any of
them, or their substitute or substitutes, to said Registration Statement and any
and all amendments thereto or to any subsequent Registration Statement for the
same offering which may be file under Rule 462(b).

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                     TITLE(S)                       DATE
                     ---------                                     --------                       ----
<C>                                                  <S>                                   <C>
               /s/ CHARLES E. MORAN                  President, Chief Executive Officer    September 9, 1999
---------------------------------------------------    and Chairman of the Board
                 Charles E. Moran                      (Principal Executive Officer)

              /s/ THOMAS J. MCDONALD                 Chief Financial Officer (Principal    September 9, 1999
---------------------------------------------------    Financial and Accounting Officer)
                Thomas J. McDonald

              /s/ STEWART K.P. GROSS                 Director                              September 9, 1999
---------------------------------------------------
                Stewart K.P. Gross

               /s/ C. SAMANTHA CHEN                  Director                              September 9, 1999
---------------------------------------------------
                 C. Samantha Chen

                /s/ JAMES ADKISSON                   Director                              September 9, 1999
---------------------------------------------------
                  James Adkisson

            /s/ WILLIAM T. COLEMAN III               Director                              September 9, 1999
---------------------------------------------------
              William T. Coleman III
</TABLE>

                                      II-4
<PAGE>   82

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
  NO.                               EXHIBIT
-------                             -------
<C>       <S>
 1.01*    Form of Underwriting Agreement.
 3.01     Amended and Restated Certificate of Incorporation of
          SkillSoft.
 3.02*    Form of Certificate of Amendment to Certificate of
          Incorporation of SkillSoft (to be filed prior to closing of
          the public offering).
 3.03*    Form of Amended and Restated Certificate of Incorporation of
          SkillSoft (to be filed following the closing of this public
          offering).
 3.04*    By-Laws of SkillSoft.
 4.01*    Specimen Certificate for shares of SkillSoft's Common Stock.
 5.01*    Legal Opinion of Hale and Dorr LLP.
10.01     1998 Stock Incentive Plan, as amended.
10.02*    1999 Non-Employee Director Stock Option Plan.
10.03     Employment Agreement between SkillSoft and Charles E. Moran
10.04     Security Agreement and Secured Promissory Note between
          SkillSoft and Charles E. Moran, each dated December 10,
          1997.
10.05     Employment Agreement dated January 12, 1998 between
          SkillSoft and Mark A. Townsend.
10.06     Employment Agreement dated February 2, 1998 between
          SkillSoft and Thomas J. McDonald.
10.07     Employment Agreement dated April 9, 1998 between SkillSoft
          and Jerald A. Nine.
10.08     Amended and Restated Registration and Investor Rights
          Agreement dated August 5, 1999 between SkillSoft and the
          Investors named therein.
21.01     Subsidiaries.
23.01*    Consent of Hale and Dorr LLP (included in Exhibit 5.01).
23.02     Consent of Arthur Andersen LLP.
24.01     Power of Attorney (included on Page II-4).
27.01     Financial Data Schedule.
27.02     Financial Data Schedule.
27.03     Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.
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1

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1999

                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1

            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            ------------------------

                             SKILLSOFT CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE                             7372                            02-0496115
 (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)      CLASSIFICATION CODE NUMBER)           IDENTIFICATION NUMBER)
------------------------

                             SKILLSOFT CORPORATION

                            20 INDUSTRIAL PARK DRIVE
                          NASHUA, NEW HAMPSHIRE 03062
                                 (603) 324-3000
         (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
            AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                CHARLES E. MORAN

                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            20 INDUSTRIAL PARK DRIVE
                          NASHUA, NEW HAMPSHIRE 03062
                                 (603) 324-3000
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------

                                   COPIES TO:
PATRICK J. RONDEAU, ESQ.                             LAWRENCE D. LEVIN, ESQ.
                 HALE AND DORR LLP                                 KATTEN MUCHIN & ZAVIS
                  60 STATE STREET                           525 WEST MONROE STREET, SUITE 1600
            BOSTON, MASSACHUSETTS 02109                           CHICAGO, ILLINOIS 60661
             TELEPHONE: (617) 526-6000                           TELEPHONE: (312) 902-5200
             FACSIMILE: (617) 526-5000                           FACSIMILE: (312) 902-1061
------------------------

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

    If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]

    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]

    If this form is post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement of
the same offering.  [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registrations statement
of the same offering.  [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
                                                                PROPOSED MAXIMUM
                 TITLE OF EACH CLASS OF                        AGGREGATE OFFERING                AMOUNT OF
              SECURITIES TO BE REGISTERED                           PRICE(1)                  REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value...........................          $46,000,000                     $12,788
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of registration fee
    pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                 SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1999

                                               Shares

                                   SKILLSOFT

[Skillsoft Corp. LOGO]            Common Stock

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

     SkillSoft Corporation is selling shares of its common stock. Prior to this
offering, there has been no public market for the common stock. The initial
public offering price is expected to be between $          and $          per
share. We will make application to list our common stock on the Nasdaq National
Market under the symbol "SKIL."

     The underwriters have an option to purchase a maximum of
               additional shares to cover over-allotments of shares.

     INVESTING IN THIS COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.
UNDERWRITING     PROCEEDS TO
                                                    PRICE TO        DISCOUNTS AND     SKILLSOFT
                                                     PUBLIC          COMMISSIONS     CORPORATION
                                                    --------        -------------    -----------
Per Share....................................      $                 $               $
Total........................................      $                 $               $
Delivery of the shares of common stock will be made on or about
            , 1999.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON
                       BANC OF AMERICA SECURITIES LLC
                                            THOMAS WEISEL PARTNERS LLC

               The date of this prospectus is             , 1999
3

                               TABLE OF CONTENTS
PAGE
                                        ----
PROSPECTUS SUMMARY....................  1
RISK FACTORS..........................  5
SPECIAL NOTE REGARDING FORWARD-
  LOOKING STATEMENTS..................  13
USE OF PROCEEDS.......................  13
DIVIDEND POLICY.......................  13
CAPITALIZATION........................  14
DILUTION..............................  15
SELECTED FINANCIAL DATA...............  16
MANAGEMENT'S DISCUSSION AND ANALYSIS
  OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.......................  17
BUSINESS..............................  23
PAGE
                                        ----
MANAGEMENT............................  39
CERTAIN TRANSACTIONS..................  45
PRINCIPAL STOCKHOLDERS................  46
DESCRIPTION OF CAPITAL STOCK..........  48
SHARES ELIGIBLE FOR FUTURE SALE.......  50
UNDERWRITING..........................  52
NOTICE TO CANADIAN RESIDENTS..........  55
LEGAL MATTERS.........................  56
EXPERTS...............................  56
WHERE YOU CAN FIND ADDITIONAL
  INFORMATION.........................  56
INDEX TO FINANCIAL STATEMENTS.........  F-1
-------------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

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

     UNTIL                      (25 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

                                        i
4

                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the common stock. You should read the entire prospectus
carefully. Unless otherwise specified, all information in this prospectus:
assumes no exercise of the underwriters' over-allotment option; reflects the
automatic conversion into common stock of all outstanding shares of preferred
stock that will occur upon the closing of this offering; and reflects the
reclassification of all outstanding shares of Class A common stock into common
stock that will occur prior to the closing of this offering.

     We are a leading provider of Web-based training resources for Global 2000
companies that cover a variety of professional effectiveness and business topics
(commonly called "soft skills"). All of our courses and support tools have been
specifically designed to take advantage of the benefits offered by the internet
and the Web-based environments of our customers. This enables the users of our
products to access the material they need, with the specificity or breadth that
they require, anytime or anywhere that they may need it. Our customers receive
comprehensive training and support solutions for their employees, comprised of:

     - our library of 126 courses, which encompasses a wide array of
       professional effectiveness skills, such as management, leadership,
       communication, project management and customer service, as well as
       business topics such as finance, marketing, sales and strategy; and

     - our Web-based online performance support tools, such as: Search-and-Learn
       technology, which permits users to perform online searches of their
       company's entire library of SkillSoft courses for a specific training
       topic and to directly access only what they need; Online Mentoring, which
       enables users to interact via e-mail with experts on a topic from any Web
       connection; and Online Job Aids, which consist of approximately 380
       topical refreshers and worksheets that are accessible online.

     Our training resources are designed to increase the competitive strength
and productivity of organizations by improving employee performance with
immediate, universally accessible skill enhancers and job support tools. We
believe that our courses appeal to a broader range of employees than do courses
on information technology and other specialized topics, and assist in improving
employee retention by sending a positive message to employees that they are
valued. We market our courses primarily to Global 2000 companies and other large
businesses, governmental organizations and educational institutions. As of
August 31, 1999, we had 27 customers, including Adobe, Citibank, Dayton Hudson,
EMC, Ernst & Young, Fluor Daniel, GTE, IBM and National Car Rental.

     According to TRAINING magazine, domestic corporations with over 100
employees budgeted approximately $60.7 billion for training in 1998 (including
the costs of internal training). There are a number of problems that make it
increasingly difficult for traditional classroom instruction to address the
training needs of many larger corporations, such as: travel costs; scheduling
difficulties; the opportunity costs of employees' time; and the inability of
classroom instruction to deliver training at the time and place an employee most
needs it -- such as right before the employee needs to apply the skill in the
workplace. As a result, companies are increasingly utilizing technology-based
training solutions to meet the educational needs of their employees.

     To date, companies have typically relied upon CD-ROMs and other
technology-based forms of instruction to alleviate the shortcomings of
instructor-led training. We believe, however, that our
                                        1
5

Web-based training solution provides a number of significant advantages over
other technology-based training products including:

     - more flexible and cost-efficient deployment of courses, enabling users to
       access our training materials anywhere, anytime and only in the amounts
       they need;

     - online performance support tools, such as Search-and-Learn technology,
       Online Mentoring and Online Job Aids, that enable users to tailor our
       educational resources to their individual needs and pace and to obtain
       specific, real-time assistance when they need it most;

     - easier to use products that incorporate intuitive navigational concepts;

     - improved means of product and user support through Web distribution; and

     - increased ability for administrators to monitor use and effectiveness of
       courses.

     By applying new technological capabilities of the internet, such as search
engine architecture and hypertext links, we believe that our training resources
will transform corporate training from a distinct event, often off-site and
limited in scope, to a process of continuous learning and improvement that will
inherently maximize time utilization and employee effectiveness. Our courses and
support tools are developed using cross-platform technologies such as Java (a
programming language), HTML (a Web document formatting language) and JavaScript
(a scripting language). To reduce the risk of technical problems that would
limit access to our training materials, our products do not use
platform-dependent proprietary plug-in technologies. Our detailed Web-based
architecture enables users to perform intelligent searches of their company's
entire library of SkillSoft courses to identify relevant training materials on
specific topics. In addition, our products all employ advanced techniques for
compression and caching of text, graphics and audio to deliver high-quality
performance within the bandwidth limitations of most corporate intranets and the
internet.

     Our objective is to be the leading global provider of high-quality
Web-based learning and performance support products. To achieve this objective,
we are continuing to expand our library of courses and to integrate new
Web-based technologies that address the needs of our customers and make our
products easier to use and more effective. We are also increasing our domestic
sales force and developing an international sales organization, while leveraging
our blue-chip client relationships to deepen our penetration within those
companies and in the market. Finally, we are continuing to increase our reseller
network and are expanding our strategic alliances with educational institutions
to further diversify our distribution channels.

                                 OUR MANAGEMENT

     Our executive management team, led by our President and Chief Executive
Officer, Charles E. Moran, has over 70 years of combined experience in the
technology and education industries. Mr. Moran's prior experience includes
National Education Training Group (NETg), where Mr. Moran served as President
and Chief Executive Officer from 1995 through 1997 following its sale to
Harcourt General, and Softdesk, Inc., a software company where Mr. Moran served
as Chief Operating Officer and Chief Financial Officer and helped lead its
initial public offering in February 1994. Other members of our management team
have prior experience at technology-based learning and other technology
companies such as CBT Group, Compaq, NETg and Motorola.
                                        2
6

                                  OUR ADDRESS

     Our principal executive offices are located at 20 Industrial Park Drive,
Nashua, New Hampshire 03062, and our telephone number at that location is (603)
324-3000. Our Web site is located at www.skillsoft.com. We were incorporated in
Delaware in October 1997. Unless the context otherwise requires, any reference
to "SkillSoft," "we," "our," and "us" in this prospectus refers to SkillSoft
Corporation and its subsidiaries.

     SkillSoft has applied for federal registration of some of its trademarks,
including "NetPlay" and "NetUniversity." Other trademarks or service marks
appearing in this prospectus are the property of their respective holders.

                                  THE OFFERING

Common stock offered..........             shares

Common stock to be outstanding
  after the offering..........             shares

Use of proceeds...............   For general corporate purposes, including
                                 working capital. See "Use of Proceeds."

Proposed Nasdaq National
Market symbol.................   SKIL

     The number of shares of common stock to be outstanding after the offering
is based on the number of shares outstanding on September 1, 1999. This number
does not include 881,965 shares of common stock issuable upon the exercise of
stock options outstanding on September 1, 1999.
                                        3
7

                             SUMMARY FINANCIAL DATA
                                 (IN THOUSANDS)

     You should read this summary information with the discussion in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes to those statements included
elsewhere in this prospectus.
PERIOD FROM                                  SIX MONTHS ENDED
                                      INCORPORATION             YEAR ENDED              JULY 31,
                                   (OCTOBER 15, 1997)          JANUARY 31,         ------------------
                                   TO JANUARY 31, 1998             1999             1998       1999
                                -------------------------    ----------------      -------    -------
                                                                                      (UNAUDITED)
STATEMENTS OF OPERATIONS DATA:
  Revenue.....................            $  --                  $    --           $    --    $ 1,088
  Cost of revenue.............               --                       --                --        254
                                          -----                  -------           -------    -------
  Gross profit................               --                       --                --        834
  Total operating expenses....              827                    8,609             2,848      8,595
  Interest income.............                3                      336               120        119
                                          -----                  -------           -------    -------
  Net loss....................            $(824)                 $(8,273)          $(2,728)   $(7,642)
                                          =====                  =======           =======    =======
The following balance sheet table presents our balance sheet as of July 31,
1999 on an actual basis, on a pro forma basis giving effect to the conversion of
all outstanding convertible preferred stock into common stock, and on a pro
forma as adjusted basis giving effect to the sale of                shares of
common stock offered hereby at an assumed initial public offering price of
$     per share, after deducting estimated underwriting discounts and
commissions and offering expenses.
AS OF JULY 31, 1999
                                                        ------------------------------------
                                                                                  PRO FORMA
                                                        ACTUAL     PRO FORMA     AS ADJUSTED
                                                        -------    ----------    -----------
                                                                    (UNAUDITED)
BALANCE SHEETS DATA:
  Cash, cash equivalents, and short-term
     investments......................................  $   524      $  524
  Working capital.....................................      183         183
  Total assets........................................    2,558       2,558
  Long-term liabilities...............................       --          --
  Convertible preferred stock.........................   16,951          --
  Stockholders' equity................................      630         630
4
8

                                  RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL PERFORMANCE

OUR LIMITED OPERATING HISTORY MAY IMPEDE YOUR ABILITY TO EVALUATE OUR BUSINESS
AND ITS FUTURE PROSPECTS

     We commenced operations in January 1998 and commercially released our first
product in March 1999. One customer accounted for 51% of our limited revenue
through July 31, 1999. Your evaluation of the risks and uncertainties of our
business will be difficult because of our limited operating history and could
cause you to overpay for our common stock.

WE EXPECT TO INCUR SUBSTANTIAL LOSSES IN THE FUTURE AND MAY NOT BE ABLE TO
ACHIEVE OR MAINTAIN PROFITABILITY

     Since we began operations in January 1998, we have incurred losses in every
fiscal period. Our accumulated deficit through July 31, 1999 was $16,738,888. We
expect to continue to incur substantial losses through at least the fiscal year
ending January 31, 2001, and we cannot be certain if or when we will become
profitable. If we do not become profitable within the timeframe expected by
investors, the market price of our common stock may be adversely affected. We
have generated relatively small amounts of revenue while increasing expenditures
in all areas in order to develop our business. We expect to continue to incur
significant expenses, particularly in sales and marketing, in an effort to
develop our business. As a result, we will need to generate significant revenue
to achieve and maintain profitability. Even if we do achieve profitability, we
cannot assure you that we can sustain or increase profitability on a quarterly
or annual basis in the future.

WE AND SEVERAL OF OUR EXECUTIVES ARE INVOLVED IN LITIGATION WHICH MAY BE COSTLY
AND DIVERT THE EFFORTS OF OUR MANAGEMENT

     SkillSoft, several of our executives and one of our key employees are
involved in a lawsuit brought by National Education Training Group, Inc. (NETg),
the former employer of several of our executives. Named as defendants in the
lawsuit (as amended), in addition to SkillSoft, are Charles E. Moran, our
President and Chief Executive Officer, Jerald A. Nine, Jr., our Vice President,
Sales and Marketing, Mark A. Townsend, our Vice President, Product Development,
Lee A. Ritze, our Senior Director, Professional Marketing and Services, and
Warburg, Pincus Ventures, L.P., our largest investor. NETg alleges in substance
that the defendants breached their fiduciary obligations to NETg in connection
with the organization and operation of SkillSoft, misappropriated trade secrets
from NETg and intentionally interfered with NETg's business and employees. The
claims seek injunctive relief against SkillSoft and Messrs. Moran, Nine,
Townsend and Ritze demanding the return, and no future use by these defendants,
of the alleged trade secrets. The claims also seek compensatory damages in an
amount to be determined and punitive damages in excess of $10,000,000.

     SkillSoft and the other defendants are vigorously defending themselves
against those allegations, and we believe that both SkillSoft and the other
defendants have meritorious defenses to the claims made in the lawsuit. However,
the lawsuit is still in discovery and we are not yet able to assess the

                                        5
9

potential liability of SkillSoft or the other defendants. Our failure to prevail
in this litigation could significantly affect our business and financial
performance as a result of:

     - injunctive relief issued against SkillSoft and our officers, which could
       restrict our ability to conduct our business;

     - an adverse judgment against us for monetary damages;

     - a settlement on unfavorable terms; or

     - obligations we have to indemnify our employees for liabilities and
       expenses they incur in connection with the lawsuit.

     In addition, this litigation, regardless of its outcome, will continue to
result in significant expenses in defending the lawsuit and may divert the
efforts and attention of our management team from normal business operations.
See "Business -- Legal Proceedings."

OUR OPERATING RESULTS ARE DIFFICULT TO FORECAST AND MAY FLUCTUATE FROM QUARTER
TO QUARTER

     As a result of our limited operating history, we do not have sufficient
historical financial data upon which to forecast quarterly revenue and operating
results. Our quarterly operating results may fluctuate as a result of a variety
of factors, including:

     - the early stage of development of the market for Web-based education and
       training, which makes it difficult for us to predict customer demand
       accurately;

     - the fact that we depend upon a relatively small number of customers for
       our revenue, so that a delay in any particular customer order beyond a
       fiscal quarter would have a significant impact on our revenue for that
       quarter;

     - our lengthy sales cycle;

     - seasonality -- we expect our revenue and operating results will generally
       be strongest in the fourth quarter of our fiscal year and weakest in the
       first quarter; and

     - the amount of hiring we do to support the anticipated growth of our
       business.

     Most of our expenses, such as rent and most employee compensation, do not
vary directly with revenue and are difficult to adjust in the short term. As a
result, if revenue for a particular quarter is below our expectations, we could
not proportionately reduce operating expenses for that quarter. Any such revenue
shortfall would therefore have a disproportionate effect on our expected
operating results for that quarter. In addition, we expect that a
disproportionate amount of our revenue each quarter will be recognized in the
final weeks of that quarter. As a result, any delays in receiving orders or
signing contracts may defer the associated revenue to the following quarter,
which would adversely affect our operating results for that quarter. If our
quarterly revenue or operating results fall below the expectations of investors
or securities analysts, the price of our common stock could fall substantially.

OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WEB-BASED EDUCATION AND TRAINING
PRODUCTS ARE NOT WIDELY ADOPTED

     Our Web-based products represent a new and emerging approach for the
corporate soft skills education and training market. Our success depends
substantially upon the widespread adoption of Web-based products for education
and training. The failure of this market to develop, or a delay in the
development of this market -- whether due to technological, competitive or other
reasons -- would adversely affect our business and financial performance.

                                        6
10

INTENSE COMPETITION FROM OTHER EDUCATION AND TRAINING COMPANIES COULD ADVERSELY
AFFECT OUR BUSINESS AND FINANCIAL PERFORMANCE

     The market for soft skills education and training is fragmented and highly
competitive. We expect that competition in this market will increase
substantially in the future for the following reasons:

     - The expected growth of this market.

     - The low barriers to entry. In particular, we do not believe that
       proprietary technology is an important competitive factor in this market.

     - Our course content providers are often not prohibited from developing
       similar course content for other companies.

     - The fragmented nature of the competitive landscape, including many small
       competitors in the technology-based segment of the market.

     One source of competition for our products is the internal educational and
technological personnel of our potential customers. If an organization decides
to use external providers to supply some or all of its training, our principal
sources of competition are:

     - Providers of traditional classroom instruction. Many of the companies in
       this category are attempting to adapt their courses to a
       non-instructor-led format suitable for Web deployment.

     - Providers of CD-ROM training courses.

     - Suppliers of online information technology training courses that are
       attempting to take advantage of their current technology and customer
       base and expand into the soft skills market. Examples of competitors in
       this group are Harcourt General (through subsidiaries such as Drake Beam
       Morin, NETg and Knowledge Communications), CBT Group (through its
       Knowledge Well and Tarragon businesses) and McGraw Hill (through its
       Xebec subsidiary).

     There can be no assurance that we can maintain or improve our competitive
position. Many of our current and potential competitors have longer operating
histories, greater name recognition and greater financial, technical, sales,
marketing, support and other resources than we do. Increased competition may
result in lost sales and may force us to lower prices, which would adversely
affect our business and financial performance.

WE RELY ON A LIMITED NUMBER OF THIRD PARTIES TO PROVIDE US WITH EDUCATIONAL
CONTENT FOR OUR COURSES, AND THEY MAY NOT BE ABLE TO DEVELOP NEW COURSES OR
ENHANCE EXISTING COURSES ON A TIMELY BASIS

     To be competitive, we must develop and introduce on a timely basis new
course offerings which meet the needs of companies seeking to use our education
and training products. In addition, some of our courses may need to be updated
due to changes in educational doctrines or the evolving requirements of
educational institutions and certification organizations. We rely on independent
third parties to provide us with the educational content for our courses. Our
most important content provider is responsible for the development of more than
half of our courses. We do not have exclusive arrangements or long-term
contracts with any of these content providers, and some of our content providers
may compete with us. If one or more of our third-party content providers were to
stop working with us, we would have to rely on other parties to develop our
course content. We cannot predict whether new content or enhancements would be
available from reliable alternative sources on reasonable terms.

                                        7
11

LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS

     Our future success depends to a significant degree on the skills and
efforts of Charles E. Moran, our founder, Chairman of the Board, President and
Chief Executive Officer. The loss of the services of Mr. Moran could have a
material adverse effect on our business and financial performance. We also
depend on the ability of our other executive officers and members of senior
management to work effectively as a team. The loss of one or more of our
executive officers or senior management members could also have a material
adverse effect on our business and financial performance.

OUR FUTURE GROWTH DEPENDS ON SUCCESSFUL HIRING AND RETENTION, AND WE MAY BE
UNABLE TO HIRE AND RETAIN THE SKILLED PERSONNEL WE NEED TO SUCCEED

     The growth of our business and revenue depends in large part upon our
ability to attract and retain sufficient numbers of highly skilled employees,
particularly sales and marketing personnel and product development personnel.
Qualified personnel are in great demand throughout the software industry. The
demand for qualified personnel is particularly acute in the New England area due
to the large number of software companies and the low unemployment rate in the
region. Our failure to attract and retain sufficient skilled personnel may limit
the rate at which we can grow or may otherwise harm our business and financial
performance.

THE LENGTHY SALES CYCLE FOR OUR PRODUCTS MAY MAKE OUR OPERATING RESULTS
UNPREDICTABLE AND VOLATILE

     The period between our initial contact with a potential customer and the
purchase of our products by that customer typically ranges from three to 12
months. Factors which may contribute to our long sales cycle include:

     - Our need to educate potential customers about the benefits of our
       Web-based training products;

     - Competitive evaluations by customers;

     - The customers' internal budgeting and approval processes;

     - The fact that some customers view training products as discretionary
       spending, rather than purchases essential to their business; and

     - The fact that we target Global 2000 companies, which often take longer to
       make purchasing decisions due to the size and complexity of the
       enterprise.

     Our long sales cycle makes it difficult for us to predict if and when a
potential sale will actually occur. In addition, if a sale is delayed from the
quarter in which we expect it to occur, our operating results for that quarter
would be adversely affected.

OUR FINANCIAL PERFORMANCE DEPENDS IN PART ON OUR ABILITY TO DEVELOP BRAND
AWARENESS, AND WE MAY NOT BE SUCCESSFUL IN DOING SO

     We believe that developing the SkillSoft brand within the corporate
training market is critical to achieving widespread acceptance of our products.
There are a number of factors which could prevent us from successfully
developing the SkillSoft brand, including the emergence of more successful
competitors, product performance problems or customer dissatisfaction, as well
as our failure to devote sufficient resources to marketing efforts.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH

     Our failure to properly manage our recent and anticipated growth could have
a material adverse effect on the quality of our products, our ability to retain
key personnel and our business and financial

                                        8
12

performance. Our revenue increased 350% in the quarter ended July 31, 1999 from
the quarter ended April 30, 1999, the first quarter in which we generated
revenue. From January 1, 1999 to August 31, 1999, the number of our employees
increased from 45 to 87. This growth has strained, and our future growth may
continue to strain, our management, operational systems and other resources. To
manage our growth effectively, we must be able to maintain and enhance our
financial and accounting systems and controls, integrate new personnel and
manage expanded operations. There can be no assurance we will be able to do so.

OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO INTRODUCE NEW COURSES AND
TECHNOLOGIES ON A TIMELY BASIS OR IF NEW COURSES ARE UNSUCCESSFUL

     Our future success will depend significantly on whether we are able to
introduce new courses and enhance our Web-based technologies as planned. While
we have new courses and technology features scheduled for commercial launch, we
cannot assure you that we will be successful in releasing them as scheduled, or
that they will meet with market acceptance. We may not have sufficient resources
to develop the new courses and technology enhancements necessary to maintain or
improve our competitive position.

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

     Some companies may not view training products as critical to the success of
their business. If these companies experience disappointing operating results,
whether as a result of adverse economic conditions, competitive issues or other
factors, they may decrease or forego education and training expenditures before
limiting their other expenditures. As a result, our business and financial
performance may be damaged, more so than most companies, by adverse financial
conditions affecting our target customers or by a general weakening of the
economy.

WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY

     The market for Web-based education and training products is characterized
by rapidly changing technologies, frequent new product and service introductions
and evolving industry standards. The growth in the use of the Web and intense
competition in our industry exacerbate these market characteristics. Our future
success will depend on our ability to adapt to rapidly changing technologies and
customer demands by continually improving the features and performance of our
products.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS FAIL TO PERFORM
PROPERLY

     Software products such as ours may contain undetected errors, or bugs,
which result in product failures or poor product performance. Our products may
be particularly susceptible to bugs or performance degradation because of the
emerging nature of Web-based technologies and the stress that may be placed on
our products by the full deployment of our products to thousands of users.
Product performance problems could result in lost or delayed revenue, loss of
market share, failure to achieve market acceptance, diversion of development
resources or injury to our reputation, any of which could have a material
adverse effect on our business and financial performance.

WE MAY NOT BE ABLE TO GENERATE ENOUGH REVENUE FROM OUR PLANNED INTERNATIONAL
EXPANSION TO OFFSET THE COSTS ASSOCIATED WITH ESTABLISHING AND MAINTAINING
FOREIGN OPERATIONS

     A key component of our growth strategy is to expand our presence in foreign
markets. It will be costly to establish international operations, market our
products internationally and support and manage geographically dispersed
operations. Revenue from international operations is not likely to offset the
expense of establishing and maintaining these foreign operations in the
foreseeable future.

                                        9
13

OUR PLANNED INTERNATIONAL BUSINESS WILL EXPOSE US TO RISKS WE HAVE NOT HAD TO
FACE IN THE PAST

     If we are successful in establishing international operations, we will have
to confront and manage a number of risks that we have not had to address in our
U.S. operations. These risks include:

     - expenses associated with customizing products for foreign countries;

     - challenges and costs inherent in managing geographically dispersed
       operations;

     - protectionist laws and business practices that favor local competitors;

     - economic or political instability in some international markets;

     - difficulties in finding and managing local resellers;

     - multiple, conflicting and changing governmental laws and regulations; and

     - foreign currency exchange rate fluctuations.

     We cannot assure you that we will be successful in managing these risks.

FACTORS ADVERSELY AFFECTING THE USE OF THE INTERNET COULD HARM OUR BUSINESS

     Some users access our courses over the public internet. Examples include
users who access courses from their company's intranet via remote access and
employees of companies that utilize our extranet hosting services and who
therefore access courses from SkillSoft-managed servers. Any factors that
adversely affect internet usage could disrupt the ability of those users to
access our courses, which would adversely effect customer satisfaction and
therefore our business. Among the factors that could disrupt internet usage are:

     - slow access and download times;

     - security concerns;

     - network problems or service disruptions that prevent users from accessing
       an internet server; and

     - delays in, or disputes concerning, the development and adoption of
       industry-wide internet standards and protocols.

ACQUISITIONS MAY DISRUPT OUR BUSINESS OR ADVERSELY AFFECT OUR FINANCIAL
PERFORMANCE

     Although acquisitions are not currently an important component of our
business strategy, we may from time to time acquire businesses in the future. We
may be unable to integrate those businesses successfully into our own operations
or to operate those businesses profitably. Any acquisitions we may make could
result in difficulties in assimilating the technologies and personnel of the
acquired company, diversion of our management's time and attention and one-time
charges relating to the acquisition and/or ongoing amortization of acquired
goodwill and other intangible assets.

OUR BUSINESS COULD BE HURT BY FAILURES OF OUR PRODUCTS OR SYSTEMS, OR THOSE OF
OUR CUSTOMERS AND SUPPLIERS, AS A RESULT OF THE YEAR 2000 TECHNOLOGY PROBLEMS

     Many existing software and computer systems do not properly recognize dates
after December 31, 1999. This Year 2000 problem could result in system failures,
erroneous results, data corruption and disruptions of operations. We may be
affected by Year 2000 problems relating to our products, our internal systems,
the systems of our vendors and our customers' systems, any of which could have a
material adverse effect on our business and financial performance.

                                       10
14

     We believe that all of our products and our internal systems are Year 2000
compliant. However, because this is a unique problem that cannot be fully
assessed in advance of the Year 2000, it is possible that our products or our
internal systems may experience Year 2000 problems.

     We have not conducted a Year 2000 compliance review of our suppliers or
resellers. Year 2000 problems experienced by those parties could adversely
affect our business and financial performance.

     Year 2000 problems experienced by our customers and potential
customers -- whether in connection with their internal systems or in connection
with other products that operate in conjunction with our products -- could
result in delays in purchasing, or reduced resources available for purchasing,
products such as ours. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Compliance" for detailed
information on our state of readiness, potential risks and contingency plans.

WE COULD BE SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM
THIRD PARTIES

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

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE UPON THEIR COPYRIGHTS OR
PATENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION

     If any of our products violate the proprietary rights of third parties, we
may be required to reengineer our products or to obtain licenses to continue
offering our products without substantial reengineering. Any efforts to
reengineer our products or obtain licenses from third parties may not be
successful and, in any case, could substantially increase our costs and have a
material adverse effect on our business and financial performance. We do not
conduct comprehensive patent searches to determine whether the technologies used
in our products infringe upon patents held by others. In addition, product
development is inherently uncertain in a rapidly evolving technological
environment in which there may be numerous patent applications pending, many of
which are confidential when filed, with regard to similar technologies.

RISKS ASSOCIATED WITH THIS OFFERING

THE PRICE OF OUR COMMON STOCK AFTER THIS OFFERING MAY BE LOWER THAN THE PRICE
YOU PAY AND MAY BE EXTREMELY VOLATILE

     The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you pay. After this offering, an
active trading market in our stock might not develop or continue. If you
purchase shares of our common stock in this offering, you will pay a price that
was negotiated by us with the representatives of the underwriters and not a
price that was established in a competitive market. See "Underwriting" for more
information regarding how the initial public offering price was determined.

     The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly Web-related companies, have been extremely volatile and
have experienced fluctuations that have often been unrelated or disproportionate
to operating performance. These broad market fluctuations could adversely affect
the market price of our common stock.

                                       11
15

THE SIGNIFICANT CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK WILL LIMIT YOUR
ABILITY TO INFLUENCE CORPORATE ACTIONS

     Immediately following this offering, Warburg, Pincus Ventures, L.P. will
own      % of our outstanding common stock and, together with our executive
officers and directors, will beneficially own approximately      % of our
outstanding common stock. As a result, those stockholders, if they act together,
will be able to control all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying, preventing or
deterring a change in control of SkillSoft, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of
SkillSoft and might affect the market price of our common stock.

SOME PROVISIONS OF OUR CHARTER AND BY-LAWS MAY DELAY OR PREVENT TRANSACTIONS
THAT MANY STOCKHOLDERS MAY FAVOR

     Some provisions of our certificate of incorporation and by-laws may
discourage, delay or prevent a merger or acquisition that our stockholders may
consider favorable, including transactions in which stockholders might otherwise
receive a premium for their shares. Some provisions of Delaware law may also
discourage, delay or prevent someone from acquiring us or merging with us. See
"Description of Capital Stock -- Delaware Anti-Takeover Law and Certain Charter
and Bylaw Provisions" for detailed information on these provisions.

FUTURE SALES OF OUR COMMON STOCK BY EXISTING STOCKHOLDERS COULD DEPRESS THE
MARKET PRICE OF OUR COMMON STOCK

     Once a trading market develops for our common stock, many of our
stockholders will have an opportunity to sell their common stock for the first
time. Sales of a substantial number of shares of common stock in the public
market, or the threat that substantial sales might occur, could cause the market
price of the common stock to decrease significantly. These factors could also
make it difficult for us to raise additional capital by selling stock. See
"Shares Eligible for Future Sale" for further details regarding the number of
shares eligible for public sale after this offering.

WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS FROM THIS OFFERING AND MAY
NOT USE THEM IN A MANNER STOCKHOLDERS WOULD PREFER

     We have not identified specific uses for most of the proceeds from this
offering, and we will have broad discretion in how we use them. In addition, we
are unable to determine how much of the proceeds will be used for any identified
purpose because circumstances regarding our planned uses of the proceeds may
change. You will not have the opportunity to evaluate the economic, financial or
other information on which we base our decisions on how to use the proceeds. The
failure of our management to apply the funds effectively could have a material
adverse effect on our business and financial performance.

                                       12
16

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance, and are identified by terminology such as "may,"
"will," "should," "expects," "scheduled," "plans," "intends," "anticipates,"
"believes," "estimates," "potential," or "continue" or the negative of these
terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks and uncertainties. Actual events or results may
differ materially from those indicated by such forward-looking statements. In
evaluating those statements, you should consider the inherent risks and
uncertainties involved, including the risks outlined under "Risk Factors."

     Although we believe that the expectations reflected in those
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. Moreover, neither we nor any
other person assumes responsibility for updating any of those forward-looking
statements after the date of this prospectus.

                                USE OF PROCEEDS

     The net proceeds to SkillSoft from this sale of the                shares
of common stock are estimated to be approximately $          at an assumed
initial public offering price of $     per share, after deducting estimated
underwriting discounts and commissions and offering expenses payable by
SkillSoft. If the underwriters' over-allotment option is exercised in full,
SkillSoft will receive an additional $          . SkillSoft intends to use the
proceeds for general corporate purposes, including expansion of its sales and
marketing capabilities, product development, expansion of its international
operations and working capital. Pending these uses, the proceeds of this
offering will be invested in short-term, interest-bearing, investment-grade
securities, certificates of deposit or direct or guaranteed obligations of the
United States.

                                DIVIDEND POLICY

     SkillSoft has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends in the foreseeable future.
SkillSoft currently intends to retain future earnings, if any, to fund the
expansion and growth of its business. Payment of future dividends, if any, will
be at the discretion of SkillSoft's board of directors after taking into account
various factors, including SkillSoft's financial condition, operating results,
current and anticipated cash needs, plans for expansion and other factors that
the board deems relevant.

                                       13
17

                                 CAPITALIZATION

     The following table sets forth the capitalization of SkillSoft as of July
31, 1999. Our capitalization is presented:

     - on an actual basis;

     - on a pro forma basis giving effect to the automatic conversion of all
       outstanding shares of preferred stock which will occur upon the closing
       of this offering into common stock and the reclassification of all
       outstanding shares of Class A common stock into common stock; and

     - on a pro forma as adjusted basis to reflect the sale by SkillSoft of
              shares of common stock offered hereby at an assumed initial public
       offering price of $     per share, after deducting estimated underwriting
       discounts and commissions and offering expenses.

This information should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes appearing elsewhere in this
prospectus.
AS OF JULY 31, 1999
                                                  ----------------------------------------
                                                                              PRO FORMA AS
                                                   ACTUAL      PRO FORMA        ADJUSTED
                                                  --------    ------------    ------------
                                                     (IN THOUSANDS, EXCEPT SHARE DATA)
Stockholders' equity:
Convertible preferred stock, $.001 par value
  Series A -- 4,000,000 shares issued and
     outstanding actual; none issued and
     outstanding pro forma and pro forma as
     adjusted...................................  $  6,958    $         --
  Series B -- 4,761,905 shares issued and
     outstanding actual; none issued and
     outstanding pro forma and pro forma as
     adjusted...................................     9,994              --
Class A common stock, 4,106,062 issued and
  outstanding actual; none issued and
  outstanding pro forma and pro forma as
  adjusted......................................         4
Common stock, $.001 par value; none issued and
  outstanding actual; 12,867,967 shares issued
  and outstanding pro forma;        shares
  issued and outstanding pro forma as
  adjusted......................................        --              13
Additional paid-in capital......................     1,468          18,411
Deferred compensation...........................      (716)           (716)
Notes receivable from stockholders..............      (339)           (339)
Accumulated deficit.............................   (16,739)        (16,739)
                                                  --------    ------------
  Total stockholders' equity....................       630             630
                                                  --------    ------------
  Total capitalization..........................  $    630    $        630
                                                  ========    ============
14
18

                                    DILUTION

     The pro forma net tangible book value of the common stock at July 31, 1999
was $630,390, or $.05 per share. Pro forma net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of common stock outstanding after giving effect to the
conversion of all shares of preferred stock. After giving effect to the sale of
       shares of common stock offered hereby by SkillSoft at an assumed initial
public offering price of $     per share and after deducting estimated
underwriting discounts and commissions and offering expenses, SkillSoft's pro
forma net tangible book value as of July 31, 1999 would have been approximately
$          , or $     per share. This represents an immediate increase in pro
forma net tangible book value of $     per share to existing stockholders and an
immediate dilution of $     per share to new investors purchasing shares of
common stock in this offering. The following table illustrates this dilution:
Assumed initial public offering price per share.............             $
Pro forma net tangible book value per share at July 31,
  1999......................................................      .05
Increase attributable to the sale of common stock in this
  offering..................................................  $
                                                              -------
Adjusted pro forma net tangible book value per share after
  this offering.............................................
                                                                         -------
Net tangible book value dilution per share to new investors
  in this offering..........................................             $
                                                                         =======
If the underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $     per
share, the decrease in net tangible book value per share to existing
stockholders would be $     per share and the dilution to individuals who
purchase shares in this offering would be $     per share.

     The following table summarizes, as of July 31, 1999, on the pro forma basis
described above, the total number of shares purchased, the consideration paid to
SkillSoft and the average price per share paid by the existing stockholders and
by new investors purchasing shares of common stock in this offering at an
assumed initial public offering price of $     per share before deducting the
estimated underwriting discounts and commissions and offering expenses:
SHARES PURCHASED      TOTAL CONSIDERATION     AVERAGE
                                      --------------------   ---------------------     PRICE
                                        NUMBER     PERCENT     AMOUNT      PERCENT   PER SHARE
                                      ----------   -------   -----------   -------   ---------
Shares owned by existing
  stockholders......................  12,867,967         %   $17,718,562          %   $ 1.38
Shares purchased in this offering...
                                      ----------    -----    -----------   -------
          Total.....................                100.0%   $               100.0%
                                      ==========    =====    ===========   =======
These tables do not give effect to the exercise of options to purchase
common stock outstanding at July 31, 1999. At July 31, 1999, there were 816,777
shares of common stock issuable upon exercise of outstanding stock options, at a
weighted average exercise price of $.29 per share. To the extent that these
options are exercised, there will be further dilution to new investors.

                                       15
19

                            SELECTED FINANCIAL DATA

     The selected financial data set forth below should be read in conjunction
with SkillSoft's financial statements and notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," appearing elsewhere
in this prospectus. The statement of operations data for the period from
incorporation (October 15, 1997) to January 31, 1998 and for the fiscal year
ended January 31, 1999 and the balance sheet data as of January 31, 1998 and
January 31, 1999 are derived from, and are qualified by reference to, audited
financial statements included elsewhere in this prospectus. The statement of
operations data for the six months ended July 31, 1998 and 1999 and the balance
sheet data as of July 31, 1999 are derived from unaudited financial statements
of SkillSoft appearing elsewhere in this prospectus. The unaudited financial
statements have been prepared on the same basis as the audited financial
statements and, in the opinion of SkillSoft's management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The historical results
of operations are not necessarily indicative of the operating results to be
expected in the future.
PERIOD FROM
                                         INCORPORATION                        SIX MONTHS ENDED
                                      (OCTOBER 15, 1997)    YEAR ENDED            JULY 31,
                                        TO JANUARY 31,      JANUARY 31,   ------------------------
                                             1998              1999          1998         1999
                                      -------------------   -----------   ----------   -----------
                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Revenue.............................       $     --         $       --    $       --   $     1,088
Cost of revenue.....................             --                 --            --           254
                                           --------         ----------    ----------   -----------
  Gross profit......................             --                 --            --           834
Operating expenses:
  Research and development..........            178              4,117         1,224         3,743
  Selling and marketing.............             --              1,671           179         2,849
  General and administrative........            649              2,821         1,445         1,965
  Amortization of deferred
     compensation...................             --                 --            --            38
                                           --------         ----------    ----------   -----------
          Total operating
             expenses...............            827              8,609         2,848         8,595
                                           --------         ----------    ----------   -----------
Interest income.....................              3                336           120           119
                                           --------         ----------    ----------   -----------
          Net loss..................       $   (824)        $   (8,273)   $   (2,728)  $    (7,642)
                                           ========         ==========    ==========   ===========
Net loss per share:
  Basic and diluted.................       $  (0.88)        $    (2.70)   $    (1.13)  $     (1.91)
                                           ========         ==========    ==========   ===========
  Basic and diluted weighted average
     common shares outstanding......        938,241          3,062,038     2,417,569     3,994,974
                                           ========         ==========    ==========   ===========
Pro forma net loss per share:
  Pro forma basic and diluted.......                        $    (1.01)                $     (0.61)
                                                            ==========                 ===========
  Pro forma basic and diluted
     weighted average common shares
     outstanding....................                         8,170,975                  12,546,408
                                                            ==========                 ===========
AS OF JANUARY 31,
                                                          ------------------    AS OF JULY 31,
                                                           1998       1999           1999
                                                          -------    -------    --------------
                                                                     (IN THOUSANDS)
BALANCE SHEETS DATA:
Cash, cash equivalents and short-term investments.......  $7,022     $3,965         $  524
Working capital.........................................   6,319      2,726            183
Total assets............................................   7,022      4,551          2,558
Long-term liabilities...................................      --         --             --
Stockholders' equity....................................   6,319      3,195            630
16
20

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis of the financial condition and
results of operations of SkillSoft should be read in conjunction with "Selected
Financial Data" and SkillSoft's financial statements and notes appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. SkillSoft's
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, but not limited to,
those set forth under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

     We are a leading provider of Web-based training resources for Global 2000
companies that cover a variety of professional effectiveness and business
topics. We commenced operations in January 1998 and until March 1999 devoted
substantially all of our efforts to product development, establishing a course
content developer and supplier base, building a direct sales and support
organization in the United States and a business application and network
infrastructure to support future growth. Since March 1999, we have devoted
substantial resources to sales and marketing activities as well as to continued
product development, and have recorded revenue, although we are not yet
profitable. We had an accumulated deficit of $16,738,888 as of July 31, 1999. We
expect to incur additional losses through at least the fiscal year ending
January 31, 2001, due primarily to substantial increases in sales and marketing
expenditures related to expanding our direct sales organization in the United
States, Europe and Australia and to increased personnel-related costs and
expenditures for travel, advertising, public relations, recruiting and other
activities. Research and development expenses will also contribute to losses
during this period as we continue to introduce new courses. Legal costs may also
increase due to the defense of a lawsuit filed against SkillSoft and certain of
our executives by NETg.

     We derive revenue primarily from license agreements under which customers
license our courses for periods of one, two or three years. The pricing for
licenses varies based upon the number of course titles licensed by a customer,
the number of users within the customer's organization and the length of the
license agreement. For example, a three-year license for 25 courses for 5,000
users would cost approximately $106,250 per year. Our license agreements permit
customers to exchange courses, generally on the contract anniversary date.
Customers may amend the license agreements, for an additional fee, to gain
access to additional courses and/or to increase the size of the user base.

     The annual license fee for the first year is generally billed in advance
and recognized as revenue at the time of delivery of products. In the event that
the customer does not initially specify the entire set of licensed courses to be
delivered or if some licensed courses are not immediately available for
delivery, the portion of the license revenue associated with those undelivered
courses is not recognized until those courses are delivered. License fees for
subsequent years of multi-year license agreements will be generally billed and
recognized on the anniversary date of the agreement, or if the customer
exchanges courses at the renewal date, upon delivery of the exchanged courses.
Revenue is recognized ratably over the license period if the customer is given
unlimited exchange privileges, exercisable other than on the contract
anniversaries, or if the customer licenses all courses currently available and
to be developed during a particular term. This license approach enables us to
build a backlog of future revenue streams. We also derive revenue from optional
complementary services such as extranet hosting and mentoring services, which
have been minimal to date. We may offer payment terms up to six months from the
initial shipment date or anniversary date for multi-year agreements.

     Our backlog at any given time represents the amount of license fees which
are due to us under existing license agreements but which have not yet been
recognized as revenue. This amount is comprised of license fees attributable to
licensed courses that have not yet been selected by the

                                       17
21

customer or delivered by us and to future years of non-cancellable multi-year
license agreements. Our backlog as of July 31, 1999 was approximately
$2,200,000. Our backlog can vary based upon a number of factors, including the
timing of the execution of new license agreements, the timing of product
deliveries and the length of our license agreements. In particular, if customer
or competitive pressures cause us to change our business model from multi-year
license agreements to one-year license agreements, our backlog (although not
necessarily our revenue) would decrease. In addition, although we expect to
develop all licensed courses, and although our license agreements generally may
not be canceled by our customers unless we breach the agreement, there can be no
assurance that all of our backlog will be ultimately recognized as revenue.
Accordingly, our backlog as of any particular date should not be relied upon as
an indication of our actual revenue for any future period.

     Cost of revenue includes the cost of materials (such as CD-ROM media),
packaging, duplication, custom library CD production, internet hosting services,
the cost of Online Mentoring services and certain infrastructure and occupancy
expenses. In the future, cost of revenue is expected to include content
royalties, although we intend to minimize the use of such arrangements. These
costs of revenue are generally recognized as incurred. Research and development
expenses consist primarily of salaries and benefits, certain infrastructure and
occupancy expenses, fees to consultants and course content development fees.
Software development costs are accounted for in accordance with SFAS No. 86,
which requires the capitalization of certain computer software development costs
incurred after technological feasibility is established. To date, development
costs after establishment of technological feasibility have been immaterial, and
all software development costs have been expensed as incurred. Selling and
marketing expenses consist primarily of salaries, commissions and benefits,
advertising and promotion, travel and certain infrastructure and occupancy
expenses. General and administrative expenses consist primarily of salaries and
benefits, consulting and service expenses, legal expenses and certain
infrastructure and occupancy expenses.

     We recorded deferred compensation of $754,156 in the six months ended July
31, 1999, representing the difference between the exercise price of stock
options granted and the sale price of restricted common stock and the fair
market value of the underlying common stock at the date of grant. No such
deferred compensation was recorded for the fiscal year ended January 31, 1999.
The difference is recorded as a reduction of stockholders' equity and is being
amortized over the vesting period of the applicable options and restricted
common stock, which is typically four years. Of the total deferred compensation
amount, $38,345 had been amortized as of July 31, 1999. The amortization of
deferred compensation is recorded as an operating expense. We currently expect
to amortize the remaining $715,811 of deferred compensation as of July 31, 1999
in the periods indicated, as follows:
August 1, 1999 - January 31, 2000...........................  $ 97,276
February 1, 2000 - January 31, 2001.........................  $194,552
February 1, 2001 - January 31, 2002.........................  $194,552
February 1, 2002 - January 31, 2003.........................  $171,504
February 1, 2003 - January 31, 2004.........................  $ 57,927
                                                              --------
                                                              $715,811
                                                              ========
RESULTS OF OPERATIONS

SIX MONTHS ENDED JULY 31, 1999 VERSUS SIX MONTHS ENDED JULY 31, 1998

     Revenue for the six months ended July 31, 1999 was $1,088,224, as compared
to no revenue for the six months ended July 31, 1998, insofar as we did not
begin recognizing revenue until

                                       18
22

March 1999. This revenue was derived from customer license agreements closed and
products shipped under those agreements during the six months ended July 31,
1999.

     Cost of revenue was $254,455, or 23% of revenue, for the six months ended
July 31, 1999, as compared to $0 for the six months ended July 31, 1998.

     Research and development expenses were $3,743,121 for the six months ended
July 31, 1999, as compared to $1,224,356 for the six months ended July 31, 1998.
This increase was primarily due to increased personnel and course development
costs. We believe that a significant investment in research and development is
necessary to remain competitive, and we therefore expect research and
development expenses to continue to increase.

     Selling and marketing expenses were $2,849,386 for the six months ended
July 31, 1999, as compared to $178,585 for the six months ended July 31, 1998.
This increase was primarily due to increased personnel, commissions, marketing
and travel costs. We believe that a significant investment in selling and
marketing to expand our distribution channel worldwide is required to remain
competitive, and we therefore expect selling and marketing expenses to continue
to increase.

     General and administrative expenses were $1,964,517 for the six months
ended July 31, 1999, as compared to $1,444,876 for the six months ended July 31,
1998. This increase was primarily due to increased personnel costs and legal
fees incurred in connection with the NETg lawsuit. We anticipate that general
and administrative expense will increase due to increases in headcount in
management information services and accounting, additional expenses associated
with operating as a public company and the legal fees relating to the NETg
lawsuit.

     Interest income was consistent from period to period and totalled $119,686
for the six months ended July 31, 1999, as compared to $120,308 for the six
months ended July 31, 1998.

YEAR ENDED JANUARY 31, 1999 VERSUS PERIOD FROM INCORPORATION (OCTOBER 15, 1997)
TO JANUARY 31, 1998

     We commenced operations in January 1998 and had no revenue until March
1999. We did not incur significant operating expenses during the period ended
January 31, 1998.

     Research and development expenses were $4,117,187 for the year ended
January 31, 1999. We had 18 research and development personnel and had not yet
completed development of any courses as of January 31, 1999.

     Selling and marketing expenses were $1,671,225 for the year ended January
31, 1999. We had 36 selling and marketing personnel as of January 31, 1999.

     General and administrative expenses were $2,820,646 for the year ended
January 31, 1999. We had nine general and administrative personnel as of January
31, 1999.

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QUARTERLY OPERATING RESULTS
QUARTER ENDED
                                                 -------------------------------
                                                 APRIL 30, 1999    JULY 31, 1999
                                                 --------------    -------------
Revenue........................................   $   197,822       $   890,402
Cost of revenue................................       126,779           127,676
                                                  -----------       -----------
  Gross profit.................................        71,043           762,726
                                                  -----------       -----------
Operating expenses:
  Research and development.....................     1,917,181         1,825,940
  Selling and marketing........................     1,281,092         1,568,294
  General and administrative...................     1,063,685           900,832
  Amortization of deferred compensation........         9,874            28,471
                                                  -----------       -----------
  Total operating expenses.....................   $ 4,271,832       $ 4,323,537
                                                  -----------       -----------
Interest income................................        64,478            55,208
                                                  -----------       -----------
     Net loss..................................   $(4,136,311)      $(3,505,603)
                                                  ===========       ===========
Revenue increased from $197,822 for the quarter ended April 30, 1999 to
$890,402 for the quarter ended July 31, 1999, due primarily to 13 new customers.
Research and development expenses decreased from $1,917,181 for the quarter
ended April 30, 1999 to $1,825,940 for the quarter ended July 31, 1999,
primarily as a result of a reduction in the use of outside contractors and lower
recruiting expenses. General and administrative expenses decreased from
$1,063,685 for the quarter ended April 30, 1999 to $900,832 for the quarter
ended July 31, 1999 due primarily to lower legal fees incurred in connection
with the NETg lawsuit. Interest income decreased from $64,478 for the quarter
ended April 30, 1999 to $55,208 for the quarter ended July 31, 1999, due to
lower cash balances.

     As a result of our limited operating history, we do not have sufficient
historical financial data upon which to forecast quarterly revenue and operating
results. Our quarterly operating results may fluctuate as a result of a variety
of factors. Please see "Risk Factors -- Our operating results are difficult to
forecast and may fluctuate from quarter to quarter" for a detailed description
of the factors that may affect our operating results.

LIQUIDITY AND CAPITAL RESOURCES

     From inception, we have been funded primarily through preferred stock
financings with Warburg Pincus and other minority investors. The net proceeds
from these financings through July 31, 1999 were approximately $16,951,435. In
addition, we raised approximately $3,761,000 of net proceeds from a preferred
stock financing in August 1999.

     We have a revolving line of credit with GreyRock Capital. The line of
credit permits borrowings of up to the lesser of $5,000,000 or the sum of 80% of
eligible accounts receivable and $1,000,000. Borrowings are secured by all of
our assets and bear interest at an annual rate of 4.875% over LIBOR. This
agreement expires on June 30, 2000 but is automatically renewable for additional
one-year terms. There are no outstanding borrowings under this line of credit.

     Capital expenditures from inception through July 31, 1999 were $627,683.
These expenditures related primarily to the corporate office server network,
furniture and fixtures and the office telephone system.

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24

     We had cash, cash equivalents and short-term investments totalling $524,002
as of July 31, 1999 and $2,619,707 as of August 31, 1999. We believe that the
net proceeds of this offering, together with our current cash, cash equivalents
and short-term investments and our credit facility with GreyRock Capital, will
be sufficient to satisfy our funding needs for at least the next 18 months.

YEAR 2000 COMPLIANCE

     The Year 2000 issue refers generally to the problems that some software and
computer systems may have in determining the correct century for the years after
1999. For example, software and computer systems with date-sensitive functions
that are not Year 2000 compliant may not be able to distinguish whether "00"
means 1900 or 2000, which may result in system failures or erroneous results.

     We have defined "Year 2000 compliant" as the ability to:

     - correctly handle date information after December 31, 1999;

     - function according to the product documentation provided for this date
       change, without changes in operation resulting from the advent of a new
       century, assuming correct configuration;

     - where appropriate, respond to two-digit date input in a way that resolves
       the ambiguity as to century in a disclosed, defined, and predetermined
       manner;

     - if the date elements in interfaces and data storage specify the century,
       store and provide output of date information in ways that are unambiguous
       as to century; and

     - recognize the year 2000 as a leap year.

     We believe that we have four general areas of potential exposure with
respect to the Year 2000 problem:

     - Our own products;

     - Our internal information systems and equipment-related systems;

     - The effects of compliance efforts of our suppliers, resellers and other
       third parties; and

     - Year 2000 problems experienced by our customers.

     All of our current courses and software products are Year 2000 compliant.
Our courses are presented through the medium of Web browsers. Date information
is supplied to our programs by the Web browser and the user's operating system.
If the Web browser and the operating system are Year 2000 compliant and pass
correct, unambiguous date information to our software, we believe that our
software will process it correctly.

     Since we began our business in January 1998, we have implemented and will
continue to implement enterprise-wide business software. This software is
represented by its vendors as being fully Year 2000 compliant. We have completed
our assessment of all critical business systems, and have found that where
software updates are required, they have been provided by the vendors and will
be installed and tested by the middle of October 1999. Because we purchased all
software and hardware we use during 1998 and 1999, we do not believe there will
be any material problems or costs relating to such software or hardware
associated with the Year 2000 problem.

     The third aspect of our Year 2000 compliance analysis involves evaluating
the Year 2000 efforts of third parties, including suppliers, resellers and
producers of software which interact with our programs. To date, we have not
conducted a Year 2000 compliance review of our suppliers or resellers. We are
currently evaluating the need to conduct a complete review of our suppliers' and

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resellers' Year 2000 compliance issues. We are currently focusing all our Year
2000 efforts on our products and our internal business systems' Year 2000
readiness. If a supplier or reseller experiences a material Year 2000 compliance
problem, we plan to change suppliers and resellers. We cannot assure you that we
will be successful in finding alternatives and that our business will not incur
significant supplier transfer costs as well as lost revenue from our resellers.
With respect to third-party software which interacts with our programs, we have
identified several databases, Web servers and Web browsers which are Year 2000
compliant. If some of our customers do not use our programs with one of these
systems, it is possible that they may experience difficulties related to
third-party software, which may affect the performance of our products and lead
to adverse results such as an unusually high number of calls to our technical
support department or other unusual requests for information or assistance.
Responding to these requests may divert resources from pursuing our business
strategy. Furthermore, failure of third-party software or products used with our
products may reduce the value of our products, decrease or delay revenues,
tarnish our brand, give rise to breach of warranty claims or divert resources,
any of which could materially adversely affect our business, results of
operations and financial condition.

     We have not evaluated and are not able to evaluate our customers' Year 2000
compliance strategies that might impact our business, such as an intranet
"lockdown" by any such customer, which could delay sales cycles or cause delays
in evaluations or decisions requiring the customer access to their intranet. Any
lockdowns could materially impact our revenue expectations during the periods in
which they occur.

     We currently anticipate that the Year 2000 problem, insofar as it relates
to our products and internal systems, will not have a material adverse effect on
our financial position or results of our operations. We can give no assurance,
however, that the systems of other companies or government entities, on which we
rely for supplies, payments and future business, will be Year 2000 compliant or
that a failure to be Year 2000 compliant by another company or government entity
would not have a material adverse effect on our business. If third party
suppliers, service providers, resellers and customers are impacted by Year 2000
compliance problems, our business may suffer.

     Our most likely worst case Year 2000 scenario would be that products and
software from third parties fail in the Year 2000, resulting in a decreased
demand for our products and damage to our brand. In the event of a Year 2000
failure of our products or systems, we would devote resources to correct it. We
believe we will be able to respond promptly to any failures that occur. The
costs of a response and the diversion of resources, however, could have a
material adverse effect on our business, results of operation and financial
condition.

     Because our products are, and our internal systems are or are soon expected
to be, Year 2000 compliant, we have not formulated any contingency plans with
regard to Year 2000 compliance. Furthermore, we have not expended a material
amount of capital resources on Year 2000 compliance and do not anticipate future
expenditures to be material to our business, results of operations and financial
condition. We have not hired additional personnel to address Year 2000
compliance issues specifically, and we do not expect to do so.

                                       22
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                                    BUSINESS

COMPANY OVERVIEW

     We are a leading provider of Web-based training resources for Global 2000
companies that cover a variety of professional effectiveness and business topics
(commonly called soft skills). All of our courses and support tools have been
specifically designed to take advantage of the benefits offered by the internet
and the Web-based environments of our customers. This enables the users of our
products to access the material they need, with the specificity or breadth that
they require, anytime or anywhere that they may need it. Our customers receive
comprehensive training and support solutions for their employees, comprised of:

     - our library of 126 courses, which encompasses a wide array of
       professional effectiveness skills, such as management, leadership,
       communication, project management and customer service, as well as
       business topics such as finance, marketing, sales and strategy; and

     - our Web-based online performance support tools, such as: Search-and-Learn
       technology, which permits users to perform online searches of their
       company's entire library of SkillSoft courses for a specific training
       topic and to directly access only what they need; Online Mentoring, which
       enables users to interact via e-mail with experts on a topic from any Web
       connection; and Online Job Aids, which consist of approximately 380
       topical refreshers and outlines that are accessible online.

     Our Web-based training solution offers several advantages over traditional
instructor-led training, such as the elimination of travel and scheduling
difficulties and a reduction in lost employee time. In addition, we provide a
number of significant advantages over other technology-based training products,
including:

     - more flexible and cost-efficient deployment of courses, enabling users to
       access our training materials anywhere, anytime and only in the amounts
       they need;

     - online performance support tools, such as Search-and-Learn technology,
       Online Mentoring and Online Job Aids, that enable users to tailor our
       educational resources to their individual needs and pace and to obtain
       specific, real-time assistance when they need it;

     - easier to use products that incorporate intuitive navigational concepts;

     - improved means of product and user support through Web distribution; and

     - increased ability for administrators to monitor use and effectiveness of
       courses.

In addition, all of our courses are developed using our Instructional Design
model, which is based on proven concepts for performance-oriented learning and
is designed to maximize learner attention and retention through the use of rich
color and graphics, audio, behavioral modelling, role-playing and substantial
user interaction.

     Our objective is to be the leading global provider of high-quality
Web-based learning and performance support products that enable business
organizations to achieve competitive advantage through superior enterprise-wide
knowledge and skills. We market our courses primarily to Global 2000 companies
and other large businesses, governmental organizations and educational
institutions. As of August 31, 1999, we had 27 customers, including Adobe,
Citibank, Dayton Hudson, EMC, Ernst & Young, Fluor Daniel, GTE, IBM and National
Car Rental. Many of our courses have received approvals from educational
institutions and certification organizations for college degree credit,
continuing education requirements or professional certification. In addition, we
have recently established a strategic relationship with The Wharton School of
the University of Pennsylvania under which The Wharton School will contribute to
our development of a series of courses focusing on financial statements.

                                       23
27

     We are led by Charles Moran, our President and CEO, along with a team of
executives who together bring over 70 years of experience in the technology and
education industries. Our library has grown to 126 courses as of August 31,
1999, and we expect to offer more than 200 courses by the end of our fiscal
year. During the six months ended July 31, 1999, we generated $1,088,224 in
revenue and incurred a $7,641,914 net loss. Our backlog of unrecognized revenue
was approximately $2,200,000 as of July 31, 1999.

MARKET OPPORTUNITY

     The increasing acceptance of the internet coupled with the proliferation of
Web browsers at work, at home and in laptop computers have dramatically changed
many businesses and business processes, creating exciting opportunities to serve
customers better, faster and more cost-effectively. We believe that new
technological capabilities of the internet, such as search engines and hypertext
links, coupled with dramatically increased connectivity for workers, have
created an opportunity to comprehensively change the way that organizations and
their employees view and implement training and education. By providing
real-time accessibility and user-focused specificity, we believe that Web-based
training will change the training and education process from a distinct
event -- often off-site and limited in scope -- to a process of continuous
learning for employees. Given the rising needs for training in increasingly
complex working environments, we believe that a properly designed and deployed
Web-based training resource can effectively address the needs of companies
seeking a comprehensive, enterprise-wide training solution.

  The Corporate Training and Soft Skills Market

     The corporate training market is large and growing. According to TRAINING
magazine, domestic corporations with over 100 employees budgeted approximately
$60.7 billion for training in 1998 (including the costs of internal training),
compared to $48.2 billion in 1993. A significant portion of the corporate
training market is comprised of soft skills training. We believe that the growth
in corporate training in general and soft skills training in particular is being
driven by:

     - the evolution of our economy to a service-based and knowledge-based
       economy, in which the skills of the workforce often represent the most
       important corporate assets;

     - the increasing recognition by businesses that it is imperative to
       continually improve the skills of their employees in order to remain
       competitive;

     - the rapidly evolving business environment, which in turn necessitates
       continual training and education of the employee base; and

     - the increased competition in today's economy for skilled employees and
       the recognition that effective training can be used to recruit and retain
       employees.

     The corporate training market is also characterized by an increasing use of
external providers to supplement or replace internal training efforts, in order
to obtain a more comprehensive and consistent training solution than is
available internally and in order to allow businesses to focus on their core
competencies. We believe that the corporate training industry is highly
fragmented, with a large number of smaller competitors but no dominant
competitor. Many companies within this industry serve niche markets or provide a
limited range of products and services that do not adequately address the
training needs of large organizations.

  Technology-Based and Web-Based Training

     Accompanying the trend toward increased training, largely through the use
of external training providers, has been an equally powerful trend toward the
use of technology-based training. Technology-based training includes CD-ROMs,
satellite broadcasts, client/server applications --

                                       24
28

which allow personal computers, called client computers, to exchange data with
more powerful computers, called servers, shared by multiple users -- and
Web-based training. Simba Information estimates that technology-based training
accounted for 24% of the corporate training market in 1998, up from 19% in 1997.
We believe the growth in technology-based training is being driven by the
increased recognition by many companies that traditional classroom instruction
is inadequate to meet their enterprise-wide training needs. Among the problems
of classroom instruction that can be addressed by traditional technology-based
training solutions such as CD-ROMs, satellite broadcasts and client/server
applications are travel costs, scheduling difficulties and the opportunity costs
of employees' time.

     However, traditional technology-based training addresses only some of the
shortcomings of classroom instruction. We believe that Web-based training
products can dramatically alter the manner in which courses are deployed and
used and can provide a number of significant advantages over traditional
instructor-based and technology-based training. Web-based training products can
be deployed more flexibly and cost-effectively, enabling users to access the
material they need anytime or anywhere that they may need it in the exact amount
they demand. In addition, Web-based training products enable self-directed
learning, which refers to a training process in which individuals initiate their
own training, customize it to their own needs, and master material at their own
pace. Other advantages of Web-based training products are ease of use, improved
means of product and user support, and enhanced administrative capabilities. We
believe that a Web-based training solution, when properly designed and deployed,
can provide a comprehensive, enterprise-wide training solution that is more
flexible, effective and cost-efficient than classroom instruction and
traditional technology-based training. International Data Corporation estimates
that the Web-based component of information technology training will grow at an
85% compound annual rate from 1997 to 2002, and we believe that Web-based soft
skills training will also experience rapid growth.

THE SKILLSOFT ADVANTAGE

     We address the enterprise-wide training needs of business organizations by
providing Web-based training resources that cover a variety of professional
effectiveness and business topics. We believe our courses and support tools
offer the following advantages:

  Comprehensive Offering of High-Quality Products

     We believe that a key advantage we offer our customers is the comprehensive
range of our training solutions. Our courses cover a wide range of professional
effectiveness and business expertise subjects, and we believe that our 126
courses, as of August 31, 1999, represent the largest number of consistently
designed, Web-deployable courses in the soft skills training industry. By
January 31, 2000, we expect to have over 200 courses in our library. We believe
that our courses appeal to a broader range of employees within an organization
than do courses on information technology and other specialized topics. In
addition, our courses are designed to be utilized without customization across a
wide range of industries, including technology, financial services,
telecommunications and manufacturing. See "-- Products."

  Web-Based Performance Support

     Our Web-based architecture and deployment strategy enables us to provide a
number of Web-enabled features designed to continuously support users in their
working environment, providing immediate, focused training solutions to improve
employee effectiveness. Our Web-based performance support tools provide
anywhere, anytime accessibility to the thousands of topical lessons available in
our course library, as well as task-related refreshers and online feedback from
experts -- all at the level of detail specified by the user. Our
Search-and-Learn technology permits users to perform keyword-based, intelligent
searches for topics across their company's entire library of licensed
                                       25
29

SkillSoft courses, in the same manner as one would use an internet search
engine. We also offer Online Mentoring, which enables a user to ask questions
relating to course materials or subject matter and receive e-mail responses from
experts in the field. See "-- Products -- Web-Based Performance Support."

[PICTURE OF JOB AID]

  State-of-the-Art Web-Based Deployment Strategy

     All of our courses are developed and deployed through an architecture built
entirely on new Web technologies and standards. We believe that our Web-based
architecture offers a number of advantages over conventional instructor-led
training as well as other technology-based training media, including:

     - More effective deployment -- Users of our courses can access them via a
       Web browser while at work, at home or while travelling, and can access
       them whenever they desire. Our courses can be accessed online through
       intranets or remotely through the internet, and may be downloaded -- in
       whole or in part -- for localized playing on laptops or other independent
       computers. Our deployment technologies are fully scalable to address the
       expanding training needs of large organizations.

     - Advanced Web technologies -- Our products incorporate emerging Web
       technologies that we believe substantially improve product performance.
       For example, by designing our products using cross-platform technologies
       such as Java (a programming language), HTML (a Web document formatting
       language) and JavaScript (a scripting language), our users avoid the need
       for proprietary plug-in technologies, which reduces the risk of technical
       problems and enhances network security. In addition, our products employ
       advanced techniques for compression and caching of text, graphics and
       audio to deliver high-quality performance within the bandwidth
       limitations of most corporate intranets.

     - Easier updating -- Because our courses generally reside on a centralized
       server accessible by users connected to the network -- rather than
       distributed on personal computers throughout the organization or on
       multiple CD-ROMs -- updating or adding courses can be done more quickly
       and cost-effectively. See "-- Products -- Web-Based Deployment."

  Instructional Design Model

     All SkillSoft courses are developed using our Instructional Design model,
which is based on proven concepts for performance-oriented learning. Our
Instructional Design model draws heavily from adult learning theory and
emphasizes motivation, topic relevance, self-management, problem solving,
mastery learning and role-playing. Users work at their own pace, learn by
observing and modeling the actions and attitudes of others, and take tests to
assess their mastery of the selected skills. The learner remains actively
engaged through interactive instruction, practice, reinforcement and feedback.
We believe that our consistent use of this model in designing our courses not
only improves the efficacy of our courses, but also makes the development of
additional courses more efficient. See "-- Products -- The SkillSoft
Instructional Design Model."

  Customer-Focused Approach

     We strive to maintain a customer-focused approach throughout all aspects of
our organization that is aimed at making it easy and productive for our
customers to do business with us. Our application engineers work with our
customers to help ensure optimal performance of our products on the customer's
network. We maintain an Advisory Board, which is comprised of senior executives
of several of our customers who meet with us two or three times per year to
discuss ways to improve

                                       26
30

our products. We also plan to introduce a broader Client Advisory Forum to
encourage direct customer input on our products, services and marketing plans. A
key component of our management philosophy is to enable all of our employees to
acquire SkillSoft common stock. We believe that this helps instill a "co-owner"
mindset in our employees and encourages a focus on customer satisfaction,
customer responsiveness, high-quality work, innovation, integrity, respect for
all our business partners and teamwork.

  Experienced and Proven Management Team

     Our executive management team, led by our President and Chief Executive
Officer, Charles E. Moran, has over 70 years of combined experience in the
technology and education industries. Mr. Moran's prior experience includes
National Education Training Group (NETg), where Mr. Moran served as President
and Chief Executive Officer from 1995 through 1997 following its sale to
Harcourt General, and Softdesk, Inc., a software company where Mr. Moran served
as Chief Operating Officer and Chief Financial Officer and helped lead its
initial public offering in February 1994. Other members of our management team
have prior experience at technology-based learning and other technology
companies such as CBT Group, Compaq, NETg and Motorola. We believe that our
management team and board of directors has proven itself to be exceptionally
skilled at responding quickly and effectively to changing market conditions,
which is especially important for technology-based companies offering Web-based
products or services. See "Management -- Executive Officers, Directors and Other
Key Employees."

SKILLSOFT GROWTH STRATEGY

     Our objective is to be the leading global provider of high-quality
Web-based learning and performance support products that enable business
organizations to achieve competitive advantage through superior enterprise-wide
knowledge and skills. To achieve this objective, we are pursuing the following
strategies:

  Expand Library of Courses

     We plan to expand our library of courses to provide an even more
comprehensive educational solution for our customers. Our goal is to increase
the number of courses we offer from 126 as of August 31, 1999 to more than 200
by January 31, 2000, and to add over 200 new courses per year for the next
several years. We believe that continuing to expand and update our library will
both enhance our appeal to a greater number of customers within our target
market and generate additional revenue from existing customers through increases
in the number of licensed courses and/or licensed users within the organization.
In addition to introducing new courses within our current educational topics, we
are considering the development of courses specifically targeted at certain
industries, such as e-commerce, healthcare and financial services.

  Enhance Web-Based Technologies

     We believe that developing new technologies and incorporating emerging Web
technologies and standards will enable us to continue to increase our appeal to
a broader base of customers. We are focused on developing and incorporating new
technologies that address the needs of our customers and make our products
easier to use and more effective, which we believe will generate increased
revenue from both existing and new customers. Among the projects we have
targeted are:

     - enhancing our Web-based performance support tools, including increasing
       the number of our Online Job Aids from approximately 380 as of August 31,
       1999 to our goal of over 700 by January 31, 2000;

     - extending the interoperability of our courses with third-party learning
       management software;

                                       27
31

     - developing interfaces between administrative tools and third-party human
       resource database software;

     - continuing to improve course start-up times when used over low-speed
       network connections; and

     - developing new role play simulations and other interactive instructional
       features.

  Increase Domestic and International Sales and Marketing Efforts

     We will continue to expand our direct sales force by hiring experienced
professionals with existing relationships in the Global 2000 market. We
currently have 31 sales professionals as well as one person focusing on
strategic relationships with educational institutions. We intend to continue to
aggressively expand our sales and marketing efforts by hiring additional
professionals to increase penetration of our target market of the largest 2000
companies around the world.

     In addition to our domestic sales efforts, we also intend to expand into
selected international markets. To date, substantially all of our revenue has
been generated within the United States. We recently opened an office in the
United Kingdom, which will serve as the hub of our international operations, and
we plan to open an office in Australia by January 31, 2000. Although we expect
to employ a direct sales force in the United Kingdom and Australia, our strategy
is to address other international markets -- such as continental Europe and the
Far East -- primarily through resellers, with the goal of penetrating
English-speaking markets in those areas. We are in the process of developing a
version of some of our courses for use in the United Kingdom and other English-
speaking markets (such as Australia and South Africa) that is modified based on
the style of English spoken and local business customs in those markets.

  Leverage and Expand Blue-Chip Client Relationships

     We have secured multiple-year contracts with a number of blue-chip
companies in our target market. Our customers currently include Adobe, Citibank,
Dayton Hudson, EMC, Ernst & Young, Fluor Daniel, GTE, IBM and National Car
Rental. We believe that we have achieved this success both because of the high
quality of our product offerings and the relationships developed by our
executive officers and sales personnel with key decision-makers within these
organizations. We believe that those customer relationships provide us with
significant credibility in establishing ourselves as a leader in our market, and
we intend to use those relationships in marketing our products to other
potential customers. In addition, we plan to leverage our initial contacts and
success within specific departments of an organization, such as human resources
or sales, in seeking to increase the number of both licensed courses and
licensed users within other departments of that organization.

  Expand Strategic Alliances

     Our strategic partners are critical to our success because they permit us
to leverage our internal competencies with their expertise in complementary
areas. We have established strategic relationships with a number of resellers of
our products, including Asymetrix, KnowledgeSoft, Syscom and FirstClass Systems.
We have established and are developing reseller arrangements with internet
commerce sites focused on training and education, such as Headlight.com and
Fatbrain.com, and plan to develop reseller arrangements with internet portals
such as AltaVista. As of August 31, 1999, we had signed reseller agreements with
23 companies, and we plan to increase our reseller network significantly over
the next year.

     In addition, our courses have received approvals from a number of
educational institutions and certification organizations for college degree
credit, continuing education requirements or professional certification. Many of
our courses are approved by the University of Phoenix for college degree credit,

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and all of our courses are approved by George Mason University for continuing
education credit. We expect that our courses will be approved by additional
educational institutions for degree credit and continuing education credit in
the future. Some of our sales and marketing courses are expected to be approved
later this year as study materials for new ISO certifications relating to sales
and marketing personnel, and we intend to develop additional business expertise
courses that adhere to the certification standards of other professional
certification organizations, such as the Project Management Institute and the
National Association of State Boards of Accountancy. In addition, we have
recently established a strategic relationship with The Wharton School of the
University of Pennsylvania under which The Wharton School will contribute to our
development of a series of courses focusing on financial statements.

PRODUCTS

  Courses

     Our comprehensive library of Web-based courses encompasses a wide array of
professional effectiveness skills and business topics. We offered 126 courses as
of August 31, 1999. Our courses are currently divided into two categories:
Professional Effectiveness and Business Expertise. Within these categories, we
offer courses on the following curricula:
PROFESSIONAL EFFECTIVENESS   BUSINESS EXPERTISE
--------------------------  --------------------
Management                  Finance
Leadership                  Marketing
Team Building               Sales
Communication               Strategic Planning
Personal Development        Human Resources
Customer Service            Knowledge Management
Project Management          Operations
Each of these curricula includes a number of series of courses. For
example, within the Project Management curriculum are series entitled
"Professional Project Management," "Advanced Risk Assessment for Project
Management" and "Advanced Project Scope, Time and Cost Management." Each series
is in turn comprised of three to eight individual courses, which are generally
two to three hours in length. Courses cover a number of different lessons, and
each lesson encompasses a number of different topics. All of our courses are
organized in a modular format, allowing users to take the entire course, or only
those portions of it that are relevant to them.

     Our courses are currently available in English. We are in the process of
developing a localized version of some of our courses for use in the United
Kingdom and other English-speaking markets (such as Australia and South Africa).

  The SkillSoft Instructional Design Model

     All SkillSoft courses are developed using our Instructional Design model,
which is based on proven concepts for performance-oriented learning. Our
Instructional Design model draws heavily from adult learning theory and
emphasizes motivation, topic relevance, self-management, problem solving,
mastery learning and role-playing. We believe that our consistent use of this
model in designing our courses not only improves the efficacy of our courses,
but also makes the development of additional courses more efficient.

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     The key components of our Instructional Design model are:

     - Consistent, intuitive graphical user interface -- Our courses employ a
       graphical user interface, consistent across all of our courses, that
       emphasizes simplicity and clarity to help ensure that employees can take
       our courses with minimal assistance. Our graphical user interface
       incorporates intuitive navigational concepts and makes rich use of color,
       illustrations and photographs.

     - Variety of instructional media -- Our courses all include audio
       instruction, which can increase attention and retention for many users.
       Audio is especially important for our behavior modeling and RolePlay
       simulations. Our courses also incorporate photographs, charts and other
       graphics where appropriate to support and clarify the instruction and
       focus attention on key training points.

     - Practice and interaction -- Our courses engage users by requiring them to
       perform practice exercises and providing them with feedback on their
       performance. Our courses also include self-evaluation strategies that
       engage the learner with the course content on a more individualized
       level.

     - Integrated assessment strategy -- Our testing strategy includes both
       pre-assessment and post-assessment components. Pre-assessment features
       are placed at the beginning of each lesson and are designed to quickly
       identify the content the learner already knows. Post-assessment, or
       mastery, occurs at the end of each lesson and evaluates the learner's
       mastery of the objectives after instruction.

     - Behavior modeling -- We believe that observing and modeling the
       behaviors, skills and attitudes of others is a key ingredient in learning
       soft skills such as leadership and customer service. Our courses present
       examples, or "models," of behaviors and then ask users to rehearse these
       new behaviors through practice exercises and case studies.

     - RolePlay simulations -- Our innovative RolePlay feature, which we
       incorporate into some courses where behavioral practice is particularly
       relevant, presents users with realistic interactive simulations of
       everyday workplace situations. Each simulation has multiple possible
       outcomes, depending upon the user's responses.

     - Accelerated Path -- This feature enables users of our courses to create
       an individualized learning sequence through the course content based on
       their demonstrated mastery of topic objectives. This helps ensure that
       users do not spend time on topics for which they do not need training.

     - Performance-oriented instruction -- Our courses focus on achieving
       defined outcomes that are stated in terms of cognitive and affective
       objectives. Instructional strategies are chosen to support achievement of
       those objectives and assessments are used to evaluate learner achievement
       of those objectives.

  Web-Based Performance Support

     Our products include a number of Web-enabled features to support users in
their learning. Examples include:

     - Search-and-Learn technology, which adapts the concept of Web search
       engines to our training resources. Using Search-and-Learn technology,
       users can perform keyword-based, intelligent searches covering their
       company's entire library of licensed SkillSoft courses. Our software
       presents them with a list of the specific courses and topics that match
       their identified training needs, enabling them to directly access that
       information -- when and where they need it. This

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       intelligent search capability is designed to locate the relevant sections
       of course content rather than every mention of the word in any course.

     - Online Job Aids, which are primers or sample documents that are
       accessible online and can be used both to supplement the basic course
       content or as "refresher" materials. Our customers can easily modify our
       Online Job Aids using word processors and HTML editors to customize them
       to meet the specific needs of the customer or its employees.

     - Online Mentoring, which enables a user to ask questions relating to
       either the course materials or the general subject matter of the course
       and receive e-mail responses (generally within 24 hours) from experts in
       the field.

     - NetUniversity, which is a Web-based software application that permits
       course users to access a wide variety of learning resources over the Web
       and enables training administrators to control, monitor and generate
       reports on the use of training courses -- either ours or those of other
       vendors -- by employees throughout the enterprise.

  Web-Based Deployment

     Our products incorporate the latest Web technologies that we believe
substantially improve our product performance. Our courses and support tools are
developed using cross-platform technologies such as Java (a programming
language), HTML (a Web document formatting language) and JavaScript (a scripting
language). To reduce the risk of technical problems that would limit access to
our training materials, our products do not use platform-dependent proprietary
plug-in technologies. In addition, our products all employ advanced techniques
for compression and caching of text, graphics and audio to deliver high-quality
performance within the bandwidth limitations of most corporate intranets and the
internet. Our technology enables us to provide these advantages to all users,
not just those with the most powerful computers, quickest modems and highest
resolution monitors.

     We have created a number of different options for customers to deploy our
courses throughout their organization, which are designed to address the needs
of a customer, regardless of its network structure or the location and network
access of its employees. Users of our courses can access them via a Web browser
while at work, at home or while traveling, and can access them whenever, and for
as long as, they desire. Our deployment technologies are fully scalable to
address the expanding training needs of large organizations. Deployment options
include:

     - NetPlay, for users with browser access over a corporate intranet.

     - NetDownload, which allows users to select either an entire course, or
       desired portions of it, download it to their personal computer and take
       the course off-line.

     - NetPlay with Local Player, which permits users to download our course
       player and access the licensed library from their local computers outside
       of their corporate network. Local Player is designed to optimize delivery
       for users with slower home internet connections while also enabling those
       users to take advantage of our Web-based performance support tools.

     - CD-ROMs, for users without access to a network.

We also offer extranet hosting services for companies who prefer to have users
access our courses from SkillSoft-managed servers rather than host the courses
on their own intranet. For many customers, this option can significantly
simplify and shorten the implementation process.

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  Course Content and Development

     We develop all of our courses in cooperation with outside organizations
that provide content and assemble the courses. We generally work with three to
six outside content providers. These organizations supply the content of our
courses based upon a jointly defined outline and assemble courses using our
course development toolkit and following our Instructional Design model. The
course development process is a collaborative exercise between SkillSoft and our
outside content providers, and the development of a series of six courses
typically takes 18 to 20 weeks.

     Our course development toolkit is a key element of our business strategy.
By requiring that our content providers use our own toolkit rather than
commercially available authoring and development software, we ensure that all
our courses -- even those being developed by different content
providers -- incorporate our Instructional Design model, our "look-and-feel"
standards and the Web-based deployment features that we require in our courses.
This toolkit also enables our content providers to develop courses more quickly,
which improves our speed-to-market and lowers our course development costs.
Owning our course development toolkit technology enables us to enhance our
toolkit whenever and however we see fit as we respond to large customer
opportunities, potential competitive threats and changing market conditions.

  Product Pricing

     The pricing for our courses varies based upon the number of course titles
licensed by a customer, the number of users within the customer's organization
and the length of the license agreement (generally one, two or three years). Our
license agreements permit customers to exchange course titles, generally on the
contract anniversary date. Some of our features, such as Online Mentoring and
extranet hosting, are separately licensed for an additional fee.

SERVICES AND SUPPORT

     We offer a broad range of support and services to our customers through our
professional services organization. We believe that providing a high level of
customer service and technical support is necessary to achieve rapid product
implementation, customer satisfaction and continued revenue growth.

     Installation support.  We have application engineers available to assist
customers with the installation of our products. These engineers test the
software and courses within the customer's network to ensure that they run
successfully both on the network and at employees' computers.

     Implementation consulting.  We employ implementation consultants to assist
customers in planning and implementing their training programs. These
individuals offer expertise in establishing training success criteria, planning
internal marketing programs and communicating with course users. These
implementation consultants work in close coordination with our application
engineers and sales representatives and are an important component of our
efforts to monitor and ensure customer satisfaction.

     Technical support.  We also provide telephone support to our customers
through our technical support engineers. They are available to assist customers
seven days per week between the hours of 6:00 a.m. and midnight, Eastern time.

     Given the nature of our product offerings, these services and support do
not require significant resources. As of August 31, 1999, our professional
services organization consisted of eight persons.

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SALES AND MARKETING

     We use a multi-prong sales strategy, consisting of

     - a direct sales force for larger accounts;

     - a telesales force for smaller accounts and lead generation; and

     - resellers for mid-sized accounts and some international markets.

We believe this strategy enables us to focus our resources on the largest sales
opportunities, while simultaneously leveraging the contacts and employees of our
resellers to address opportunities that may not be cost-effective for us to
pursue directly.

     As of August 31, 1999 we employed 26 sales professionals who have
individual sales quotas. Each of our account executives reports to a regional
sales vice president who is responsible for revenue growth and expense control
for his or her area. We presently employ two regional sales vice presidents in
the United States, a Director of Channel Sales and a Vice President/Managing
Director of International Sales and Marketing, each of whom reports to our Vice
President, Worldwide Sales and Marketing. We also have a sales executive focused
exclusively on educational institutions. Our sales professionals have
backgrounds at companies such as CBT Group, NETg, Xebec, PeopleSoft and
Ziff-Davis, as well as extensive contacts at the Global 2000 companies that we
target. Our goal is to increase the number of our quota-carrying sales persons
to approximately 50 by January 31, 2000. The sales process for an initial sale
to a Global 2000 customer typically ranges from three to twelve months and often
involves a coordinated effort among a number of groups within our organization.

     We use sophisticated salesforce automation software to track each prospect
and customer through a sales cycle covering the following seven stages:
prospect, qualify, discovery, evaluation, proposal, negotiate and close. Each
step of the sales cycle has certain exit criteria that must be satisfied before
the prospect can progress to the next stage. Our senior sales executives meet
once each quarter with our regional sales vice presidents and their account
executives to assess their 90-day forecast, 120-day pipeline development and
longer term territory strategy. Our regional sales vice presidents and their
account executives typically meet weekly throughout the quarter to review
progress toward quarterly goals and longer term business objectives and for
coaching sessions.

     Our products are resold by a number of leading education technology
vendors, including Asymetrix, KnowledgeSoft, Syscom and FirstClass Systems. We
have established and are developing reseller arrangements with internet commerce
sites focused on training and education, such as Headlight.com and Fatbrain.com,
and plan to develop reseller arrangements with internet portals such as
AltaVista. As of August 31, 1999, we had signed reseller agreements with 23
companies, and we plan to increase our reseller network significantly over the
next year.

     To date, substantially all of our revenue has been generated within the
United States. We recently opened an office in the United Kingdom, which will
serve as the hub of our international operations, and we plan to open an office
in Australia by January 31, 2000. Although we expect to employ a direct sales
force in the United Kingdom and Australia, our strategy is to address other
international markets -- such as continental Europe and the Far
East -- primarily through resellers, with the goal of penetrating
English-speaking markets in those areas.

     Our marketing organization utilizes a variety of programs to support our
sales team. As of August 31, 1999, our marketing organization consisted of six
employees. Our marketing programs include:

     - telemarketing;

     - product and strategy updates with industry analysts;

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     - articles in the trade press;

     - public relations activities and speaking engagements;

     - printed promotional materials;

     - promotional materials on our Web site;

     - "roadshow" tours, seminars and trade shows; and

     - monthly online discussions, using "chat room" technology, on subjects
       such as the successful implementation of Web-based training programs.

CUSTOMERS

     We market our courses primarily to Global 2000 companies and other large
businesses, governmental organizations and educational institutions. We believe
the subject matter of our courses has appeal across a wide range of business
sectors, including technology, financial services, telecommunications and
manufacturing. The following is a partial list of our customers:
Adobe          Fluor Daniel
Avnet          Fujitsu
BEA Systems    General American Life
Citibank       GTE
Dayton-Hudson  Highmark BC/BS
Duke Energy    IBM
EMC            Kurt Salmon
Ernst & Young  National Car Rental
Finova
We have established and are developing reseller arrangements with internet
commerce sites focused on training and education and are developing reseller
arrangements with internet portals to reach markets beyond our target customer
base.

PRODUCT DEVELOPMENT

     We devote substantial resources to the development of new and innovative
technologies that increase the effectiveness of our courses and that support
emerging Web standards. Our future success will depend in part on our ability to
anticipate and respond to changes in technologies and customer demands, enhance
the technological features of our courses, and develop and introduce new course
titles.

     Our product development efforts are focused primarily on enhancing our
Web-based architecture and technologies and our Instructional Design model that
underlies the development and structure of all of our courses.

     The content for our courses is supplied by outside parties working in
cooperation with our product development personnel. The course development
process is a collaborative exercise between SkillSoft and our outside content
providers, and the development of a series of six courses typically takes 18 to
20 weeks.

     As of August 31, 1999, we had 21 employees engaged in product development
and production activities. We also utilize independent contractors for some
product development work. Our research and development expenditures for the
fiscal year ended January 31, 1999 and the six months ended

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July 31, 1999 were approximately $4,117,000 and $3,743,000, respectively. We
expect to continue to commit significant resources to research and development
in the future. To date, all research and development expenses have been expensed
as incurred.

COMPETITION

     The market for soft skills education and training products is fragmented
and highly competitive. We expect that competition in this market will increase
substantially in the future for the following reasons:

     - The expected growth of this market.

     - The low barriers to entry. In particular, we do not believe that
       proprietary technology is an important competitive factor in this market.

     - Our course content providers are often not prohibited from developing
       similar course content for other companies.

     - The fragmented nature of the competitive landscape, including many small
       competitors in the technology-based segment of the market.

     One source of competition for our products is the internal educational and
technological personnel of our potential customers. If an organization decides
to use external providers to supply some or all of its training, our principal
sources of competition are:

     - Providers of traditional classroom instruction. Many of the companies in
       this category are attempting to adapt their courses to a
       non-instructor-led format suitable for Web deployment.

     - Providers of CD-ROM training courses.

     - Suppliers of online information technology training courses that are
       attempting to take advantage of their current technology and customer
       base and expand into the soft skills market. Examples of competitors in
       this group are Harcourt General (through subsidiaries such as Drake Beam
       Morin, NETg and Knowledge Communications), CBT Group (through its
       Knowledge Well and Tarragon businesses) and McGraw Hill (through its
       Xebec subsidiary).

     We believe that the principal competitive factors in the soft skills
training market include:

     - the breadth and depth of the course content;

     - performance support and other features of the training solution;

     - adaptability, flexibility and scalability of the training products
       offered;

     - the deployment options offered to customers;

     - customer service and support;

     - price/value relationship;

     - relationships with the customer; and

     - corporate reputation.

     Although we believe that we currently compete favorably with respect to
those factors, there can be no assurance that we can maintain or improve our
competitive position. Many of our current and potential competitors have longer
operating histories, greater name recognition and greater financial, technical,
sales, marketing, support and other resources than we do. Increased competition
may result

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in lost sales and may force us to lower prices, which would adversely affect our
business and financial performance.

PROPRIETARY RIGHTS

     We do not believe that proprietary technology forms an important or
valuable part of our product offerings. We believe that the creative skills of
our personnel in developing new products and technologies, our ability to
develop and introduce new products rapidly and our responsiveness to customer
demands are more important than the availability of legal protections for
proprietary rights.

     We attempt to avoid infringing upon intellectual property and proprietary
rights of third parties in our product development efforts. However, we do not
conduct patent searches to determine whether the technology used in our products
infringes patents held by third parties. In addition, product development is
inherently uncertain in a rapidly evolving technological environment in which
there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. If our products
violate third-party proprietary rights, we could be liable for substantial
damages. In addition, we may be required to reengineer our products or seek to
obtain licenses to continue offering the products, and there can be no assurance
that those efforts would be successful.

     We currently license from third parties some technology and most course
content that we incorporate into our products. There can be no assurance that
this technology and content will continue to be available to us on commercially
reasonable terms, if at all. The loss of this technology or content could result
in delays in development and introduction of new products or product
enhancements, which could have a material adverse effect on our business and
financial performance. Moreover, we may face claims from others that the
third-party technology or content incorporated in our products violates
proprietary rights held by those claimants. We may also face claims for
indemnification from our customers resulting from infringement claims against
them based on the incorporation of third-party technology or content in our
products. Although we are generally indemnified against such claims, in some
cases the scope of that indemnification is limited. Even if we receive broad
indemnification, third party indemnitors are not always well capitalized and may
not be able to indemnify us in the event of infringement. In addition, such
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources in addition to potential product
redevelopment costs and delays, all of which could materially adversely affect
our business.

     We have trademark applications pending in the United States for some of our
trademarks, including NetPlay and NetUniversity.

EMPLOYEES

     As of August 31, 1999, we had 87 employees, of whom 42 were engaged in
sales and marketing, 8 were engaged in customer service and support, 20 were
engaged in product development, one was engaged in product production and 16
were engaged in executive management, finance and administration. None of our
employees is subject to a collective bargaining agreement. We believe that our
relations with our employees are good.

FACILITIES

     Our headquarters are located in approximately 10,000 square feet of office
space in Nashua, New Hampshire under a lease that expires in February 2001. We
also lease a sales office in the Dallas area and in the United Kingdom. We
expect to lease additional space within our headquarters building in October
1999. We believe that our existing facilities are adequate to meet our current

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needs and that suitable additional or substitute space will be available on
commercially reasonable terms when needed.

LEGAL PROCEEDINGS

     SkillSoft, several of our executives, one of our key employees and our
largest investor are named as defendants in a lawsuit brought on or about May 6,
1998 in the United States District Court for the Northern District of Illinois
by National Education Training Group, Inc. (NETg), the former employer of
several of those individuals. Upon leaving the employment of NETg, and after
receiving letters from NETg expressing NETg's dissatisfaction with their
departure, these individuals filed an action on April 17, 1998 against NETg in
the Superior Court for Hillsborough County, State of New Hampshire, in which
SkillSoft and Messrs. Moran and Townsend sought a declaratory judgment that they
were free to hire NETg employees who had no enforceable post-employment covenant
not-to-compete and that they otherwise had not breached any duty to NETg. NETg
subsequently brought this lawsuit in the State of Illinois. The NETg lawsuit
alleges in substance that:

     - Charles E. Moran, as the former President of NETg, breached his fiduciary
       obligations to NETg by usurping NETg's corporate opportunities, by
       commencing a rival business while still employed by NETg and by
       soliciting NETg personnel to join his rival business while still employed
       by NETg;

     - Jerald A. Nine, as the former Vice President of Sales and Marketing of
       NETg, breached his fiduciary duty to NETg by assisting Mr. Moran in the
       creation, commencement and operation of the rival concern prior to Mr.
       Nine's resignation from NETg, by assisting Mr. Moran in the usurpation of
       corporate opportunities, by failing to inform his superiors at NETg of
       Mr. Moran's plans to form a rival business and by otherwise failing to
       use his best efforts on behalf of NETg while still employed there;

     - SkillSoft, Mr. Moran, Mr. Nine, Mark A. Townsend and Lee A. Ritze
       misappropriated trade secrets of NETg, and SkillSoft, Mr. Moran and Mr.
       Nine intentionally interfered with NETg's "prospective economic
       advantage"; and

     - Warburg, Pincus Ventures, L.P., our largest investor, intentionally
       interfered with NETg's employment relationships with "at-will" employees,
       including Mr. Townsend, by offering those employees financial incentives
       to leave NETg and join SkillSoft, engaged in unfair competition through
       that same conduct and intentionally interfered with Mr. Moran's and Mr.
       Nine's fiduciary duty to NETg.

The claims seek injunctive relief against SkillSoft and Messrs. Moran, Nine,
Townsend and Ritze demanding the return, and no future use by these defendants,
of the alleged trade secrets. The claims also seek compensatory damages in an
amount to be determined and punitive damages in excess of $10,000,000.

     None of the defendants in this lawsuit were bound by written
non-competition or non-solicitation agreements with NETg. SkillSoft and the
other defendants are vigorously defending themselves against NETg's allegations,
and we believe that both SkillSoft and the other defendants have meritorious
defenses to the claims made in the lawsuit. However, the lawsuit is still in
discovery and we are not yet able to assess the potential liability of SkillSoft
or the other defendants. Our failure to prevail in this litigation could
significantly affect our business and financial performance as a result of:

     - injunctive relief issued against SkillSoft and our officers, which could
       restrict our ability to conduct our business;

     - an adverse judgment against us for monetary damages;

     - a settlement on unfavorable terms; or

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     - obligations we have to indemnify our employees for liabilities and
       expenses they incur in connection with the lawsuit.

In addition, this litigation, regardless of its outcome, will continue to result
in significant expenses in defending the lawsuit and may divert the efforts and
attention of our management team from normal business operations.

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

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                                   MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES

   The directors and executive officers of SkillSoft are as follows:
NAME                                        AGE                       POSITION
----                                        ---                       --------
Charles E. Moran..........................  44    Chairman of the Board, President and Chief
                                                  Executive Officer
Thomas J. McDonald........................  49    Chief Financial Officer, Vice President,
                                                  Operations, Treasurer and Secretary
Mark A. Townsend..........................  46    Vice President, Product Development
Jerald A. Nine, Jr. ......................  41    Vice President, Worldwide Sales and Marketing
James Adkisson*...........................  51    Director
C. Samantha Chen*.........................  30    Director
William T. Coleman III**..................  51    Director
Stewart K.P. Gross**......................  40    Director
*  Member of the audit committee.
** Member of the compensation committee.

   Other key employees of SkillSoft include:
Dennis E. Brown...........................  47    Director of Marketing Communications
Eric W. Ertel.............................  37    Director of Software Development
David L. Eubanks..........................  42    Vice President of Western Regional Sales
Kristina E. Johnson.......................  36    Director of Creative Design
Charles E. King...........................  42    Vice President of Eastern Regional Sales
Steven A. Lichtman........................  43    Director of Channel Sales
Lee A. Ritze..............................  46    Senior Director of Marketing and Professional
                                                  Services
Sally H. Welsh............................  48    Director of Instructional Design
Kevin T. Young............................  46    Vice President/Managing Director of International
                                                  Sales and Marketing
Charles E. Moran is a founder of SkillSoft and has served as its Chairman
of the Board, President and Chief Executive Officer since January 1998. Before
founding SkillSoft, Mr. Moran served as President and Chief Executive Officer of
National Education Training Group, Inc. (NETg), a computer-based information
technology training company, from May 1995 until November 1997. From July 1994
to May 1995, Mr. Moran was an independent consultant. From October 1993 until
July 1994, Mr. Moran served as Chief Financial Officer and Chief Operating
officer of Softdesk, Inc., a developer of computer-assisted design and drafting
software. Mr. Moran is also a director of Workgroup Technology Corporation.

     Thomas J. McDonald is a founder of SkillSoft and has served as its Chief
Financial Officer and Vice President of Operations since February 1998. From
September 1994 to November 1997, Mr. McDonald served as Chief Financial Officer
and Vice President of Operations at NETg. From February 1990 to August 1994, Mr.
McDonald served as Chief Financial Officer and Vice President of Bear
Automotive. He previously held senior financial and operational positions with
SPX Corporation, U.S. Industries and Cenco, Inc.

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     Mark A. Townsend is a founder of SkillSoft and has served as its Vice
President of Product Development since January 1998. From February 1996 to
December 1997, Mr. Townsend served as Vice President of Advanced Technology at
NETg. From March 1994 until February 1996, Mr. Townsend served as Vice President
of Engineering at Sytron Corporation, a software data storage management
company.

     Jerald A. Nine, Jr. is a founder of SkillSoft and has served as its Vice
President of Worldwide Sales and Marketing since April 1998. From July 1995 to
February 1998, Mr. Nine served as the Vice President of Sales and Marketing at
NETg. From September 1992 until July 1995, Mr. Nine served as Vice President of
Sales and Marketing at Sytron Corporation.

     James Adkisson has served as director of SkillSoft since January 1998.
Since 1992, Mr. Adkisson has been a Partner at Growth Resources International,
an investment advisory services company.

     C. Samantha Chen has served as director of SkillSoft since June 1999. Ms.
Chen has been an associate at E.M. Warburg, Pincus & Co., LLC since September
1997. From April 1992 to June 1995, Ms. Chen served as an analyst at Bessemer
Venture Partners. From September 1995 to June 1997, Ms. Chen attended the
Stanford Graduate School of Business, where she obtained her MBA.

     William T. Coleman III has served as director of SkillSoft since August
1999. Since January 1995, Mr. Coleman has served as Chairman of the Board and
Chief Executive Officer of BEA Systems Inc., a provider of software solutions
for enterprise e-commerce applications. From December 1985 to January 1995, Mr.
Coleman served as Vice President and General Manager and Vice President of
Software at Sun Microsystems. Mr. Coleman is also a director of Portal Software,
Inc.

     Stewart K.P. Gross has served as director of SkillSoft since January 1998.
Mr. Gross is a Managing Director of E.M. Warburg, Pincus & Co., LLC, where he
has been employed since July 1987. Mr. Gross is a director of BEA Systems, Inc.,
IA Corporation and several privately held companies.

     In accordance with the terms of SkillSoft's certificate of incorporation,
the terms of office of the members of the board of directors are divided into
three classes. Messrs. Moran and Gross serve as Class I Directors (whose term
expires in 2000), Ms. Chen and Mr. Coleman serve as Class II Directors (whose
term expires in 2001) and Mr. Adkisson serves as a Class III Director (whose
term expires in 2002). At each annual meeting of stockholders, the successors to
directors whose terms then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election.
Additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible, each
class will consist of one-third of the total number of directors. The
classification of the board of directors may have the effect of delaying or
preventing changes in control or management of SkillSoft.

     Each officer is appointed by, and serves at the discretion of, the board of
directors. There are no family relationships among any of the directors,
officers or key employees of SkillSoft.

COMMITTEES OF THE BOARD OF DIRECTORS

     The SkillSoft compensation committee consists of Messrs. Coleman and Gross.
It reviews and evaluates the salaries and incentive compensation of management
and key employees of SkillSoft and makes recommendations concerning these
matters to the board of directors. The SkillSoft compensation committee also
administers SkillSoft's stock option plans.

     The SkillSoft audit committee consists of Mr. Adkisson and Ms. Chen. It
reviews the results and scope of audits and other services provided by
SkillSoft's independent public accountants and reviews SkillSoft's system of
internal accounting and financial controls. The SkillSoft audit committee

                                       40
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also reviews such other matters with respect to the accounting, auditing and
financial reporting practices and procedures of SkillSoft as it may find
appropriate or may be brought to its attention.

DIRECTOR COMPENSATION

     Non-employee directors will be reimbursed for their reasonable
out-of-pocket expenses incurred in attending meetings of the board of directors.
No director will receive cash compensation for services rendered as a director.
Non-employee directors (other than those currently serving on the board of
directors) will also eligible for participation in SkillSoft's 1999 Non-Employee
Director Stock Option Plan. See "Management -- Stock Plans."

EXECUTIVE COMPENSATION

     The following Summary Compensation Table sets forth the total compensation
paid or accrued for the year ended January 31, 1999 for each of the executive
officers of SkillSoft.

                           SUMMARY COMPENSATION TABLE
LONG TERM
                                                                             COMPENSATION
                                                                            ---------------
                                                                                AWARDS
                                                    ANNUAL COMPENSATION     ---------------
                                                    --------------------      RESTRICTED
NAME AND PRINCIPAL POSITION                          SALARY      BONUS      STOCK AWARDS(1)
---------------------------                         --------    --------    ---------------
Charles E. Moran, Chairman of the Board, President
  and Chief Executive Officer.....................  $250,000          --       $      --
Thomas J. McDonald, Chief Financial Officer, Vice
  President, Operations and Treasurer.............  $135,000    $100,000       $      --
Mark A. Townsend, Vice President, Product
  Development.....................................  $145,000          --       $      --
Jerald A. Nine, Jr., Vice President Worldwide
  Sales and Marketing(2)..........................  $117,115          --       $      --
-------------------------

(1) Long term compensation consisted of restricted stock granted under
    SkillSoft's 1998 Stock Incentive Plan and vests in 36 equal monthly
    installments commencing the month following the date of grant. Amounts shown
    above represent the value of the restricted stock award, based on the fair
    market value of the common stock on the date of grant less the purchase
    price paid. The number of shares of restricted stock granted to Messrs.
    Moran, McDonald, Nine and Townsend in the fiscal year ended January 31, 1999
    was 0; 300,000; 700,000 and 600,000, respectively. The number of shares of
    restricted stock held by each of the executive officers as of January 31,
    1999 and its value as of January 31, 1999, based on a fair market value of
    $.175 per share, was as follows: Mr. Moran: none; Mr. McDonald: 300,000
    shares, $52,500; Mr. Townsend: 600,000 shares, $105,000; and Mr. Nine:
    700,000 shares, $122,500.

(2) Mr. Nine joined SkillSoft in April 1998 and thus received compensation for
    only part of the fiscal year.

OPTION GRANTS DURING FISCAL YEAR

     SkillSoft did not grant any options or stock appreciation rights during the
fiscal year ended January 31, 1999 to any of its executive officers.

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OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

     None of the executive officers of SkillSoft exercised any options to
purchase stock of SkillSoft during the fiscal year ended January 31, 1999 or
held any such options as of January 31, 1999.

EMPLOYMENT AGREEMENTS

     SkillSoft is a party to an employment agreement with Mr. Moran entered into
in December 1997. Under the terms of this employment agreement, Mr. Moran is
entitled to receive an annual base salary of $250,000, which may be increased in
accordance with SkillSoft's regular salary review practices. Mr. Moran is also
entitled to be paid a signing bonus of $600,000 upon the earliest of (1) the end
of the second consecutive quarter that SkillSoft achieves quarterly revenue in
excess of $1,000,000, (2) the fourth anniversary of the date of the employment
agreement or (3) a sale of SkillSoft following which SkillSoft's stockholders
own less than 50% of the equity securities of the surviving company. Mr. Moran
is also entitled to participate in any bonus plan that SkillSoft may establish
for its senior executives. Either SkillSoft or Mr. Moran may terminate the
employment agreement at will for any reason, upon three months' prior notice in
the case of termination by SkillSoft, or upon two months' prior notice in the
case of termination by Mr. Moran. If SkillSoft terminates Mr. Moran's employment
without cause, or if Mr. Moran terminates his employment for good reason (as
defined in the employment agreement), then SkillSoft will be required to pay Mr.
Moran his base salary and benefits for a period of twelve months following
termination. In addition, in the event of such a termination, Mr. Moran's stock
options will continue to vest and be exercisable if he performs consulting
services for SkillSoft of up to ten hours per month during the twelve months
following termination.

     SkillSoft is a party to an employment agreement with Mr. McDonald, dated
February 2, 1998. Under the terms of the employment agreement, Mr. McDonald is
entitled to receive an annual base salary of $135,000, which may be increased in
accordance with SkillSoft's regular salary review practices. In addition,
SkillSoft agreed to sell Mr. McDonald 300,000 shares of its restricted common
stock, which vest in 36 equal monthly installments. Mr. McDonald is entitled to
participate in any bonus plan that SkillSoft may establish for its senior
executives. Either SkillSoft or Mr. McDonald may terminate the employment
agreement at will for any reason, upon three months' prior notice in the case of
termination by SkillSoft, or upon two months' prior notice in the case of
termination by Mr. McDonald. If SkillSoft terminates Mr. McDonald's employment
without cause, or if Mr. McDonald terminates his employment for good reason (as
defined in the employment agreement), then SkillSoft will be required to pay Mr.
McDonald his base salary and benefits for a period of six months following
termination. In addition, in the event of such a termination, Mr. McDonald's
stock options will continue to vest and be exercisable if he performs consulting
services for SkillSoft of up to ten hours per week during the six months
following termination.

     SkillSoft is also a party to employment agreements with Messrs. Townsend
and Nine, dated January 12, 1998 and April 9, 1998, respectively. Under these
employment agreements, Messrs. Nine and Townsend are each entitled to receive a
base salary of $145,000, which may be increased in accordance with SkillSoft's
regular salary review practices. In addition, SkillSoft agreed to sell Messrs.
Townsend and Nine 600,000 and 700,000 shares, respectively, of its restricted
common stock, which vest in 36 equal monthly installments. Messrs. Townsend and
Nine are also entitled to participate in any bonus plans that SkillSoft may
establish for its senior executives. These employment agreements provide for the
same termination provisions and severance benefits as Mr. McDonald.

                                       42
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STOCK PLANS

  1998 Stock Incentive Plan

     General.  SkillSoft's 1998 Stock Incentive Plan provides for the grant of
incentive stock options, nonstatutory stock options, restricted stock awards and
other awards. The Incentive Plan authorizes the issuance of a maximum of
4,690,000 shares of common stock. As of September 1, 1999, 2,231,874 shares had
been issued under the Incentive Plan and 881,965 shares were subject to
outstanding options under the Incentive Plan. The Incentive Plan is administered
by the board of directors and the compensation committee.

     Eligibility to Receive Awards.  Employees, directors and consultants of
SkillSoft and its subsidiaries are eligible to be granted awards under the
Incentive Plan. Under present law, however, incentive stock options qualifying
under Section 422 of the Internal Revenue Code may only be granted to employees.

     Incentive Stock Options and Nonstatutory Stock Options.  Stock options
entitle the holder to purchase a specified number of shares of common stock at a
specified option price, subject to the other terms and conditions contained in
the option grant. SkillSoft may grant options at an exercise price equal to or
greater than 85% of the fair market value of the common stock on the date of
grant. Under present law, however, incentive stock options and options intended
to qualify as performance-based compensation under Section 162(m) of the
Internal Revenue Code may not be granted at an exercise price less than the fair
market value of the common stock on the date of grant (or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power of SkillSoft). Options may not be
granted for a term in excess of ten years. The board of directors or the
compensation committee determines:

     - the number of shares subject to each option granted,

     - the exercise price of the option,

     - the vesting schedule of the option (generally over four years),

     - the duration of the option (generally ten years, subject to earlier
       termination in the event of the termination of the optionee's employment
       or consulting arrangement), and

     - the manner of payment of the exercise price of the option (including
       payment by cash, check or promissory note or through a "cashless
       exercise").

     Restricted Stock Awards.  Restricted stock awards entitle recipients to
acquire shares of common stock, subject to the right of SkillSoft to repurchase
all or part of such shares from the recipient in the event of the termination of
the recipient's employment or consulting arrangement prior to the end of the
vesting period for such award or if other conditions specified in the award are
not satisfied. The board of directors or the compensation committee determines:

     - the number of shares subject to each restricted stock award granted,

     - the purchase price of the restricted stock award,

     - the vesting schedule of the restricted stock award (generally over three
       years), and

     - the manner of payment of the purchase price for the restricted stock
       award (including payment by cash, check or promissory note).

     Acquisition of SkillSoft.  In the event of an acquisition of SkillSoft,
outstanding options, restricted stock and other awards under the Incentive Plan
will either be assumed by the acquiring company, accelerated in full or
terminated.

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  1999 Non-Employee Director Stock Option Plan

     In September 1999, SkillSoft's board of directors adopted and SkillSoft's
stockholders approved the 1999 Non-Employee Director Stock Option Plan. The
Director Plan authorizes the grant of options to purchase up to 240,000 shares
of common stock to non-employee directors of SkillSoft. No options have been
granted to date under the Director Plan.

     Under the Director Plan, each non-employee director of SkillSoft (other
than current directors) will be granted a stock option to purchase 60,000 shares
of common stock on the date he or she is first elected to the board of
directors. The exercise price for all options granted under the Director Plan
will be equal to the fair market value of the common stock on the date of grant.
The options granted will become exercisable in four equal annual installments on
each anniversary of the date of grant, provided that the optionee remains a
director, and will become exercisable in full upon a change in control of
SkillSoft. Each option will expire on the earlier of ten years from the date of
grant or on the first anniversary of the date on which the optionee ceases to be
a director of SkillSoft.

401(K) PLAN

     SkillSoft maintains a 401(k) plan qualified under Section 401(k) of the
Internal Revenue Code. Under the 401(k) plan, a participant may contribute a
maximum of 20% of his or her pre-tax salary, commissions and bonuses through
payroll deductions, up to the statutorily prescribed annual limit of $10,000 in
calendar year 1999. The percentage elected by more highly compensated
participants may be required to be lower. In addition, at the discretion of the
board of directors, SkillSoft may make discretionary matching or profit-sharing
contributions into the 401(k) plan for all eligible employees. During the years
ended January 31, 1998 and 1999, SkillSoft made no matching or profit-sharing
contributions to the 401(k) plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Prior to the establishment of the compensation committee in September 1999,
compensation decisions were made by the board of directors, including Mr. Moran,
an executive officer of SkillSoft. Since its establishment, the compensation
committee, comprised of Messrs. Coleman and Gross, has been responsible for
executive compensation decisions. No executive officer of SkillSoft has served
as a director or member of the compensation committee of any other entity whose
executive officers served as a director or member of the SkillSoft compensation
committee.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

     SkillSoft's certificate of incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director for monetary damages for breach
of his or her fiduciary duties as a director, except for liability (1) for any
breach of their duty of loyalty to the corporation or its stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (4) for any transaction from which the director
derived an improper personal benefit.

     SkillSoft's certificate of incorporation provides that SkillSoft will
indemnify its directors and officers to the fullest extent permitted by law.
SkillSoft's certificate of incorporation permits SkillSoft to advance expenses
incurred by an indemnified director or officer in connection with the defense of
any action or proceeding arising out of such director's or officer's status or a
director or officer of SkillSoft upon an undertaking by such director or officer
to repay such advances if it is ultimately determined that the director or
officer is not entitled to such indemnification.

     SkillSoft has also purchased directors and officers liability insurance.
                                       44
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                              CERTAIN TRANSACTIONS

     SkillSoft has engaged in the following transactions with the following
directors, executive officers and stockholders who beneficially own more than 5%
of the outstanding capital stock of SkillSoft and affiliates of these directors,
executive officers and 5% stockholders.

     On December 10, 1997, SkillSoft sold 1,900,000 shares of restricted common
stock, at a purchase price of $.175 per share, to Charles E. Moran in exchange
for a cash payment of $166,250 and a promissory note in the original principal
amount of $166,250. This promissory note bears interest at a rate of 6.2% per
year and is due and payable on the earlier of December 10, 2002 or the date on
which Mr. Moran ceases to be an employee of SkillSoft. Mr. Moran pledged 950,000
shares as collateral for the promissory note.

     On December 10, 1997, SkillSoft sold 100,000 shares of its common stock to
James Adkisson, a director of SkillSoft, at a purchase price of $.175 per share.

     On January 8, 1998, SkillSoft sold an aggregate of 4,000,000 shares of its
Series A preferred stock to two purchasers at a purchase price of $1.75 per
share. Warburg, Pincus Ventures, L.P. purchased 3,600,000 of these shares. On
August 14, 1998 and February 16, 1999, SkillSoft issued and sold an aggregate of
4,761,905 shares of its Series B preferred stock to Warburg, Pincus Ventures,
L.P. at a purchase price of $2.10 per share. Mr. Gross and Ms. Chen, directors
of SkillSoft, are managing director and associate, respectively, of E.M.
Warburg, Pincus & Co., LLC, the manager of Warburg, Pincus Ventures, L.P.

     On June 19, 1998, June 24, 1998 and June 26, 1998, SkillSoft sold 700,000,
300,000 and 600,000 shares of restricted common stock, at a purchase price of
$.175 per share, to Messrs. Nine, McDonald and Townsend, respectively, in
exchange for cash payments of $61,250, $26,250, and $52,500, respectively, and
promissory notes in the original principal amounts of $61,250, $26,250, and
$52,500, respectively. These promissory notes bear interest at a rate of 5.77%
per year and are due and payable in June 2003. Messrs. Nine, McDonald and
Townsend each pledged half of the shares issued to them as collateral for the
promissory notes.

     On March 13, 1999 and March 15, 1999, SkillSoft sold 50,000 and 100,000
shares of restricted common stock, at a purchase price of $.175 per share, to
Messrs. Nine and McDonald, respectively, in exchange for cash payments of $4,375
and $8,750, respectively, and promissory notes in the principal amounts of
$4,375 and $8,750, respectively. These promissory notes bear interest at a rate
of 4.83% per year and are due and payable in March 2004. Messrs. Nine and
McDonald each pledged half of the shares issued to him as collateral for the
promissory notes.

     On March 31, 1999, SkillSoft sold 150,000 and 50,000 shares of restricted
common stock, at a purchase price of $.175 per share, to Messrs. Moran and
Townsend, respectively, in exchange for cash payments of $13,125 and $4,375,
respectively, and promissory notes in the principal amounts of $13,125 and
$4,375, respectively. These promissory notes bear interest at a rate of 4.83%
per year and are due and payable in March 2004. Messrs. Moran and Townsend each
pledged half of the shares issued to him as collateral for the promissory notes.

     On August 5, 1999, SkillSoft issued and sold an aggregate of 1,195,238 of
its Series C preferred stock to five purchasers at a purchase price of $3.15 per
share. William Coleman III and James Adkisson, directors of SkillSoft, each
purchased 31,746 of these shares. Warburg, Pincus Ventures, L.P. purchased
952,381 of these shares.

     On August 31, 1999 and September 1, 1999, SkillSoft sold 60,000 shares of
restricted common stock to each of Messrs. Coleman and Adkisson at a purchase
price of $1.00 per share pursuant to its 1998 stock incentive plan.

     SkillSoft believes that all transactions set forth above were made on terms
no less favorable to it than it would have obtained from unaffiliated third
parties.

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                             PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information regarding beneficial
ownership of SkillSoft's common stock as of September 1, 1999, and as adjusted
to reflect the sale of the shares of common stock offered by this prospectus,
by:

     - each person known by SkillSoft to be the beneficial owner of more than 5%
       of its common stock;

     - each executive officer;

     - each of SkillSoft's directors; and

     - all executive officers and directors of SkillSoft as a group.

Unless otherwise noted below, to the knowledge of SkillSoft, each person has
sole voting and investment power over the shares shown as beneficially owned
except to the extent authority is shared by spouses under applicable law and
except as set forth in the footnotes to the table. The number of shares of
common stock outstanding used in calculating the percentage ownership for each
person listed includes the shares of common stock underlying options held by
such person that are exercisable within 60 days after September 1, 1999, but
excludes shares of common stock underlying options held by any other person.
Percentage ownership is based on 14,199,017 shares of common stock outstanding
as of September 1, 1999, and an additional           shares of common stock to
be outstanding upon completion of this offering.
PERCENTAGE OF COMMON
                                                                           STOCK OUTSTANDING
                                                                          --------------------
                                                     NUMBER OF SHARES      BEFORE      AFTER
NAME OF BENEFICIAL OWNER                            BENEFICIALLY OWNED    OFFERING    OFFERING
------------------------                            ------------------    --------    --------
Warburg, Pincus Ventures, L.P.(1).................       9,314,286          65.6%
Stewart K.P. Gross(2).............................       9,314,286          65.6
Charles E. Moran(3)...............................       2,050,000          14.4
Jerald A. Nine(4).................................         750,000           5.3
Mark A. Townsend..................................         650,000           4.6
Thomas J. McDonald................................         400,000           2.8
James Adkisson....................................         191,746           1.4
William T. Coleman III(5).........................          91,746             *
C. Samantha Chen(6)...............................              --            --
All executive officers and directors as a group
  (eight persons)(7)..............................      13,447,778          94.7
-------------------------

 *  Less than 1%.

(1) The address for Warburg, Pincus Ventures, L.P. is 466 Lexington Avenue, 10th
    Floor, New York, New York 10017-3147.

(2) Consists of shares beneficially owned by Warburg, Pincus Ventures, L.P.
    Warburg, Pincus & Co. is the sole general partner of Warburg, Pincus
    Ventures, L.P. Warburg, Pincus Ventures, L.P. is managed by E.M. Warburg,
    Pincus & Co., LLC. Lionel I. Pincus is the managing partner of Warburg
    Pincus & Co. and the managing member of E.M. Warburg, Pincus & Co., LLC, and
    may be deemed to control both entities. Mr. Gross, a director of SkillSoft,
    is a managing director and member of E.M. Warburg, Pincus & Co., LLC and a
    general partner of Warburg

                                       46
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    Pincus & Co. Mr. Gross disclaims beneficial ownership of these shares. Mr.
    Gross' address is c/o Warburg, Pincus Ventures L.P., 466 Lexington Avenue,
    10th Floor, New York, New York 10017-3147.

(3) Consists of 1,100,000 shares beneficially owned by Mr. Moran and a total of
    950,000 shares of common stock beneficially owned by Mr. Moran's wife, as
    trustee of various trusts for the benefit of Mr. Moran's children. Mr. Moran
    disclaims beneficial ownership of the shares held in trust. Excluding these
    shares, Mr. Moran beneficially owns a total of 1,100,000 shares of common
    stock, or 7.7% of the outstanding common stock prior to this offering. Mr.
    Moran's address is c/o SkillSoft Corporation, 20 Industrial Park Drive,
    Nashua, New Hampshire 03062.

(4) Mr. Nine's address is c/o SkillSoft Corporation, 20 Industrial Park Drive,
    Nashua, New Hampshire 03062.

(5) Consists of shares beneficially owned by the Coleman Family Trust, of which
    Mr. Coleman is trustee.

(6) Excludes shares beneficially owned by Warburg, Pincus Ventures, L.P. Ms.
    Chen is an associate of E.M. Warburg, Pincus & Co., LLC, the manager of
    Warburg, Pincus Ventures, L.P.

(7) See Notes 2, 3, 5 and 6.

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51

                          DESCRIPTION OF CAPITAL STOCK

     Upon the closing of this offering, the authorized capital stock of
SkillSoft will consist of 50,000,000 shares of common stock, $0.001 par value
per share, and 5,000,000 shares of preferred stock, $0.001 par value per share.
As of September 1, 1999, there were outstanding 14,199,017 shares of common
stock held by 25 stockholders of record and options to purchase an aggregate of
881,965 shares of common stock.

     The following summary of certain provisions of our securities and various
provisions of our certificate of incorporation and bylaws is not intended to be
complete and is qualified by reference to the provisions of applicable law and
to our certificate of incorporation and bylaws included as exhibits to the
Registration Statement of which this prospectus is a part. See "Where You Can
Find Additional Information."

COMMON STOCK

     Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends declared by the board of directors, subject to any
preferential dividend rights of outstanding preferred stock. Upon the
liquidation, dissolution or winding up of SkillSoft, the holders of common stock
are entitled to receive ratably the net assets of SkillSoft available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are, and the shares offered by SkillSoft in this offering will be, when
issued and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to the rights of the holders
of shares of any series of preferred stock which SkillSoft may designate and
issue in the future. Certain holders of common stock have the right to require
SkillSoft to register their shares of common stock under the Securities Act in
certain circumstances. See "Shares Eligible for Future Sale."

PREFERRED STOCK

     Under the terms of our certificate of incorporation, the board of directors
is authorized to designate and issue shares of preferred stock in one or more
series without stockholder approval. The Board has discretion to determine the
rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock.

     The purpose of authorizing the board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could make it more difficult for a third party to
acquire, or could discourage a third party from attempting to acquire, a
majority of the outstanding voting stock of SkillSoft. SkillSoft has no present
plans to issue any shares of preferred stock.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

     SkillSoft is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved by the board of directors and/or stockholders
of SkillSoft in a prescribed

                                       48
52

manner. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years did own,
15% or more of the corporation's voting stock.

     SkillSoft's certification of incorporation and bylaws provide for the
division of the board of directors into three classes as nearly equal in size as
possible with staggered three-year terms. Any vacancy on the board of directors,
including a vacancy resulting from an enlargement of the board of directors, may
only be filled by vote of a majority of the directors then in office. The
classification of the board of directors and the limitation on filling of
vacancies could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, control of SkillSoft.

     SkillSoft's bylaws also provide that any action required or permitted to be
taken by the stockholders of SkillSoft at an annual meeting or special meeting
of stockholders may only be taken if it is properly brought before such meeting
and may not be taken by written action in lieu of a meeting. The bylaws further
provide that special meetings of the stockholders may only be called by the
Chairman of the Board, the President or the board of directors. In order for any
matter to be considered "properly brought" before a meeting, a stockholder must
comply with certain requirements regarding advance notice and provide certain
information to SkillSoft. These provisions could have the effect of delaying
until the next stockholders meeting stockholder actions which are favored by the
holders of a majority of the outstanding voting securities of SkillSoft. These
provisions could also discourage a third party from making a tender offer for
the common stock, because even if it acquired a majority of the outstanding
voting securities of SkillSoft, it would be able to take action as a stockholder
(such as electing new directors or approving a merger) only at a duly called
stockholders' meeting and not by written consent.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services L.L.C.

                                       49
53

                        SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering, there has been no market for SkillSoft's common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect prevailing market prices from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering because of contractual and legal restrictions on resale described
below, sales of substantial amounts of common stock of SkillSoft in the public
market after the restrictions lapse could adversely affect the prevailing market
price and the ability of SkillSoft to raise equity capital in the future.

     Based on shares outstanding at September 1, 1999, upon completion of this
offering SkillSoft will have outstanding an aggregate of                shares
of common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants. Of these shares, the
               shares sold in this offering will be freely tradable without
restrictions or further registration under the Securities Act, unless the shares
are purchased by an existing affiliate of SkillSoft, as that term is defined in
Rule 144 under the Securities Act.

     The remaining 14,199,017 shares of common stock held by existing
stockholders are restricted shares or are subject to the contractual
restrictions described below. Restricted shares may generally be sold in the
public market only if registered or if they qualify for an exception from
registration under Rule 144 promulgated under the Securities Act, which is
summarized below. Of these restricted shares, 7,594,250 shares will be available
for resale in the public market in reliance on Rule 144 and Rule 701 beginning
90 days following the closing of this offering. However, all of these 7,594,250
shares are subject to lock-up agreements. The remaining 6,604,767 shares become
eligible for resale in the public market at various dates thereafter, of which
               shares are subject to lock-up agreements.

     All of the officers and directors and some of the stockholders and
optionholders of SkillSoft are bound by lock-up agreements in favor of the
underwriters. As a result, these individuals and entities are not permitted to
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock or publicly disclose the intention
to make any such offer, sale, pledge or disposition for a period of 180 days
after the date of this prospectus, without the prior written consent of Credit
Suisse First Boston. Credit Suisse First Boston currently has no plans to
release any portion of the securities subject to lock-up agreements. When
determining whether or not to release shares from the lock-up agreements, Credit
Suisse First Boston will consider, among other factors, the stockholder's
reasons for requesting the release, the number of shares for which the release
is being requested and market conditions at the time.

     In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year would be entitled to sell a certain number of
shares within any three-month period. That certain number of shares cannot
exceed the greater of one percent of the number of shares of common stock then
outstanding, which will equal approximately                shares immediately
after this offering, or the average weekly trading volume of the common stock on
the Nasdaq National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to manner of sale provisions, notice requirements and the availability
of current public information about SkillSoft. Rule 144 also provides that
affiliates of SkillSoft who are selling shares of common stock that are not
restricted shares must nonetheless comply with the same restrictions applicable
to restricted shares with the exception of the holding period requirement.

     Under Rule 144(k), a person who is not deemed to have been an affiliate of
SkillSoft at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be

                                       50
54

sold for at least two years, is entitled to sell those shares without complying
with the manner of sale, public information, volume limitation or notice
provisions of Rule 144.

     Rule 701 may be relied upon with respect to the resale of shares of common
stock originally purchased from SkillSoft under its stock option plan, so long
as the option was granted prior to the date of this prospectus. Shares issued in
reliance on Rule 701 are restricted shares and, subject to the lock-up
agreements described above, beginning 90 days after the date of this prospectus,
may be sold by persons other than affiliates, subject only to the manner of sale
provisions of Rule 144, and may be sold by affiliates under Rule 144 without
compliance with its one-year minimum holding period requirement.

     SkillSoft has agreed not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of common stock or any securities convertible into or exercisable
or exchangeable for common stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposition or filing, for a period of 180 days after
the date of this prospectus, without the prior written consent of Credit Suisse
First Boston, subject to limited exceptions such as issuances under its stock
plans or in connection with an acquisition of a business.

     Following this offering, SkillSoft intends to file registration statements
under the Securities Act covering approximately 2,698,126 shares of common stock
issuable upon the exercise of stock options or reserved for issuance under
SkillSoft's 1998 Stock Incentive Plan and 1999 Non-Employee Director Stock
Option Plan. The shares registered under these registration statements will,
subject to Rule 144 provisions applicable to affiliates, be available for sale
in the open market, except to the extent that the shares are subject to
SkillSoft's vesting restrictions or the lock-up agreements described above. See
"Management -- Stock Plans."

     In addition, following this offering, under specified conditions and
subject to customary exceptions, holders of 9,957,143 shares of common stock
will have demand registration rights with respect to their shares of common
stock, subject to the 180 day lock-up period described above, to require
SkillSoft to register their shares of common stock under the Securities Act, and
they will have the right to participate in future registrations of securities by
SkillSoft. SkillSoft is not required to effect a registration within six months
after the closing of this offering and it is not required to effect more than
three demand registrations on behalf of these holders. SkillSoft is generally
required to bear all of the expenses of all registrations. Registration of any
of the shares of common stock would result in these shares becoming freely
tradeable without restriction under the Securities Act upon effectiveness of the
registration statement.

                                       51
55

                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated              , we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC and Thomas Weisel Partners LLC are acting as representatives, the
following respective numbers of shares of common stock:
NUMBER
                        UNDERWRITER                           OF SHARES
                        -----------                           ---------
Credit Suisse First Boston Corporation......................
Banc of America Securities LLC..............................
Thomas Weisel Partners LLC..................................
                                                              ---------
          Total.............................................
                                                              =========
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that, if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

     We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to                additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.

     The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

     The following table summarizes the compensation and estimated expenses we
will pay.
PER SHARE                             TOTAL
                                --------------------------------    --------------------------------
                                   WITHOUT             WITH            WITHOUT             WITH
                                OVER-ALLOTMENT    OVER-ALLOTMENT    OVER-ALLOTMENT    OVER-ALLOTMENT
                                --------------    --------------    --------------    --------------
Underwriting discounts and
  commissions paid by us......    $                 $                 $                 $
Expenses payable by us........    $                 $                 $                 $
The underwriters have informed us that they do not expect sales to accounts
over which any underwriter exercises discretionary authority to exceed 5% of the
shares of common stock being offered.

     Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 63 filed
public offerings of equity securities, of which 33 have been completed, and has
acted as a syndicate member in an additional 32 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors, or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering.

     Credit Suise First Boston Corporation, one of the representatives of the
underwriters in this Offering, is an indirect subsidiary of Credit Suisse Group,
which indirectly holds a 19.9% passive

                                       52
56

minority interest in Warburg, Pincus & Co., the general partner of Warburg,
Pincus Ventures, L.P. Warburg, Pincus Ventures, L.P. is a stockholder of
SkillSoft.

     We have a line of credit agreement with GreyRock Capital. GreyRock Capital
is a division of Banc of America Commercial Finance Corporation. Both Banc of
America Commercial Finance Corporation and Banc of America Securities LLC are
subsidiaries of Bank of America Corporation.

     We and each of our directors and officers and some of our stockholders and
optionholders have agreed not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our common stock, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus
except, in our case, issuances pursuant to the exercise of employee stock
options outstanding on the date hereof or pursuant to our stock option plans.

     The underwriters have reserved for sale, at the initial public offering
price, up to                shares of the common stock for employees, directors
and certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in this offering will be reduced to the extent those
persons purchase reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

     We will make application to list the shares of common stock on The Nasdaq
Stock Market's National Market.

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors considered in
determining the public offering price will include:

     - the information set forth in this prospectus and otherwise available to
       the representatives;

     - the history of, and the prospects for, SkillSoft and the industry in
       which it competes;

     - an assessment of our management;

     - the prospects for, and the timing of, future earnings of SkillSoft;

     - the present state of SkillSoft's development and its current financial
       condition;

     - the general condition of the securities markets at the time of the
       offering;

     - the recent market prices of, and the demand for, publicly-traded common
       stock of companies in businesses similar to those of SkillSoft;

     - market conditions for initial public offerings; and

     - other relevant factors.

     The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

     - Over-allotment involves syndicate sales in excess of the offering size,
       which creates a syndicate short position.

                                       53
57

     - Stabilizing transactions permit bids to purchase the underlying security
       so long as the stabilizing bids do not exceed a specified maximum.

     - Syndicate covering transactions involve purchases of the common stock in
       the open market after the distribution has been completed in order to
       cover syndicate short positions.

     - Penalty bids permit the representatives to reclaim a selling concession
       from a syndicate member when the common stock originally sold by that
       syndicate member is purchased in a stabilizing transaction or in a
       syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.

                                       54
58

                          NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchases are advised to seek legal advice prior to any resale of the
common stock.

REPRESENTATIONS OF PURCHASERS

     Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities law to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canada courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities commission a report within ten days of the sales of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                       55
59

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for SkillSoft by Hale and Dorr LLP, Boston, Massachusetts. Certain legal
matters will be passed upon for the underwriters by Katten Muchin & Zavis,
Chicago, Illinois.

                                    EXPERTS

     The financial statements of SkillSoft as of January 31, 1998 and 1999 and
for each of the periods then ended, which are included in this prospectus and
registration statement, have been so included in reliance on the report of
Arthur Andersen LLP, independent public accountants, given on the authority of
said firm as experts in auditing and accounting.

                   WHERE YOU CAN FIND ADDITIONAL INFORMATION

     SkillSoft has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. For further information
with respect to SkillSoft and the common stock, reference is made to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or any other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of the contract
or document filed as an exhibit to the registration statement, and each such
statement is qualified in all respects by reference to such exhibit. Copies of
the registration statement may be examined without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661
and World Trade Center, Thirteenth Floor, New York, New York 10048. Copies of
all or any portion of the registration statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, or by calling the Commission at
1-800-SEC-0330, at prescribed rates. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy, registration and information
statements and other information regarding registrants, such as SkillSoft, that
make electronic filings with the Commission.

     SkillSoft intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm.

                                       56
60

                             SKILLSOFT CORPORATION

                         INDEX TO FINANCIAL STATEMENTS
PAGE
                                                              ----
Report of Independent Public Accountants....................  F-2
Balance Sheets as of January 31, 1998 and 1999 and July 31,
  1999 (Unaudited)..........................................  F-3
Statements of Operations for the Period from Incorporation
  (October 15, 1997) to January 31, 1998 and for the Year
  Ended January 31, 1999 and the Six Months Ended July 31,
  1998 and 1999 (Unaudited).................................  F-4
Statements of Stockholders' Equity for the Period from
  Incorporation (October 15, 1997) to January 31, 1998 and
  for the Year Ended January 31, 1999 and the Six Months
  Ended July 31, 1999 (Unaudited)...........................  F-5
Statements of Cash Flows for the Period from Incorporation
  (October 15, 1997) to January 31, 1998 and for the Year
  Ended January 31, 1999 and for the Six Months Ended July
  31, 1998 and 1999 (Unaudited).............................  F-6
Notes to Financial Statements...............................  F-7
F-1
61

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SkillSoft Corporation:

     We have audited the accompanying balance sheets of SkillSoft Corporation (a
Delaware corporation) as of January 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for the period
from incorporation (October 15, 1997) to January 31, 1998 and for the year ended
January 31, 1999. 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 generally accepted auditing
standards. 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 financial position of SkillSoft Corporation as of
January 31, 1998 and 1999, and the results of its operations and its cash flows
for the period from incorporation (October 15, 1997) to January 31, 1998 and for
the year ended January 31, 1999 in conformity with generally accepted accounting
principles.

                                                                          Arthur
Andersen LLP
Boston, Massachusetts
March 26, 1999

                                       F-2
62

                             SKILLSOFT CORPORATION

                                 BALANCE SHEETS
JANUARY 31,                 JULY 31, 1999
                                                           ------------------------   ---------------------------
                                                                                                      PRO FORMA
                                                              1998         1999          ACTUAL      (NOTE 2(C))
                                                           ----------   -----------   ------------   ------------
                                                                                              (UNAUDITED)
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents..............................  $2,650,637   $   623,322   $     25,442   $     25,442
  Short-term investments.................................   4,371,333     3,341,702        498,560        498,560
  Accounts receivable....................................          --            --        887,368        887,368
  Prepaid expenses and other current assets..............          --       116,144        699,695        699,695
                                                           ----------   -----------   ------------   ------------
         Total current assets............................   7,021,970     4,081,168      2,111,065      2,111,065
PROPERTY AND EQUIPMENT, AT COST:
  Computer equipment.....................................          --       357,719        425,427        425,427
  Furniture and fixtures.................................          --       173,456        178,312        178,312
  Leasehold improvements.................................          --        23,944         23,944         23,944
                                                           ----------   -----------   ------------   ------------
                                                                   --       555,119        627,683        627,683
  Less -- Accumulated depreciation and amortization......          --        85,726        180,747        180,747
                                                           ----------   -----------   ------------   ------------
                                                                   --       469,393        446,936        446,936
                                                           ----------   -----------   ------------   ------------
                                                           $7,021,970   $ 4,550,561   $  2,558,001   $  2,558,001
                                                           ==========   ===========   ============   ============
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable.......................................  $   78,537   $   210,741   $    421,000   $    421,000
  Accrued expenses.......................................     624,592     1,144,703      1,255,417      1,255,417
  Deferred revenue.......................................          --            --        251,194        251,194
                                                           ----------   -----------   ------------   ------------
         Total current liabilities.......................     703,129     1,355,444      1,927,611      1,927,611
                                                           ----------   -----------   ------------   ------------
COMMITMENTS AND CONTINGENCIES (NOTE 5)

STOCKHOLDERS' EQUITY:
  Series A convertible preferred stock, $.001 par
    value --
    Authorized, issued and outstanding -- 4,000,000
      shares at January 31, 1998 and 1999 and July 31,
      1999, no shares pro forma (liquidation preference
      of $7,596,822 at January 31, 1999).................   6,957,774     6,957,774      6,957,774             --
  Series B convertible preferred stock, $.001 par
    value --
    Authorized -- 4,761,905 shares
    Issued and outstanding -- 2,380,953 and 4,761,905
      shares at January 31, 1999 and July 31, 1999,
      respectively, no shares pro forma (liquidation
      preference of $5,153,426 at January 31, 1999)......          --     4,993,767      9,993,661             --
  Class A common stock, $.001 par value --
    Authorized -- 26,000,000 shares
    Issued and outstanding -- 2,010,000, 3,696,000 and
      4,106,062 shares at January 31, 1998 and 1999 and
      July 31, 1999, respectively, no shares pro forma...       2,010         3,696          4,106             --
  Common stock, $.001 par value --
    Issued and outstanding -- no shares at January 31,
      1998 and 1999 and July 31, 1999, 12,867,967 shares
      pro forma (see Note 2(c))..........................          --            --             --         12,868
  Additional paid-in capital.............................     349,740       643,104      1,468,611     18,411,284
  Deferred compensation..................................          --            --       (715,811)      (715,811)
  Notes receivable from stockholders.....................    (166,250)     (306,250)      (339,063)      (339,063)
  Accumulated deficit....................................    (824,433)   (9,096,974)   (16,738,888)   (16,738,888)
                                                           ----------   -----------   ------------   ------------
         Total stockholders' equity......................   6,318,841     3,195,117        630,390        630,390
                                                           ----------   -----------   ------------   ------------
                                                           $7,021,970   $ 4,550,561   $  2,558,001   $  2,558,001
                                                           ==========   ===========   ============   ============
The accompanying notes are an integral part of these financial statements.
                                       F-3
63

                             SKILLSOFT CORPORATION

                            STATEMENTS OF OPERATIONS
PERIOD FROM
                                          INCORPORATION
                                           (OCTOBER 15,
                                             1997) TO        YEAR ENDED     SIX MONTHS ENDED JULY 31,
                                           JANUARY 31,      JANUARY 31,     -------------------------
                                               1998             1999           1998          1999
                                          --------------    ------------    -----------   -----------
                                                                                   (UNAUDITED)
REVENUE...............................      $      --       $        --     $        --   $ 1,088,224
COST OF REVENUE.......................             --                --              --       254,455
                                            ---------       -----------     -----------   -----------
       Gross profit...................             --                --              --       833,769
                                            ---------       -----------     -----------   -----------
OPERATING EXPENSES:
  Research and development............        177,836         4,117,187       1,224,356     3,743,121
  Selling and marketing...............             --         1,671,225         178,585     2,849,386
  General and administrative..........        649,404         2,820,646       1,444,876     1,964,517
  Amortization of deferred
     compensation.....................             --                --              --        38,345
                                            ---------       -----------     -----------   -----------
          Total operating expenses....        827,240         8,609,058       2,847,817     8,595,369
INTEREST INCOME.......................          2,807           336,517         120,308       119,686
                                            ---------       -----------     -----------   -----------
       Net loss.......................      $(824,433)      $(8,272,541)    $(2,727,509)  $(7,641,914)
                                            =========       ===========     ===========   ===========
NET LOSS PER SHARE (Note 2(e)):
  Basic and diluted...................      $   (0.88)      $     (2.70)    $     (1.13)  $     (1.91)
                                            =========       ===========     ===========   ===========
  Basic and diluted weighted average
     common shares outstanding........        938,241         3,062,038       2,417,569     3,994,974
                                            =========       ===========     ===========   ===========
PRO FORMA NET LOSS PER SHARE (Note
  2(e)):
  Pro forma basic and diluted.........                      $     (1.01)                  $     (0.61)
                                                            ===========                   ===========
  Pro forma basic and diluted weighted
     average common shares
     outstanding......................                        8,170,975                    12,546,408
                                                            ===========                   ===========
The accompanying notes are an integral part of these financial statements.
                                       F-4
64

                             SKILLSOFT CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
                               ---------------------------------------------------          CLASS A
                                       SERIES A                   SERIES B                COMMON STOCK
                               ------------------------   ------------------------   ----------------------
                               NUMBER OF     CARRYING     NUMBER OF     CARRYING     NUMBER OF    $.001 PAR
                                 SHARES        VALUE        SHARES        VALUE        SHARES       VALUE
                               ---------     --------     ---------     --------     ---------    ---------
INCORPORATION (OCTOBER 15,
 1997).......................         --    $        --          --    $        --          --     $    --
 Initial capitalization......         --             --          --             --   2,010,000       2,010
 Issuance of Series A
   convertible preferred
   stock, net of issuance
   costs of $42,226..........  4,000,000      6,957,774          --             --          --          --
 Net loss....................         --             --          --             --          --          --
                               ----------   -----------   ----------   -----------   ----------    -------
BALANCE, JANUARY 31, 1998....  4,000,000      6,957,774          --             --   2,010,000       2,010
 Issuance of Class A
   restricted common stock...         --             --          --             --   1,686,000       1,686
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $6,234...........         --             --   2,380,953      4,993,767          --          --
 Net loss....................         --             --          --             --          --          --
                               ----------   -----------   ----------   -----------   ----------    -------
BALANCE, JANUARY 31, 1999....  4,000,000      6,957,774   2,380,953      4,993,767   3,696,000       3,696
 Issuance of Class A
   restricted common stock
   (unaudited)...............         --             --          --             --     390,000         390
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $106
   (unaudited)...............         --             --   2,380,952      4,999,894          --          --
 Deferred compensation
   related to grants of stock
   options and issuances of
   Class A restricted common
   stock (unaudited).........         --             --          --             --          --          --
 Amortization of deferred
   compensation (unaudited)..         --             --          --             --          --          --
 Exercise of stock options
   (unaudited)...............         --             --          --             --      20,062          20
 Net loss (unaudited)........         --             --          --             --          --          --
                               ----------   -----------   ----------   -----------   ----------    -------
BALANCE, JULY 31, 1999
 (UNAUDITED).................  4,000,000      6,957,774   4,761,905      9,993,661   4,106,062       4,106
 Conversion of Class A common
   stock into common stock
   (unaudited)...............         --             --          --             --   (4,106,062)    (4,106)
 Conversion of convertible
   preferred stock into
   common stock
   (unaudited)...............  (4,000,000)   (6,957,774)  (4,761,905)   (9,993,661)         --          --
                               ----------   -----------   ----------   -----------   ----------    -------
 PRO FORMA BALANCE, JULY 31,
   1999 (UNAUDITED)..........         --    $        --          --    $        --          --     $    --
                               ==========   ===========   ==========   ===========   ==========    =======
COMMON STOCK                                            NOTES
                               ----------------------                                     RECEIVABLE
                               NUMBER OF    $.001 PAR     ADDITIONAL        DEFERRED         FROM       ACCUMULATED
                                 SHARES       VALUE     PAID-IN CAPITAL   COMPENSATION   STOCKHOLDERS     DEFICIT
                               ---------    ---------   ---------------   ------------   ------------   -----------
INCORPORATION (OCTOBER 15,
 1997).......................         --     $    --      $        --      $      --      $      --     $        --
 Initial capitalization......         --          --          349,740             --       (166,250)             --
 Issuance of Series A
   convertible preferred
   stock, net of issuance
   costs of $42,226..........         --          --               --             --             --              --
 Net loss....................         --          --               --             --             --        (824,433)
                               ----------    -------      -----------      ---------      ---------     ------------
BALANCE, JANUARY 31, 1998....         --          --          349,740             --       (166,250)       (824,433)
 Issuance of Class A
   restricted common stock...         --          --          293,364             --       (140,000)             --
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $6,234...........         --          --               --             --             --              --
 Net loss....................         --          --               --             --             --      (8,272,541)
                               ----------    -------      -----------      ---------      ---------     ------------
BALANCE, JANUARY 31, 1999....         --          --          643,104             --       (306,250)     (9,096,974)
 Issuance of Class A
   restricted common stock
   (unaudited)...............         --          --           67,860             --        (32,813)             --
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $106
   (unaudited)...............         --          --               --             --             --              --
 Deferred compensation
   related to grants of stock
   options and issuances of
   Class A restricted common
   stock (unaudited).........         --          --          754,156       (754,156)            --              --
 Amortization of deferred
   compensation (unaudited)..         --          --               --         38,345             --              --
 Exercise of stock options
   (unaudited)...............         --          --            3,491             --             --              --
 Net loss (unaudited)........         --          --               --             --             --      (7,641,914)
                               ----------    -------      -----------      ---------      ---------     ------------
BALANCE, JULY 31, 1999
 (UNAUDITED).................         --          --        1,468,611       (715,811)      (339,063)    (16,738,888)
 Conversion of Class A common
   stock into common stock
   (unaudited)...............  4,106,062       4,106               --             --             --              --
 Conversion of convertible
   preferred stock into
   common stock
   (unaudited)...............  8,761,905       8,762       16,942,673             --             --              --
                               ----------    -------      -----------      ---------      ---------     ------------
 PRO FORMA BALANCE, JULY 31,
   1999 (UNAUDITED)..........  12,867,967    $12,868      $18,411,284      $(715,811)     $(339,063)    $(16,738,888)
                               ==========    =======      ===========      =========      =========     ============
TOTAL
                               STOCKHOLDERS'
                                  EQUITY
                               -------------
INCORPORATION (OCTOBER 15,
 1997).......................   $        --
 Initial capitalization......       185,500
 Issuance of Series A
   convertible preferred
   stock, net of issuance
   costs of $42,226..........     6,957,774
 Net loss....................      (824,433)
                                -----------
BALANCE, JANUARY 31, 1998....     6,318,841
 Issuance of Class A
   restricted common stock...       155,050
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $6,234...........     4,993,767
 Net loss....................    (8,272,541)
                                -----------
BALANCE, JANUARY 31, 1999....     3,195,117
 Issuance of Class A
   restricted common stock
   (unaudited)...............        35,437
 Issuance of Series B
   convertible preferred
   stock, net of issuance
   costs of $106
   (unaudited)...............     4,999,894
 Deferred compensation
   related to grants of stock
   options and issuances of
   Class A restricted common
   stock (unaudited).........            --
 Amortization of deferred
   compensation (unaudited)..        38,345
 Exercise of stock options
   (unaudited)...............         3,511
 Net loss (unaudited)........    (7,641,914)
                                -----------
BALANCE, JULY 31, 1999
 (UNAUDITED).................       630,390
 Conversion of Class A common
   stock into common stock
   (unaudited)...............            --
 Conversion of convertible
   preferred stock into
   common stock
   (unaudited)...............            --
                                -----------
 PRO FORMA BALANCE, JULY 31,
   1999 (UNAUDITED)..........   $   630,390
                                ===========
The accompanying notes are an integral part of these financial statements.

                                       F-5
65

                             SKILLSOFT CORPORATION

                            STATEMENTS OF CASH FLOWS
PERIOD FROM
                                               INCORPORATION
                                               (OCTOBER 15,
                                                 1997) TO      YEAR ENDED    SIX MONTHS ENDED JULY 31,
                                                JANUARY 31,    JANUARY 31,   -------------------------
                                                   1998           1999          1998          1999
                                               -------------   -----------   -----------   -----------
                                                                                    (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...................................   $  (824,433)   $(8,272,541)  $(2,727,509)  $(7,641,914)
  Adjustments to reconcile net loss to net
     cash used in operating activities --
     Amortization of deferred compensation...            --             --            --        38,345
     Depreciation and amortization...........            --         85,726        39,000        95,021
     Changes in current assets and
       liabilities --
       Accounts receivable...................            --             --            --      (887,368)
       Prepaid expenses and other current
          assets.............................            --       (116,144)     (273,155)     (583,551)
       Accounts payable......................        78,537        132,204       372,135       210,259
       Accrued expenses......................       624,592        520,111       134,004       110,714
       Deferred revenue......................            --             --            --       251,194
                                                -----------    -----------   -----------   -----------
          Net cash used in operating
            activities.......................      (121,304)    (7,650,644)   (2,455,525)   (8,407,300)
                                                -----------    -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment........            --       (555,119)     (317,368)      (72,564)
  Purchases of short-term investments........    (4,371,333)    (3,341,702)   (2,910,357)   (9,868,310)
  Sales of short-term investments............            --      4,371,333     3,398,531    12,711,452
                                                -----------    -----------   -----------   -----------
          Net cash (used in) provided by
            investing activities.............    (4,371,333)       474,512       170,806     2,770,578
                                                -----------    -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of Series A convertible preferred
     stock, net of issuance costs............     6,957,774             --            --            --
  Issuance of Series B convertible preferred
     stock, net of issuance costs............            --      4,993,767            --     4,999,894
  Issuance of Class A common stock...........       185,500             --            --            --
  Issuance of Class A restricted common
     stock...................................            --        155,050       155,050        35,437
  Exercise of stock options..................            --             --            --         3,511
                                                -----------    -----------   -----------   -----------
          Net cash provided by financing
            activities.......................     7,143,274      5,148,817       155,050     5,038,842
                                                -----------    -----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS................................     2,650,637     (2,027,315)   (2,129,669)     (597,880)
CASH AND CASH EQUIVALENTS, BEGINNING OF
  PERIOD.....................................            --      2,650,637     2,650,637       623,322
                                                -----------    -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.....   $ 2,650,637    $   623,322   $   520,968   $    25,442
                                                ===========    ===========   ===========   ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
  TRANSACTIONS:
  Issuance of Class A restricted common stock
     for notes receivable from
     stockholders............................   $   166,250    $   140,000   $   140,000   $    32,813
                                                ===========    ===========   ===========   ===========
The accompanying notes are an integral part of these financial statements.
                                       F-6
66

                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)

(1) OPERATIONS

     SkillSoft Corporation (the Company) was incorporated in Delaware on October
15, 1997. The Company commenced operations on January 8, 1998 in conjunction
with its initial round of financing. The Company is a provider of web-based
training resources that cover a variety of professional effectiveness and
business topics.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Management's Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (b) Interim Financial Statements

     The accompanying balance sheet as of July 31, 1999, the statements of
operations and cash flows for the six months ended July 31, 1998 and 1999 and
the statement of stockholders' equity for the six months ended July 31, 1999 are
unaudited, but in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of results
for these interim periods. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted, although management believes that the
disclosures included are adequate to make the information presented not
misleading. The results of operations for the six months ended July 31, 1999 are
not necessarily indicative of the results to be expected for the entire fiscal
year.

  (c) Unaudited Pro Forma Presentation

     Upon the closing of the Company's proposed initial public offering, the
Company will have a single class of common stock. All shares of Class A and
Class B common stock issued and outstanding will be converted into a new single
class of common stock in connection with this offering.

     The unaudited pro forma balance sheet as of July 31, 1999 and the pro forma
net loss per share for the six months ended July 31, 1999 reflect the automatic
conversion of all outstanding shares of Series A and Series B convertible
preferred stock into 8,761,905 shares of common stock, which will occur upon the
closing of the Company's proposed initial public offering.

  (d) Revenue Recognition

     The Company follows the provisions of the American Institute of Certified
Public Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue
Recognition, as amended by SOP 98-4. The Company derives revenue primarily
pursuant to license agreements under which customers license usage of delivered
products for a period of one, two or three years. On each anniversary date
during the term of multi-year license agreements, customers are generally
allowed to exchange any or all of the licensed products for an equivalent number
of alternative products within the Company's course library. The first year
license fee is generally billed in advance and recognized

                                       F-7
67
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

as revenue at the time of delivery of the products, provided the Company's fees
are fixed or determinable and collections of accounts receivable are probable.
In the event that the customer does not initially specify the entire set of
licensed courses to be delivered or if some licensed courses are not immediately
available for delivery, the portion of the license revenue associated with those
undelivered courses is not recognized until those courses are delivered.
Subsequent annual license fees for multi-year agreements will be generally
billed and recognized on each anniversary date or, if the customer exchanges
courses at the renewal date, upon delivery of the exchanged courses, provided
the Company's fees are fixed or determinable and collections of accounts
receivable are probable. Revenue from license agreements providing unlimited
product exchange rights exercisable other than on each anniversary date during
the term of the agreement or providing for licenses of all courses currently
available and to be developed during a specified period is recognized ratably
over the license term. The Company also derives revenue from extranet hosting
and online mentoring services, which is recognized as revenue as the service is
performed and have been minimal to date. The Company may offer payment terms
generally up to six months from the initial shipment date or anniversary date
for multi-year agreements to some of its customers. The cost of satisfying any
Post Contract Support (PCS) is accrued and included in deferred revenue at the
time revenue is recognized, as PCS fees are included in the annual license fee.
The estimated cost of providing PCS during the agreements is insignificant and
the Company does not offer it separately. Unspecified upgrades or enhancements
offered have been and are expected to be minimal and infrequent. For
multi-element agreements, vendor specific objective evidence exists to allocate
the total fee to the undelivered elements of the agreement. Deferred revenue
represents the undelivered portion of first year license fees and PCS for which
the Company has received payment.

  (e) Net Loss Per Share

     Basic and diluted net loss per common share was determined by dividing net
loss by the weighted average common shares outstanding during the period. Basic
and diluted net loss per share are the same, as outstanding common stock options
and convertible preferred stock are antidilutive, because the Company has
recorded a net loss for all periods presented. Options to purchase a weighted
total of 0, 157,447, 27,116 and 700,153 common shares have been excluded from
the computation of diluted weighted average shares outstanding for the period
from incorporation (October 15, 1997) to January 31, 1998, for the year ended
January 31, 1999 and for the six months ended July 31, 1998 and 1999,
respectively. Shares of common stock issuable upon the conversion of outstanding
convertible preferred stock have also been excluded for all periods presented.
In accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 98, Earnings Per Share in an Initial Public Offering, there were no
issuances of the Company's common stock at nominal consideration prior to the
Company's planned initial public offering.

     The calculation of pro forma net loss per common share assumes that all
Series A and Series B convertible preferred stock had been converted to common
stock as of the issuance date.

  (f) Cash, Cash Equivalents and Short-Term Investments

     The Company considers all highly liquid investments with original
maturities of 90 days or less at the time of purchase to be cash equivalents. At
January 31, 1998 and 1999 and July 31, 1999, cash equivalents consisted mainly
of money market funds. The Company accounts for its investments in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Under SFAS No. 115,
securities that the

                                       F-8
68
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

Company has the positive intent and ability to hold to maturity are reported at
amortized cost, which approximates market value, and are classified as
held-to-maturity. At January 31, 1998 and 1999, the Company's investments
consisted of held-to-maturity securities that are investments in high grade
commercial paper instruments, short-term notes and U.S. Treasury bills. At July
31, 1999, the Company's investments consisted of a held-to-maturity security
invested in a short-term note. All of these investments are classified as
current assets in the accompanying balance sheets as they mature within one
year.

  (g) Prepaid Expenses and Other Current Assets

     As of July 31, 1999, prepaid expenses and other current assets consisted
primarily of approximately $488,000 of prepaid commissions paid to the Company's
salespeople. This asset will be charged to expense as the related revenue is
recognized and the commissions are earned during the fiscal year.

  (h) Depreciation and Amortization

     The Company provides for depreciation and amortization by charges to
operations in amounts estimated to allocate the cost of property and equipment
over their estimated useful lives, on a straight-line basis, as follows:
ESTIMATED
                                                           USEFUL LIVES
                                                           -------------
Computer equipment.......................................    2-3 years
Furniture and fixtures...................................     5 years
Leasehold improvements...................................  Life of lease
(i) Software Development Costs and Research and Development Expenses

     SFAS No. 86, Accounting for the Costs of Computer Software To Be Sold,
Leased or Otherwise Marketed, requires the capitalization of certain computer
software development costs incurred after technological feasibility is
established. Once technological feasibility of a software product has been
established, the additional development costs incurred to bring the product to a
commercially acceptable level has not been and is not expected to be
significant. As a result, the Company has not capitalized software development
costs as of January 31, 1998 and 1999 and July 31, 1999.

     The Company charges all research and development expenses, which include
course content development fees, to operations as incurred.

  (j) Comprehensive Loss

     In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 requires disclosure of all
components of comprehensive income on an annual and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions, other events and circumstances from nonowner sources.
The Company does not have any components of comprehensive loss other than its
reported net loss.

                                       F-9
69
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

  (k) Fair Value of Financial Instruments

     Financial instruments consist mainly of cash and cash equivalents,
short-term investments accounts receivable and accounts payable. The carrying
amounts of these instruments approximate their fair value.

  (l) Concentrations of Credit Risk

     SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. The Company has no significant off-balance-sheet concentration
of credit risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements. The Company's accounts receivable credit risk is
concentrated domestically, because for the six months ended July 31, 1999 all
revenue was derived from domestic customers. For the six months ended and at
July 31, 1999, the Company had a customer that individually comprised 51% and
75% of the Company's total revenue and accounts receivable, respectively.

  (m) Disclosures About Segments of an Enterprise

     The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended January 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. The Company's chief operating decision makers,
as defined under SFAS No. 131, are the Chief Executive Officer and the Chief
Financial Officer. To date, the Company has viewed its operations and manages
its business as principally one operating segment. As a result, the financial
information disclosed herein represents all of the material financial
information related to the Company's principal operating segment.

  (n) Long-Lived Assets

     The Company follows the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of.
SFAS No. 121 requires that long-lived assets be reviewed for impairment by
comparing the fair value of the assets with the carrying amount. Any write-downs
are to be treated as permanent reductions in the carrying amount of the assets.
The Company believes that the carrying value of these assets is realizable and
to date has not recorded any impairment charges.

  (o) Recent Accounting Pronouncements

     In March 1998, the AICPA issued SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires
certain computer software costs associated with internal-use software to be
expensed as incurred until certain capitalization

                                      F-10
70
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

criteria are met. The Company adopted SOP No. 98-1 beginning February 1, 1999.
Adoption of this statement did not have a material impact on the Company's
financial position or results of operations.

     In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-up Activities, which requires that all nongovernmental entities expense
the costs of start-up activities, including organizational costs, as those costs
are incurred. The Company has recorded all such costs as expenses in the period
incurred.

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for periods
beginning after June 15, 2000. SFAS No. 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Because the Company currently
holds no derivative financial instruments and does not currently engage in
hedging activities, the adoption of SFAS No. 133 is not expected to have a
material impact on the Company's financial condition or results of operations.

(3) NOTES RECEIVABLE FROM STOCKHOLDERS

     In January 1998, the Company issued 950,000 shares of Class A common stock
to a founder of the Company in exchange for a note receivable equal to the fair
market value of the shares. The note receivable accrues interest at a rate of
6.2% per annum and the principal and all outstanding interest are due upon the
maturity of the note in December 2002. The balance on this note receivable is
$166,250 at January 31, 1998 and 1999 and July 31, 1999, and is included as a
reduction of stockholders' equity in the accompanying balance sheets and
statements of stockholders' equity.

     During the fiscal year ended January 31, 1999, the Company issued a total
of 800,000 shares of Class A restricted common stock to three founders of the
Company in exchange for notes receivable equal to the fair market value of the
shares. The shares vest ratably on a monthly basis over three years (see Note
6(b)). The notes receivable accrue interest at a rate of 5.77% per annum and the
principal and all outstanding interest are due upon the maturity of the notes in
June 2003. The total balance of these notes receivable is $140,000 at January
31, 1999 and July 31, 1999 and is included as a reduction of stockholders'
equity in the accompanying balance sheets and statements of stockholders'
equity.

     During February 1999, the Company issued a total of 187,500 shares of Class
A restricted common stock to several officers of the Company in exchange for
notes receivable equal to the fair market value of the shares. The shares vest
ratably on a monthly basis over three years (see Note 6(b)). The notes
receivable accrue interest at a rate of 4.83% per annum and the principal and
all outstanding interest are due upon the maturity of the notes in March 2004.
The total balance of these notes receivable is $32,813 at July 31, 1999 and is
included as a reduction of stockholders' equity in the accompanying balance
sheets and statements of stockholders' equity.

(4) INCOME TAXES

     The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes. Under the liability
method specified by SFAS No. 109, a deferred tax asset or liability is
determined based on the difference between the financial statement and tax bases
of assets and liabilities, as measured by the enacted tax rates assumed to be in
effect

                                      F-11
71
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

when these differences are expected to reverse. A deferred tax valuation
allowance is required if it is more likely than not that all or a portion of the
recorded deferred tax assets will not be realized.

     No provision for federal or state income taxes has been recorded, as the
Company incurred net operating losses for all periods presented. As of January
31, 1998 and 1999, the Company had net operating loss carryforwards of
approximately $164,000 and $3,741,000, respectively, available to reduce future
income taxes, if any. The Company also has available federal tax credit
carryforwards of approximately $120,000. If not utilized, these carryforwards
expire at various dates through the fiscal year ended January 31, 2019. If
substantial changes in the Company's ownership should occur, as defined by
Section 382 of the Internal Revenue Code (the Code), there could be annual
limitations on the amount of carryforwards which can be realized in future
periods. The Company has completed several financings since its inception and
has incurred ownership changes as defined under the Code. The Company does not
believe that these changes in ownership will have a material impact on its
ability to use its net operating loss and tax credit carryforwards.

     Net deferred tax assets consist of the following:
JANUARY 31,
                                                  -----------------------
                                                    1998         1999
                                                  ---------   -----------
Net operating loss carryforwards................  $  56,000   $ 1,272,000
Nondeductible expenses and reserves.............    262,000     2,072,000
Tax credits.....................................         --       120,000
                                                  ---------   -----------
                                                    318,000     3,464,000
Less--Valuation allowance.......................   (318,000)   (3,464,000)
                                                  ---------   -----------
                                                  $      --   $        --
                                                  =========   ===========
Due to the Company's history of operating losses, there is significant
uncertainty surrounding the Company's ability to utilize its net operating loss
and tax credit carryforwards. Accordingly, the Company has provided a full
valuation allowance against its otherwise recognizable deferred tax assets as of
January 31, 1998 and 1999.

     A reconciliation of the federal statutory rate to the Company's effective
tax rate is as follows:
JANUARY 31,
                                                        --------------
                                                        1998     1999
                                                        -----    -----
Income tax provision at federal statutory rate........  (34.0)%  (34.0)%
Increase (decrease) in tax resulting from --
  State tax provision, net of federal benefit.........   (4.6)    (4.6)
  Increase in valuation allowance.....................   38.6     38.6
                                                        -----    -----
Effective tax rate....................................     --%      --%
                                                        =====    =====
(5) COMMITMENTS AND CONTINGENCIES

  (a) Line-of-Credit with a Financial Institution

     In June 1999, the Company entered into a working capital credit facility
agreement with a financial institution, which expires on June 30, 2000 and is
automatically renewable for additional one-year terms. Under the working capital
line-of-credit, the Company may borrow up to the lesser of

                                      F-12
72
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

$5,000,000 or the sum of 80% of eligible accounts receivable, as defined, and
$1,000,000. Borrowings bear interest at the LIBOR rate (5.19% at July 31, 1999)
plus 4.875%. The working capital line-of-credit is collateralized by
substantially all assets of the Company. The agreement contains certain
covenants, with which, as of July 31, 1999, the Company was in full compliance.
As of July 31, 1999, there were no amounts outstanding under the working capital
line-of-credit and approximately $2,582,000 was available for borrowing.

  (b) Leases

     The Company leases its facility and certain equipment and furniture under
operating lease agreements that expire at various dates through October 2001.
Included in the accompanying statements of operations is rent expense for the
leased facility and equipment of approximately $0, $55,000, $28,000 and $55,000
for the period from incorporation (October 15, 1997) to January 31, 1998, for
the year ended January 31, 1999 and for the six months ended July 31, 1998 and
1999, respectively.

     Future minimum lease payments under the operating lease agreements are
approximately as follows:
FISCAL YEAR
               -----------
2000.....................................  $232,000
2001.....................................   205,000
2002.....................................    22,000
                                           --------
                                           $459,000
                                           ========
(c) Litigation

     In May 1998, the former employer of three of the Company's executive
officers and one key employee filed a lawsuit against the Company, the three
executive officers and the key employee. The former employer claims in substance
that the Company's President and Chief Executive Officer breached his fiduciary
obligations to his former employer by misappropriating alleged trade secrets,
commencing a rival concern and interfering with employment relationships by
soliciting other employees to join the Company while employed by their former
employer; that the Company's Vice President, Worldwide Sales and Marketing
breached his fiduciary obligations to his former employer by assisting the
Company's President and Chief Executive Officer in these activities; that the
other individuals allegedly misappropriated alleged trade secrets; and that the
Company misappropriated alleged trade secrets and allegedly interfered with
employment relationships. The claims seek injunctive relief and compensatory
damages in an amount to be determined and punitive damages in excess of
$10,000,000. Management denies all allegations and believes that it has
meritorious defenses to all claims and intends to vigorously defend its
positions. It is not possible to predict the outcome of this litigation.
Regardless of the outcome, this litigation will continue to result in
significant expenses and may divert the efforts and attention of the Company's
management from normal business operations and may have a material adverse
impact on the Company's business, financial condition or results of operations.
In connection with this lawsuit, the Company has recorded as expense $416,717,
$0 and $989,392 for the fiscal year ended January 31, 1999 and the six months
ended July 31, 1998 and 1999, respectively, which is included in general and
administrative expenses in the accompanying statements of operations.

                                      F-13
73
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

(6) STOCKHOLDERS' EQUITY

  (a) Convertible Preferred Stock

     The Company has authorized the issuance of 13,000,000 shares of convertible
preferred stock (the Preferred Stock), $.001 par value, of which 4,000,000,
4,761,905, and 3,174,603 shares have been designated as Series A, Series B and
Series C Preferred Stock, respectively. At July 31, 1999, 1,063,492 shares of
preferred stock are undesignated for a particular series.

     In January 1998, the Company issued 4,000,000 shares of Series A
convertible preferred stock for gross proceeds of approximately $7,000,000. In
August 1998, the Company issued 2,380,953 shares of Series B convertible
preferred stock for gross proceeds of approximately $5,000,000. In February
1999, the Company issued the remaining 2,380,952 shares of Series B convertible
preferred stock for gross proceeds of approximately $5,000,000. In August 1999,
the Company issued 1,195,238 shares of Series C convertible preferred stock for
gross proceeds of approximately $3,765,000.

     The rights, preferences and privileges of the Preferred Stock are as
follows:

     VOTING RIGHTS

          Each holder of outstanding shares of Preferred Stock shall be entitled
     to the number of votes equal to the number of whole shares of Class A
     common stock into which the shares of Series A, B and C Preferred Stock are
     then convertible.

     DIVIDENDS

          The holders of the Series A, B and C Preferred Stock shall be entitled
     to receive dividends of $0.14, $0.168 and $0.252 per share per annum,
     respectively, payable when and if declared by the Board of Directors of the
     Company. There were no dividends declared payable by the Board of Directors
     during the fiscal years ended January 31, 1998 and 1999 or the six months
     ended July 31, 1999.

     LIQUIDATION PREFERENCE

          In the event of any voluntary or involuntary liquidation, winding up
     or dissolution of the Company, the holders of the Company's Preferred Stock
     then outstanding are entitled to be paid out of the assets of the Company
     before any payment is made to common stockholders. The Series A, B and C
     preferred stockholders are entitled to be paid at a rate of $1.75, $2.10
     and $3.15 per share, respectively, plus any declared but unpaid dividends.
     In addition, the preferred stockholders are entitled to a liquidation
     dividend of an amount equal to 8% of the original issuance price for each
     year that the shares have been outstanding.

          After payment of all preferential amounts required to be paid to
     holders of the Preferred Stock as set forth above, upon the involuntary
     liquidation, winding up or dissolution of the Company, the remaining assets
     and funds of the Company will be distributed solely to the holders of the
     common stock.

                                      F-14
74
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     CONVERSION

          Each share of Series A, B and C Preferred Stock is convertible, at the
     option of the holder, at any time into one share of common stock, subject
     to adjustment based on certain defined events.

          Shares of Preferred Stock will convert into Class A common stock,
     provided that the conversion shall not cause the holder to possess greater
     than 49.9% of the total Class A common stock then outstanding and any
     additional shares shall convert to Class B common stock.

          In connection with the sale of shares of common stock in a public
     offering, resulting in at least $20,000,000 of net proceeds to the Company
     and a $6.30 per share price to the public, all outstanding shares of
     Preferred Stock shall automatically be converted into shares of common
     stock.

  (b) Common Stock

     The Company has authorized the issuance of up to 33,000,000 shares of
common stock, $.001 par value, of which 26,000,000 and 7,000,000 shares have
been designated as Class A and Class B, respectively. The voting, dividend and
liquidation rights of the holders of the common stock are subject to, and
qualified by, the rights of the holders of the Preferred Stock. The Company has
reserved 3,990,000 shares of common stock to be issued as either restricted
stock awards or stock options under the 1998 Stock Incentive Plan discussed in
Note 6(c). An additional 4,000,000, 4,761,905 and 3,174,603 shares of common
stock have been reserved for issuance upon the conversion of the Series A, B and
C Preferred Stock, respectively.

     The holders of the Class A common stock shall be entitled to vote on all
corporate matters, and the holders of the Class B common stock shall not be
entitled to vote for any such matters except changes and amendments to the Class
B shareholder rights and preferences.

     In connection with the Company's proposed initial public offering, all
issued and outstanding shares of Class A and Class B common stock will be
converted to a new single class of common stock.

     The Company issued 2,010,000 shares of Class A common stock, which were not
part of the 1998 Stock Incentive Plan, to a founder of the Company and to
several private investors in January 1998. Of these shares, 950,000 were issued
to a founder of the Company in exchange for a full recourse note receivable (see
Note 3).

     During the fiscal year ended January 31, 1999, the Company issued an
additional 1,686,000 shares of Class A restricted common stock pursuant to the
1998 Stock Incentive Plan. Of these shares, 800,000 were issued to three
founders of the Company in exchange for full recourse notes receivable (see Note
3). These shares all vest ratably on a monthly basis over a three-year period;
unvested shares are subject to the right of repurchase by the Company at the
original sales price of the shares.

     During the six months ended July 31, 1999, the Company issued an additional
390,000 shares of Class A restricted common stock pursuant to the 1998 Stock
Incentive Plan. Of these shares, 187,500 were issued to several officers of the
Company in exchange for full recourse notes receivable (see Note 3). These
shares all vest over a three-year period; unvested shares are subject to the
right of repurchase by the Company at the original sales price of the shares.

                                      F-15
75
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     As of July 31, 1999, a total of 1,250,472 shares of Class A restricted
common stock are subject to the right of repurchase by the Company.

  (c) Stock Option Plan

     In February 1998, the Company adopted the 1998 Stock Incentive Plan (the
Plan), pursuant to which up to 3,990,000 shares of common stock may be issued
over a 10-year period. Under the Plan, the Company may grant both incentive
stock options and nonqualified stock options, as well as award or sell shares of
common stock to employees, directors or outside consultants of the Company. All
option grants, prices and vesting periods are determined by the Board of
Directors. Incentive stock options may be granted at a price not less than 100%
of the fair market value of the common stock on the date of grant and not less
than 110% of the fair market value for a stockholder holding more than 10% of
the Company's voting common stock.

     All stock option activity under the Plan for the fiscal years ended January
31, 1998 and 1999 and for the six months ended July 31, 1999 is as follows:
WEIGHTED
                                                                             AVERAGE
                                                           EXERCISE          EXERCISE
                                             OPTIONS        PRICE             PRICE
                                             -------    --------------    --------------
Granted..................................  435,250     $      .175          $.175
                                             -------     -----------          -----
Outstanding, January 31, 1999..............  435,250            .175           .175
  Granted (unaudited)......................  413,750       .175-1.00            .41
  Exercised (unaudited)....................  (20,062)           .175           .175
  Canceled (unaudited).....................  (12,161)           .175           .175
                                             -------     -----------          -----
Outstanding, July 31, 1999 (unaudited).....  816,777     $ .175-1.00          $ .29
                                             =======     ===========          =====
Exercisable, January 31, 1999..............       --     $        --          $  --
                                             =======     ===========          =====
Exercisable, July 31, 1999 (unaudited).....   25,105     $      .175          $.175
                                             =======     ===========          =====
During August 1999, the Company granted options for the purchase of 98,500
shares of common stock at an exercise price of $1.00 per share.

     The following table summarizes certain information relating to the
outstanding and exercisable options as of July 31, 1999 (unaudited):
OUTSTANDING
----------------------------------------------------
                         WEIGHTED                             EXERCISABLE
                         AVERAGE                       --------------------------
 RANGE                  REMAINING        WEIGHTED                     WEIGHTED
   OF       NUMBER     CONTRACTUAL       AVERAGE        NUMBER        AVERAGE
EXERCISE      OF           LIFE          EXERCISE         OF          EXERCISE
 PRICES     SHARES       (YEARS)          PRICE         SHARES         PRICE
--------   ---------   ------------   --------------   ---------   --------------
$.175      700,277        9.3            $.175         25,105         $.175
  1.00      116,500        9.9             1.00             --            --
            -------                                     ------
            816,777                                     25,105
            =======                                     ======
F-16
76
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     In connection with certain issuances of Class A restricted common stock and
stock option grants during the six months ended July 31, 1999, the Company
recorded deferred compensation of $754,156, which represents the aggregate
difference between the exercise or sale price and the fair market value of the
common stock as determined for accounting purposes. The deferred compensation
will be recognized as an operating expense over the vesting period of the
restricted common stock and the underlying stock options. The Company recorded
compensation expense of $38,345 in the six months ended July 31, 1999 related to
these restricted shares and options. In addition, the Company will record
additional deferred compensation of approximately $1,202,000 related to the sale
of 120,000 shares of Class A restricted common stock and to the grant of 98,500
options in August 1999, which also will be recognized as an operating expense
over the vesting period of the restricted common stock and the underlying stock
options.

  (d) Stock-Based Compensation

     In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 requires the measurement of the fair value of stock
options to employees to be included in the statements of operations or disclosed
in the notes to financial statements. The Company accounts for stock-based
compensation for its employees under Accounting Principles Board (APB) Opinion
No. 25 and elected the disclosure-only alternative under SFAS No. 123, which
requires disclosure of the pro forma effects on earnings as if the
fair-value-based method of accounting under SFAS No. 123 had been adopted, as
well as certain other information.

     The Company has computed the pro forma disclosures required under SFAS No.
123 for options granted in fiscal 1999 and the six months ended July 31, 1998
and 1999 using the Black-Scholes option pricing model prescribed by SFAS No.
123. The weighted average information and assumptions used for the grants is as
follows:
YEAR ENDED   SIX MONTHS ENDED JULY 31,
                                                JANUARY 31,  --------------------------
                                                   1999          1998          1999
                                                -----------  ------------  ------------
                                                                    (UNAUDITED)
Risk-free interest rates......................  4.18-5.52%   5.47-5.52%    5.01-6.02%
Expected dividend yield.......................      -             -             -
Volatility factor.............................      -             -             -
Expected lives................................   7 years       7 years       7 years
Weighted average fair value of options
  granted.....................................     $.05         $.06          $2.57
Weighted average remaining contractual life of
  outstanding options.........................  9.6 years     9.9 years     9.4 years
F-17
77
                             SKILLSOFT CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
        (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS) -- (CONTINUED)

     Had compensation expense for the Plan been determined consistent with SFAS
No. 123, the Company's net loss and basic and diluted net loss per share would
have been increased to the following pro forma amounts:
YEAR ENDED     SIX MONTHS ENDED JULY 31,
                                         JANUARY 31,    --------------------------
                                            1999           1998           1999
                                         -----------    -----------    -----------
                                                               (UNAUDITED)
Net loss --
  As reported..........................  $(8,272,541)   $(2,727,509)   $(7,641,914)
  Pro forma............................   (8,274,806)    (2,727,744)    (7,695,590)
Basic and diluted net loss per share --
  As reported..........................        (2.70)         (1.13)         (1.91)
  Pro forma............................        (2.70)         (1.13)         (1.93)
Because additional option grants are expected to be made in future periods,
the above pro forma disclosures may not be representative of pro forma effects
on results for future periods.

(7) ACCRUED EXPENSES

     Accrued expenses in the accompanying balance sheets consist of the
following:
JANUARY 31,
                                              ----------------------     JULY 31,
                                                1998         1999          1999
                                              --------    ----------    -----------
                                                                        (UNAUDITED)
Accrued compensation........................  $622,788    $  654,430    $  691,875
Professional fees...........................        --       380,449       343,500
Sales tax...................................        --            --       132,018
Other.......................................     1,804       109,824        88,024
                                              --------    ----------    ----------
                                              $624,592    $1,144,703    $1,255,417
                                              ========    ==========    ==========
(8) EMPLOYEE BENEFIT PLAN

     The Company has a 401(k) plan covering all employees of the Company who
have met certain eligibility requirements. Under the terms of the 401(k) plan,
the employees may elect to make tax-deferred contributions to the 401(k) plan.
In addition, the Company may match employee contributions, as determined by the
Board of Directors, and may make a discretionary contribution to the 401(k)
plan. No matching or discretionary contributions have been made to the 401(k)
plan in any period.

                                      F-18
78

                                    PART II

                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:
SEC registration fee........................................  $12,788
NASD filing fee.............................................    5,100
Nasdaq National Market listing fee..........................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Transfer agent and registrar fees and expenses..............
Director and officer insurance..............................
                                                              -------
Miscellaneous...............................................
                                                              -------
          Total.............................................  $
                                                              =======
SkillSoft will bear all expenses shown above.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     The Delaware General Corporation Law and SkillSoft's Certificate of
Incorporation provide for indemnification of SkillSoft's directors and officers
for liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of SkillSoft and, with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.

     The Underwriting Agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of SkillSoft against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").

     In addition, SkillSoft has purchased a directors and officers liability
insurance policy.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.

     In the three years preceding the filing of this registration statement,
SkillSoft has sold the following securities that were not registered under the
Securities Act:

          1. On December 10, 1997, SkillSoft issued and sold 1,900,000 shares of
     its common stock to Mr. Moran for an aggregate purchase price of $332,500.
     This issuance was made pursuant to Section 4(2) of the Securities Act.

          2. On December 10, 1997, SkillSoft issued and sold an aggregate of
     110,000 shares of its common stock to two purchasers for an aggregate
     purchase price of $19,250. This issuance was made pursuant to Section 4(2)
     of the Securities Act.

                                      II-1
79

          3. On January 8, 1998, SkillSoft issued and sold an aggregate of
     4,000,000 shares of its Series A preferred stock to two purchasers for an
     aggregate purchase price of $7,000,000. These issuances were made pursuant
     to Section 4(2) of the Securities Act.

          4. On August 14, 1998 and February 16, 1999, SkillSoft issued and sold
     an aggregate of 4,761,905 shares of its Series B preferred stock to
     Warburg, Pincus Ventures, L.P. for an aggregate purchase price of
     $10,000,000. These issuances were made pursuant to Section 4(2) of the
     Securities Act.

          5. On August 5, 1999, SkillSoft issued and sold an aggregate of
     1,195,238 of its Series C preferred stock to five purchasers for an
     aggregate purchase price of $3,765,000. These issuances were made pursuant
     to Section 4(2) of the Securities Act.

          6. Between June 19, 1998 and September 1, 1999, SkillSoft issued a
     total of 2,231,874 shares of common stock to thirteen persons under its
     1998 Stock Incentive Plan for purchase prices between $0.175 and $1.00 per
     share. These shares were issued in reliance upon the exemption from
     registration under Rule 701 promulgated under the Securities Act.

     No underwriters were involved in the foregoing sales of securities.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

     (a) EXHIBITS.
EXHIBIT
  NO.                               EXHIBIT
-------                             -------
1.01*    Form of Underwriting Agreement.
 3.01     Amended and Restated Certificate of Incorporation of
          SkillSoft.
 3.02*    Form of Certificate of Amendment to Certificate of
          Incorporation of SkillSoft (to be filed prior to closing of
          the public offering).
 3.03*    Form of Amended and Restated Certificate of Incorporation of
          SkillSoft (to be filed following the closing of this public
          offering).
 3.04*    By-Laws of SkillSoft.
 4.01*    Specimen Certificate for shares of SkillSoft's Common Stock.
 5.01*    Legal Opinion of Hale and Dorr LLP.
10.01     1998 Stock Incentive Plan, as amended.
10.02*    1999 Non-Employee Director Stock Option Plan.
10.03     Employment Agreement between SkillSoft and Charles E. Moran
10.04     Security Agreement and Secured Promissory Note between
          SkillSoft and Charles E. Moran, each dated December 10,
          1997.
10.05     Employment Agreement dated January 12, 1998 between
          SkillSoft and Mark A. Townsend.
10.06     Employment Agreement dated February 2, 1998 between
          SkillSoft and Thomas J. McDonald.
10.07     Employment Agreement dated April 9, 1998 between SkillSoft
          and Jerald A. Nine.
10.08     Amended and Restated Registration and Investor Rights
          Agreement dated August 5, 1999 between SkillSoft and the
          Investors named therein.
21.01     Subsidiaries.
II-2
80
EXHIBIT
  NO.                               EXHIBIT
-------                             -------
23.01*    Consent of Hale and Dorr LLP (included in Exhibit 5.01).
23.02     Consent of Arthur Andersen LLP.
24.01     Power of Attorney (included on Page II-4).
27.01     Financial Data Schedule.
27.02     Financial Data Schedule.
27.03     Financial Data Schedule.
-------------------------

* To be filed by amendment.

     (b) FINANCIAL STATEMENT SCHEDULES.

     All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17.  UNDERTAKINGS.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

     The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser, (2) that for
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497 (h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

                                      II-3
81

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Nashua, New Hampshire
on September 9, 1999.

                                          SKILLSOFT CORPORATION

                                          By: /s/ CHARLES E. MORAN
                                            ------------------------------------
                                              Charles E. Moran
                                              President, Chief Executive Officer
                                              and Chairman of the Board

                               POWER OF ATTORNEY
                                 AND SIGNATURES

     We, the undersigned officers and directors of SkillSoft Corporation hereby
severally constitute and appoint Charles E. Moran, Thomas J. McDonald, Patrick
J. Rondeau and Scott E. Pueschel and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, with full powers of
substitution and resubstititon, to sign for us and in our names in the
capacities indicated below, the Registration statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement on Form S-1 filed herewith and any and all pre-effective
and post effective amendment to said Registration Statement, and any subsequent
Registration statement for the same offering which may be filed under Rule
462(b), and generally to do all such things in our names and on our behalf in
our capacities as officers and directors to enable SkillSoft Corporation to
comply with the provision of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney, or any of
them, or their substitute or substitutes, to said Registration Statement and any
and all amendments thereto or to any subsequent Registration Statement for the
same offering which may be file under Rule 462(b).

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                     TITLE(S)                       DATE
                     ---------                                     --------                       ----
/s/ CHARLES E. MORAN                  President, Chief Executive Officer    September 9, 1999
---------------------------------------------------    and Chairman of the Board
                 Charles E. Moran                      (Principal Executive Officer)

              /s/ THOMAS J. MCDONALD                 Chief Financial Officer (Principal    September 9, 1999
---------------------------------------------------    Financial and Accounting Officer)
                Thomas J. McDonald

              /s/ STEWART K.P. GROSS                 Director                              September 9, 1999
---------------------------------------------------
                Stewart K.P. Gross

               /s/ C. SAMANTHA CHEN                  Director                              September 9, 1999
---------------------------------------------------
                 C. Samantha Chen

                /s/ JAMES ADKISSON                   Director                              September 9, 1999
---------------------------------------------------
                  James Adkisson

            /s/ WILLIAM T. COLEMAN III               Director                              September 9, 1999
---------------------------------------------------
              William T. Coleman III
II-4
82

                                 EXHIBIT INDEX
EXHIBIT
  NO.                               EXHIBIT
-------                             -------
1.01*    Form of Underwriting Agreement.
 3.01     Amended and Restated Certificate of Incorporation of
          SkillSoft.
 3.02*    Form of Certificate of Amendment to Certificate of
          Incorporation of SkillSoft (to be filed prior to closing of
          the public offering).
 3.03*    Form of Amended and Restated Certificate of Incorporation of
          SkillSoft (to be filed following the closing of this public
          offering).
 3.04*    By-Laws of SkillSoft.
 4.01*    Specimen Certificate for shares of SkillSoft's Common Stock.
 5.01*    Legal Opinion of Hale and Dorr LLP.
10.01     1998 Stock Incentive Plan, as amended.
10.02*    1999 Non-Employee Director Stock Option Plan.
10.03     Employment Agreement between SkillSoft and Charles E. Moran
10.04     Security Agreement and Secured Promissory Note between
          SkillSoft and Charles E. Moran, each dated December 10,
          1997.
10.05     Employment Agreement dated January 12, 1998 between
          SkillSoft and Mark A. Townsend.
10.06     Employment Agreement dated February 2, 1998 between
          SkillSoft and Thomas J. McDonald.
10.07     Employment Agreement dated April 9, 1998 between SkillSoft
          and Jerald A. Nine.
10.08     Amended and Restated Registration and Investor Rights
          Agreement dated August 5, 1999 between SkillSoft and the
          Investors named therein.
21.01     Subsidiaries.
23.01*    Consent of Hale and Dorr LLP (included in Exhibit 5.01).
23.02     Consent of Arthur Andersen LLP.
24.01     Power of Attorney (included on Page II-4).
27.01     Financial Data Schedule.
27.02     Financial Data Schedule.
27.03     Financial Data Schedule.
------------------------

* To be filed by amendment.