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The Company records revenue net of applicable sales tax collected. Taxes collected from customers are recorded as part of accrued expenses on the balance sheet and are remitted to state and local taxing jurisdictions based on the filing requirements of each jurisdiction.

The Company records as deferred revenue amounts that have been billed in advance for products or services to be provided. Deferred revenue includes the unamortized portion of revenue associated with license fees for which the Company has received payment or for which amounts have been billed and are due for payment in 90 days or less for resellers and 180 days or less for direct customers.

~~The Company’s~~SkillSoft contracts often include an uptime guarantee for solutions hosted on ~~its~~the Company’s servers whereby customers may be entitled to credits in the event of non-performance. The Company also retains the right to remedy any nonperformance event prior to issuance of any credit. Historically, the Company has not incurred substantial costs relating to this guarantee and the Company currently accrues for such costs as they are incurred. The Company reviews these costs on a regular basis as actual experience and other information becomes available; and should these costs become substantial, the Company would accrue an estimated exposure and consider the potential related effects of the timing of recording revenue on its license arrangements. The Company has not accrued any costs related to these warranties in the accompanying condensed consolidated financial statements.

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5. SHAREHOLDERS’ EQUITY

~~5. ACCOUNTING FOR SHARE-BASED COMPENSATION~~(a) ADS Repurchase Program

On April 8, 2008, the Company’s shareholders approved a program for the repurchase by the Company of up to an aggregate of 10,000,000 ADSs. On September 24, 2008, the Company’s shareholders approved an increase in the number of shares that may be repurchased under the program to 25,000,000 and an extension of the repurchase program until March 23, 2010. As of July 31, 2009, 11,277,508 shares remain available for repurchase, subject to certain limitations, under the shareholder approved repurchase program.

During the six months ended July 31, 2009, the Company repurchased a total of 2,625,177 shares for a total purchase price, including commissions, of $19.9 million. The Company retired 3,281,779 shares during the six months ended July 31, 2009, including 830,802 shares repurchased in the prior fiscal year. As of July 31, 2009, 174,200 of the repurchased shares had not yet been retired or canceled and were held as treasury shares at cost. The Company intends to retire these shares in the near future.

(b) Share Based Compensation

The Company has ~~several~~two share-based compensation plans under which employees, officers, directors and consultants may be granted options to purchase the Company’s ordinary shares, generally at the market price on the date of grant. The options become exercisable over various periods, typically four years (and typically one or three years in the case of directors), and have a maximum term of ~~up to~~ ten years. As of ~~October~~July 31, ~~2008, 2,363,263~~2009, 2,039,826 ordinary shares remain available for future grant under the Company’s share option plans. Please see Note 9 of the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as filed with the SEC on ~~March 31, 2008~~April 1, 2009 for a detailed description of the Company’s share option plans.

A summary of share option activity under the Company’s plans during the ~~nine~~six months ended ~~October~~July 31, ~~2008~~2009 is as follows:

Share Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding, January 31, 2009		13,024,156		$	7.54
Granted		60,000			4.17
Exercised		(109,167	)		3.31
Forfeited		(32,917	)		3.94
Expired		(333,390	)		14.96
Outstanding, July 31, 2009		12,608,682		$	7.37		3.55	$	30,470
Exercisable, July 31, 2009		10,254,605		$	7.73		3.36	$	23,851
Vested and Expected to Vest, July 31, 2009 (1)		12,326,377		$	7.42		3.54	$	29,474

Share Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands)
Outstanding, January 31, 2008 16,630,763 $ 7.05 4.76
Granted 50,000 10.81
Exercised (3,636,058 ) 4.51
Cancelled (69,420 ) 15.01
Outstanding, October 31, 2008 12,975,285 $ 7.74 4.13 $ 20,240
Exercisable, October 31, 2008 9,757,981 $ 8.10 3.77 $ 16,255
Vested and Expected to Vest, October 31, 2008 (1) 12,564,616 $ 7.77 4.09 $ 19,731

~~___________~~____________

(1)

Represents the number of vested options as of ~~October~~July 31, ~~2008~~2009 plus the number of unvested options as of ~~October~~July 31, ~~2008~~2009 that are expected to vest, adjusted for an estimated forfeiture rate of ~~12.9%~~15.4%. The Company recognizes expense incurred under SFAS No. 123(R) on a straight line basis. Due to the Company’s vesting schedule, expense is incurred on options that have not yet vested but which are expected to vest in a future period. The options for which expense has been incurred but have not yet vested are included above as options expected to vest.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the shares ~~on October 31, 2008 of $7.70~~ and the exercise price of each in-the-money option) that would have been ~~received~~realized by the option holders had all option holders exercised their options on ~~October~~July 31, ~~2008.~~2009.

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The ~~total~~aggregate intrinsic value of options exercised during the three and six months ended ~~October~~July 31, ~~2008 and 2007~~2009 was approximately ~~$10.8~~$0.3 million and ~~$0.6~~$0.5 million, respectively. The ~~total intrinsic~~weighted average grant date fair value of options ~~exercised~~granted as calculated by Black-Scholes option pricing model during the ~~nine~~six months ended ~~October~~July 31, 2009 and 2008 was $3.19 and ~~2007 was approximately $21.7 million and $6.3 million,~~$3.84 per share, respectively.

6. ~~ACQUISITION~~

On May 14, 2007, the Company acquired NETg from The Thomson Corporation for approximately $254.7 million in cash. The combined entity offers a more robust multi-modal solution that includes online courses, simulations, digitized books and an on-line video library as well as complementary learning technologies. The acquisition supports SkillSoft’s mission to deliver comprehensive and high quality learning solutions and positions the Company to serve the demands of this growing marketplace.

~~The acquisition of NETg was accounted for as a business combination under SFAS No. 141, “Business Combinations”~~ ~~(SFAS No. 141), using the purchase method. Accordingly, the results of NETg have been included in the Company’s consolidated financial statements since the date of acquisition.~~

~~SUPPLEMENTAL PRO-FORMA INFORMATION~~

The Company concluded that the NETg acquisition represented a material business combination. The following are unaudited pro forma results of operations of the Company and NETg assuming the NETg acquisition occurred on February 1, 2007, with pro forma adjustments to give effect to amortization of intangible assets, an increase in interest expense on acquisition financing and certain other adjustments:

NINE MONTHS ENDED OCTOBER 31, 2007

Revenue $ 266,233
Net income (loss) (18,800 )
Net income (loss) per share - basic $ (0.18 )
Net income (loss) per share - diluted $ (0.17 )

~~The unaudited pro forma results above are not necessarily indicative of results of operations that may have actually occurred had the acquisition of NETg occurred on the date noted.~~

7. SPECIAL CHARGES

MERGER AND EXIT COSTS

(a) Merger and Exit Costs Recognized as Liabilities in Purchase Accounting

In connection with the closing of the NETg acquisition on May 14, 2007, the Company’s management effected an acquisition integration effort to eliminate redundant facilities and employees and to reduce the overall cost structure of the acquired business to better align the Company’s operating expenses with existing economic conditions, business requirements and the Company’s operating model. Pursuant to this restructuring, the Company recorded $11.6 million of costs related to severance and related benefits, costs to vacate leased facilities and other pre-Acquisition liabilities. These costs were accounted for under EITF Issue No. 95-3, “~~Recognition of Liabilities in Connection with Purchase Business Combinations.” These costs, which were recognized as a liability assumed in the purchase business combination, were included in the allocation of the purchase price.~~

The reductions in employee headcount totaled approximately 360 employees from the administrative, sales, marketing and development functions, and amounted to a liability of approximately $8.9 million, which was paid against the exit plan accrual through October 31, 2008.

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In connection with the exit plan, the Company abandoned certain leased facilities and has a remaining facilities consolidation liability of $0.1 million as of October 31, 2008, consisting of lease termination costs, broker commissions and other facility costs. As part of the plan, two larger sites and a number of small locations were vacated. The fair value of the lease termination costs was calculated with certain assumptions related to the Company’s estimated cost recovery efforts from subleasing vacated space, including (i) the time period over which the property will remain vacant, (ii) the sublease terms and (iii) the sublease rates.

The Company’s merger and exit liabilities, which include previous merger and acquisition transactions, are recorded in accrued expenses (see Note 13) and long-term ~~liabilities (see Note 16).~~liabilities. Activity in the ~~nine~~six month period ended ~~October~~July 31, ~~2008~~2009 is as follows (in thousands):

EMPLOYEE SEVERANCE AND RELATED COSTS CLOSEDOWN OF FACILITIES OTHER TOTAL
Merger and exit accrual January 31, 2008 $ 1,646 $ 3,224 $ 1,370 $ 6,240
Adjustment to provision for merger and exit costs in connection with the acquisition of NETg 212 (139 ) (971 ) (898 )
Adjustment to provision for merger and exit costs in connection with the acquisition of SmartForce (899 ) 266 - (633 )
Payments made during the nine months ended October 31, 2008 (959 ) (1,723 ) (164 ) (2,846 )
Merger and exit accrual October 31, 2008 $ - $ 1,628 $ 235 $ 1,863

	CLOSEDOWN OF FACILITIES			OTHER		TOTAL
Merger and exit accrual January 31, 2009	$	1,594		$	77	$	1,671
Payments made		(845	)		11		(834	)
Adjustment to provision for merger and exit costs in connection with the SmartForce Merger		(381	)		-		(381	)
Merger and exit accrual July 31, 2009	$	368		$	88	$	456

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

Year Ended January 31,
2009 (remaining 3 months) $ 409
2010 452
2011 1,002
Total $ 1,863

Year Ended January 31, 2010 (remaining 6 months)	$	93
Year Ended January 31, 2011		363
Total	$	456

In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” the costs of continued employment of certain former employees of NETg ~~employees~~(which the Company acquired in May 2007), during the transition period ~~were~~are being expensed as incurred and are included in merger and integration related expenses in the accompanying statements of income.

(b) Discontinued Operations

In connection with the NETg acquisition, the Company discontinued four businesses acquired from ~~NETg because the Company believed those product offerings~~NETg.

Discontinued operations did not ~~represent areas that could grow in a manner consistent with~~affect our results of operations during the ~~Company’s operating model~~three or ~~be consistent with the Company’s profit model or strategic initiatives. The businesses that were identified as discontinued operations were Financial Campus, NETg Press, Interact Now and Wave.~~

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six months ended July 31, 2009. Summarized results of operations for discontinued operations ~~which includes~~for the three and six months ended July 31, 2008 is as follows (in thousands):

	THREE MONTHS ENDED JULY 31, 2008		SIX MONTHS ENDED JULY 31, 2008
Revenue from discontinued operations	$	107	$	288

Gain from discontinued operations before income taxes		3,459		3,305
Income tax		1,392		1,331
Gain from discontinued operations	$	2,067	$	1,974

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The income from discontinued operations before income tax for the six months ended July 31, 2008 consisted primarily of a ~~gain of $2.0~~$3.4 million ~~net of income tax~~gain resulting from proceeds received ~~during the second quarter of fiscal 2009~~ from the Company’s sale of the assets related to the NETg Press business in October 2007, ~~are as follows (in thousands):~~

THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
2008 2007 2008 2007

Revenue from discontinued operations $ (64 ) $ 3,134 $ 224 $ 6,760
(Loss) gain from discontinued operations before income tax (62 ) (662 ) 3,243 249
Income tax (benefit) provision (25 ) (311 ) 1,306 76
(Loss) gain from discontinued operations $ (37 ) $ (351 ) $ 1,937 $ 173
which was partially offset by a $0.1 million loss from discontinued operations.

On January 19, 2009, the Company committed to a reduction in force with respect to a total of approximately 120 employees in the United States, Canada, Ireland and the United Kingdom. The decision was based on a review of various cost savings initiatives undertaken in connection with the development of the Company’s budget and operating plan for fiscal 2010. The Company also recorded a $56,000 restructuring charge in the six months ended July, 31 2009, which is included in the statement of income as restructuring, and is primarily related to a further reduction in force of 6 employees in its Australia office, which was communicated on March 4, 2009. Substantially all of this charge represents the severance cost for the terminated employees.

Activity in the Company’s restructuring accrual was as follows (in thousands):

Restructuring accrual as of January 31, 2009	$	1,112
Payments made		(1,161	)
Restructuring charges incurred		56
Restructuring accrual as of July 31, 2009	$	7

Total restructuring accrual as of January 31, 2008 $ 961
Payments made during the nine months ended October 31, 2008 (464 )
Restructuring charges incurred during the nine months ended October 31, 2008 -
Total restructuring accrual as of October 31, 2008 $ 497

The Company anticipates that the remainder of the restructuring accrual will be paid out in fiscal ~~2009.~~2010.

8.7. GOODWILL AND INTANGIBLE ASSETS

Intangible assets are as follows (in thousands):

	OCTOBER 31, 2008									JANUARY 31, 2008
	GROSS						NET			GROSS						NET
	CARRYING			ACCUMULATED			CARRYING			CARRYING			ACCUMULATED			CARRYING			JULY 31, 2009						JANUARY 31, 2009
	AMOUNT			AMORTIZATION			AMOUNT			AMOUNT			AMORTIZATION			AMOUNT			GROSS CARRYING AMOUNT		ACCUMULATED AMORTIZATION		NET CARRYING AMOUNT		GROSS CARRYING AMOUNT		ACCUMULATED AMORTIZATION		NET CARRYING AMOUNT
Internally developed software/ courseware		$	38,717		$	38,430		$	287		$	38,717		$	33,259		$	5,458	$	38,717	$	38,526	$	191	$	38,717	$	38,462	$	255
Customer contracts			36,848			25,231			11,617			36,848			19,846			17,002		36,848		29,793		7,055		36,848		26,938		9,910
Non-compete			6,900			4,140			2,760			6,900			2,070			4,830
Non-compete agreement																				6,900		6,210		690		6,900		4,830		2,070
Trademarks and trade names			2,725			2,047			678			2,725			1,028			1,697		2,725		2,725		—		2,725		2,388		337
Books trademark			900			-			900			900			-			900
Books 24X7 trademark																				900		—		900		900		—		900
		$	86,090		$	69,848		$	16,242		$	86,090		$	56,203		$	29,887	$	86,090	$	77,254	$	8,836	$	86,090	$	72,618	$	13,472

Table of ~~additional fees to the Lenders upon execution of Amendment No. 1. Pursuant to Amendment No. 1, the~~Contents

Table of comprehensive income was a $0.3 million net gain and a $0.8 million net loss, respectively. For the nine months ended October 31, 2008 and 2007, the change in net unrealized gains (losses) on the interest rate swap designated as a cash flow hedge and reported as a component of comprehensive income was a $1.2 million net gain and a $1.1 million net loss, respectively.Contents

Amounts reported in accumulated other comprehensive income related to derivatives will be ~~incurred as~~reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The ~~change in net unrealized gains (losses)~~current interest rate swap held by the Company matures on ~~cash flow hedges reflects a reclassification of $0.6 million of net unrealized losses and $0.1 million of net unrealized gains~~December 31, 2009. For the period from accumulated other comprehensive income to interest expense for the three months ended October 31, 2008 and 2007, respectively. The change in net unrealized gains (losses) on cash flow hedges reflects a reclassification of $1.8 million of net unrealized losses and $0.2 million of net unrealized gains from accumulated other comprehensive income to interest expense for the nine months ended October 31, 2008 and 2007, respectively. During the twelve month period ending OctoberAugust 1, 2009 through December 31, 2009, the Company estimates that ~~it will incur~~ an additional ~~$1.5~~$0.5 million will be recorded as an increase to interest expense.

As of July 31, 2009, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest ~~expense relating to the interest~~ rate ~~swap.~~risk:

~~20. SHARE REPURCHASE PROGRAM~~

Interest Rate Derivates		Notional (in thousands)			Effective Date	Maturity Date	Index		Strike Rate
Interest Rate Swap		$	38,400		May 14, 2007	December 31, 2009	3 Month LIBOR			5.1015	%

~~On April 8, 2008,~~The following table summarizes the location of the fair value of the Company’s ~~shareholders approved a program for~~derivative instruments within the ~~repurchase by~~condensed consolidated balance sheets as of July 31, 2009, and January 31, 2009 (in thousands):

	Balance Sheet Location	July 31, 2009		January 31, 2009
Liabilities:
Derivative instruments designated as a cash flow instruments under SFAS 133:
Interest rate swap contracts	Accrued expenses	$	485	$	1,581
Total assets		$	485	$	1,581

The tables below present the ~~Company~~effect of ~~up to an aggregate of 10,000,000 ADSs. On September 24, 2008,~~ the Company’s ~~shareholders approved an increase in~~derivative financial instruments on the ~~number~~Consolidated Statement of ~~shares that may be repurchased under the program to 25,000,000 and an extension of the repurchase program until March 23, 2010. During~~Income for the three and ~~nine~~six months ended ~~October~~July 31, ~~2008,~~2009 (in thousands):

	Amount of Gain (Loss) Recognized in OCI			Amount of Gain (Loss) Reclassified from AOCI into Net Income			Location of Gain (Loss) Reclassified from AOCI into Net Income
For the three months ended July 31, 2009:
Interest rate swap contracts	$	(71	)	$	(539	)	Interest Expense
Total	$	(71	)	$	(539	)

	Amount of Gain (Loss) Recognized in OCI			Amount of Gain (Loss) Reclassified from AOCI into Net Income			Location of Gain (Loss) Reclassified from AOCI into Net Income
For the six months ended July 31, 2009:
Interest rate swap contracts	$	(117	)	$	(1,213	)	Interest Expense
Total	$	(117	)	$	(1,213	)

As of July 31, 2009, the fair value of derivatives is in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these instruments was $0.6 million. As of July 31, 2009, the Company repurchased a total of 2,985,680 and 5,709,399 shares, respectively, for a total purchase price, including commissions, of $29.3 million and $56.5 million, respectively. The Company retired 11,586,183 shares during the three months ended October 31, 2008, including 6,533,884 shares repurchased in prior fiscal years. As of October 31, 2008, 657,100 of the repurchased shares havehad not ~~been retired or canceled and are held as treasury stock at cost;~~posted any collateral related to these instruments. If the Company ~~intends~~had breached any of these provisions at July 31, 2009, it would have been required to ~~retire these shares in the near future. As of October 31, 2008, 19,290,601 shares remain available for repurchase, subject to certain limitations,~~settle its obligations under the ~~shareholder approved repurchase program.~~instruments at their termination value of $0.6 million.

~~21.~~

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19. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In ~~February 2007, the FASB, issued SFAS No. 159,~~ ~~“The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115~~ ” (SFAS No. 159), which permits entities to choose to measure many financial instruments and certain other items at fair value and is effective for fiscal years beginning after November 15, 2007, or February 1, 2008 for SkillSoft. The Company adopted SFAS No. 159 on February 1, 2008 and elected not to measure any additional financial instruments or other items at fair value. Adoption of SFAS No. 159 did not have a material impact on the Company’s financial position or results of operations.

In December 2007, the ~~FASB~~Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised), “Business ~~Combinations”~~Combinations” (SFAS ~~No.~~ 141(R)). SFAS ~~No.~~ 141(R) changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. Adoption of SFAS ~~No.~~ 141(R) ~~is effective~~on February 1, 2009 did not have a material impact on the Company’s financial position or results of operations. The adoption of SFAS 141(R) will have an impact on the Company’s accounting for ~~the Company for any~~ business combinations ~~for which the acquisition date is~~occurring on or after ~~February 1, 2009, with early~~the adoption ~~prohibited.~~date, but the effect will be dependent on the acquisitions at that time.

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In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. ~~51”~~ 51~~(SFAS No.~~” (SFAS 160). SFAS ~~No.~~ 160 changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS ~~No.~~ 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. ~~SFAS No. 160 is effective for the Company in fiscal 2009, with early adoption prohibited.~~ Adoption of SFAS ~~No.~~ 160 on February 1, 2009 did not have a material impact on the Company’s financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. ~~133”~~ 133~~(SFAS No.~~” (SFAS 161). SFAS ~~No.~~ 161 applies to all derivative instruments and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 37 and 42 of Statement 133 and related hedged items accounted for under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging ~~Activities”~~ Activities~~(SFAS No.~~” (SFAS 133). SFAS ~~No.~~ 161 requires entities to provide greater transparency through additional disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows. Adoption of SFAS 161 on February 1, 2009 did not have a material impact on the Company’s financial position or results of operations.

In April 2008, the FASB issued FASB Staff Position (FSP) No. ~~161~~142-3, “Determination of the Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for SFAS 142’s entity-specific factors. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2009. Adoption of this statement is not expected to have a material impact on the ~~Company on February 1,~~Company’s consolidated financial statements when it becomes effective.

In May 2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 165, “Subsequent Events”(SFAS 165) . SFAS 165 does not require significant changes regarding recognition or disclosure of subsequent events, but does require disclosure of the date through which subsequent events have been evaluated for disclosure and recognition. SFAS 165 is effective for financial statements issued after June 15, 2009. The ~~Company is currently analyzing~~implementation of this standard did not have a significant impact on the ~~effect, SFAS No. 161 will~~financial statements of the Company. Subsequent events through the filing date of this Quarterly Report on Form 10-Q have ~~on its disclosures related to the Company’s interest rate swap agreement.~~been evaluated for disclosure and recognition.

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ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Any statement~~From time to time, including in this Quarterly Report on Form 10-Q, ~~about our future expectations,~~we may make forward-looking statements relating to such matters as anticipated financial performance, business prospects, strategy, plans, regulatory, market and ~~prospects, including statements containing the words “believes,” “anticipates,” “plans,” “expects,” “will”~~industry trends, and similar ~~expressions, constitute forward-looking statements within the meaning of~~matters. The Private Securities Litigation Reform Act of ~~1995. Actual~~1995 and federal securities laws provides a safe harbor for forward-looking statements. We note that a variety of factors, including known and unknown risks and uncertainties as well as incorrect assumptions, could cause our actual results ~~may~~and experience to differ materially from ~~those indicated by~~the anticipated results or other expectations expressed in such forward-looking ~~statements as a result~~statements. The factors that may affect the operations, performance, development and results of ~~various important factors, including~~our business include those ~~set forth~~discussed under Part II, Item 1A, “Risk ~~Factors.”~~Factors” of this Quarterly Report on Form 10-Q.

As used in this Form 10-Q, “we”, “us”, “our”, “SkillSoft” and “the Company” refer to SkillSoft Public Limited Company and its subsidiaries; and references to our fiscal year refer to the fiscal year ended on January 31 of that year (e.g., fiscal 2009 is the fiscal year ended January 31, 2009).

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

OVERVIEW

We are a leading Software as a Service (SaaS) provider of on-demand e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. We enable business organizations to maximize business performance through a combination of comprehensive e-learning content, online information resources, flexible learning technologies and support services. Our multi-modal learning solutions support and enhance the speed and effectiveness of both formal and informal learning processes and integrate our in-depth content resources, learning management system, virtual classroom technology and support services.

We generate revenue primarily from the license of our products, the provision of professional services ~~as well as from~~and the provision of hosting and application services. The pricing for our courses varies based upon the content offering selected 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 agreements permit customers to exchange course titles, generally on the contract anniversary date. Hosting services are sold separately ~~licensed~~ for an additional fee.

Cost of ~~revenues~~revenue includes the cost of materials (such as storage media), packaging, shipping and handling, CD duplication, custom content development, ~~and~~ hosting services, royalties, ~~and~~ certain infrastructure and occupancy expenses and share-based compensation. We generally recognize these costs as incurred. Also included in cost of ~~revenues~~revenue is amortization expense related to capitalized software development costs and intangible assets related to developed software and courseware acquired in business combinations.

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We account for software development costs in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed” (SFAS ~~No.~~ 86), which requires the capitalization of certain computer software development costs incurred after technological feasibility is established. No software development costs incurred during the three and ~~nine~~six months of ended ~~October~~July 31, ~~2008~~2009 met the requirements for capitalization in accordance with SFAS ~~No.~~ 86.

Research and development expenses consist primarily of salaries and benefits, share-based compensation, certain infrastructure and occupancy expenses, fees to consultants and course content development fees. Selling and marketing expenses consist primarily of salaries and benefits, share-based compensation, commissions, advertising and promotion expenses, travel expenses and certain infrastructure and occupancy expenses. General and administrative expenses consist primarily of salaries and benefits, share-based compensation, consulting and service expenses, legal expenses, audit and tax preparation costs, regulatory compliance costs and certain infrastructure and occupancy expenses.

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Amortization of intangible assets represents the amortization of customer value, non-compete agreements, trademarks and tradenames from our acquisitions of NETg, Targeted Learning Corporation (TLC), Books24x7 and GoTrain Corp. and our merger with SkillSoft Corporation (the SmartForce Merger).

Merger and integration related expenses primarily consist of salaries paid to NETg employees for transitional work assignments, facilities, systems and process integration activities.

Restructuring expenses primarily consist of charges associated with our recent reduction in force as described in our Form 8-K filed with the SEC on January 20, 2009.

SEC investigation expenses primarily consist of legal and consulting fees incurred ~~related to~~in connection with the SEC’s review of SmartForce’s option granting practices prior to the SmartForce ~~Merger, and historically, the SEC investigation relating to the restatement of SmartForce’s financial statements for 1999, 2000, 2001 and the first two quarters of 2002.~~Merger.

BUSINESS OUTLOOK

In the three and ~~nine~~six months ended ~~October~~July 31, ~~2008,~~2009, we generated ~~revenues~~revenue of ~~$83.1~~$78.9 million and ~~$248.0~~$155.4 million, respectively, as compared to ~~$75.1~~$83.3 million and ~~$203.7~~$165.0 million in the three and ~~nine~~six months ended ~~October~~July 31, ~~2007,~~2008, respectively. We reported net income in the three and ~~nine~~six months ended ~~October~~July 31, ~~2008~~2009 of ~~$12.0~~$17.2 million and ~~$32.0~~$36.0 million, respectively, as compared to ~~$5.8~~$12.9 million and ~~$25.7~~$20.0 million in the three and ~~nine~~six months ended ~~October~~July 31, ~~2007,~~2008, respectively.

While we have achieved increased ~~revenues~~operating income and ~~profitability~~net income from last fiscal year’s comparable ~~periods,~~period, we have experienced during the last year a significantly more cautious customer spending environment due to the current challenging global economic climate. In addition, we continue to find ourselves in a challenging business environment due to (i) budgetary constraints on training and information technology (IT) spending by our current and potential customers, (ii) price competition and value-based competitive offerings from a broad array of competitors in the learning market and (iii) the relatively slow overall market adoption rate for e-learning solutions. In recent months, the challenging U.S. and global economic environment has ~~put additional pressure on potential budgetary~~placed further constraints on ~~IT and spending by~~ our ~~current~~customers’ and potential ~~customers. While~~customers’ IT budgets and spending. We have not yet seen signs of an improving customer environment, but we are also not experiencing continued deterioration. We have ~~seen some customers put spending~~also encountered longer sales cycles due to additional customer scrutiny on ~~hold, we have seen others increase spending and utilize e-learning as a cost effective alternative to traditional learning.~~deals. This has given us less visibility into the overall timing of our sales cycles. Despite ~~the~~these challenges, our core business so far this fiscal year has performed ~~predominately~~ in accordance with our expectations. ~~Our recent~~We expect our revenue ~~growth,~~to decline approximately 6% to 7% this fiscal year as compared to last fiscal year ~~was~~ primarily due to recent changes in foreign exchange rates and the ~~result~~negative effect they have on our international subsidiaries’ revenue when converted to U.S. dollars. However, given the volatility of foreign exchange rates, our forward-looking estimates, which are based on July 31, 2009 rates, could change materially. Despite the expected decrease in revenue, we anticipate an increase in our operating income and net income this fiscal year as compared to last fiscal year, primarily due to a number of actions we took in the fourth quarter of fiscal 2009 to reduce our cost structure. These cost-saving initiatives allow us flexibility to manage our costs in light of the ~~realization of additional revenue from the increased customer base associated with the NETg acquisition, third party resellers of our product and international sales. Our growth prospects~~difficult economic conditions we are strongest in developing our expanded core business, which leverages our various product lines in a strategy of bundled product offerings, as well as continued distribution partnerships with third party resellers and international distribution growth. As a result,facing. Despite these cost-savings initiatives, we have increased our sales and marketing investment related to these areas to help capitalize on the recent growth and potential continued growth. We have also invested aggressively in research and development in those areas to accelerate the time by which our planned new products will be available to our customers. In order to pursue the small and medium-sized business markets, we continue to invest in our telesales business unit; however, we have not seen results in line with our expectations and as a result we have maderecently added, and will continue to ~~make organizational changes as needed~~add, additional sales resources in response to ~~achieve our expected growth. We plan to continue to invest in our new business direct field sales team and lead generator organizations.~~the cautious customer spending environment.

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In ~~the nine months ended October 31, 2008 and for the remainder of~~ fiscal ~~2009,~~2010 we ~~have and~~ will continue to focus on revenue generation and earnings growth ~~excluding normal and anticipated acquisition and integration related expenses,~~ primarily by:

~~evaluating our current operating cost structure to determine where we can realize cost efficiencies;~~

cross selling and up selling;

looking at new ~~markets, which may include expanding or investing internationally;~~markets;

acquiring new ~~customers through~~customers;

carefully managing our ~~core sales team as well as through the recently formed New Business Field Sales team;~~spending;

continuing to execute on our new product and telesales distribution initiatives; and

continuing to evaluate merger and acquisition and possible partnership opportunities that could contribute to our long-term objectives.

CRITICAL ACCOUNTING POLICIES

We believe that our critical accounting policies are those related to revenue recognition, amortization of intangible assets and impairment of goodwill, share-based compensation, deferral of commissions, restructuring charges, legal contingencies and income ~~taxes and valuation of business combinations.~~taxes. We believe these accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require application of significant judgment by our management. In applying these policies, management uses its judgment in making certain assumptions and estimates. Our critical accounting policies are more fully described under the heading ~~“Critical~~“Summary of Significant Accounting Policies” in Note 2 of the Notes to the Consolidated Financial Statements and under “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K as filed with the SEC on ~~March 31, 2008.~~April 1, 2009. The policies set forth in our Form 10-K have not changed.

RESULTS OF OPERATIONS

THREE MONTHS ENDED ~~OCTOBER~~JULY 31, ~~2008~~2009 VERSUS THREE MONTHS ENDED ~~OCTOBER~~JULY 31, ~~2007~~2008

Revenue

THREE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Revenues $ 83,064 $ 75,124 $ 7,940 11 %
Operating income 21,607 10,361 11,246 109 %

	THREE MONTHS ENDED JULY 31,						DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009			2008
(In thousands, except percentages)
Revenue:
United States		$	60,040		$	60,756		$	(716	)		(1	)%
International			18,886			22,576			(3,690	)		(16	)%
Total		$	78,926		$	83,332		$	(4,406	)		(5	)%

~~Revenue increased primarily due to the realization of additional~~The decrease in both total revenue ~~resulting from an increased customer base associated with the NETg acquisition in May 2007 as well as from continued additional~~and international revenue ~~earned under agreements with third party resellers of our products. We expect revenue growth to continue through the fourth quarter of fiscal 2009 compared to the fourth quarter of fiscal 2008.~~

THREE MONTHS ENDED OCTOBER 31,
(In thousands) 2008 2007 CHANGE
Revenue:
United States $ 61,998 $ 59,076 $ 2,922
International 21,066 16,048 5,018
Total $ 83,064 $ 75,124 $ 7,940

~~Revenue increased by 5% and 31% in the United States and internationally, respectively, in~~for the three months ended ~~October~~July 31, ~~2008 as compared to~~2009 versus the three months ended ~~October~~July 31, ~~2007 as a~~2008 was primarily the result of ~~increased~~the negative effect foreign exchange rates had on our international subsidiaries’ revenue ~~generated from the NETg acquisition and from existing customers and new business.~~when converted to U.S. dollars.

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We exited the fiscal year ended January 31, 2008 with non-cancelable backlog of approximately $255 million compared to $181 million at January 31, 2007. This amount is calculated by combining the amount of deferred revenue at each fiscal year end with the amounts to be added to deferred revenue throughout the next twelve months from billings under committed customer contracts and determining how much of these amounts are scheduled to amortize into revenue during the upcoming fiscal year. The amount scheduled to amortize into revenue during fiscal 2009 is disclosed as “backlog” as of January 31, 2008. Amounts to be added to deferred revenue during fiscal 2009 include subsequent installment billings for ongoing contract periods as well as billings for committed contract renewals. We have included this non-GAAP disclosure as it is directly related to our subscription based revenue recognition policy. This is a key business metric, which factors into our forecasting and planning activities and provides visibility into fiscal 2009 revenue.

Costs and Expenses

	THREE MONTHS ENDED OCTOBER 31, 2008						DOLLAR INCREASE/(DECREASE)			PERCENT CHANGE			THREE MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2008			2007									2009				2008
(In thousands, except percentages)
Cost of revenues	$	9,374		$	8,282		$	1,092			13	%
Cost of revenue														$	7,524			$	9,830			$	(2,306	)		(23	)%
As a percentage of revenue		11	%		11	%									10	%			12	%
Cost of revenues - amortization of intangible assets		1,690			1,740			(50	)		(3	)%
Cost of revenue – amortization of intangible assets															32				1,740				(1,708	)		(98	)%
As a percentage of revenue		2	%		2	%									—				2	%

Table of ~~revenue partially offset by the aforementioned factors.~~

Contents

	THREE MONTHS ENDED OCTOBER 31, 2008						DOLLAR INCREASE/(DECREASE)			PERCENT CHANGE			THREE MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)			PERCENT CHANGE
	2008			2007									2009				2008
(In thousands, except percentages)
General and administrative	$	9,130		$	9,449		$	(319	)		(3	)%		$	9,400			$	9,433			$	(33)		0	%
As a percentage of revenue		11	%		13	%									12	%			11	%

~~The decrease in general~~General and administrative expense in the three months ended ~~October~~July 31, ~~2008~~2009 was approximately the same as in the three months ended July 31, 2008. An increase in executive bonus expense in the second quarter of fiscal 2010 of $1.7 million was offset by reductions of $0.5 million in professional fees related to our business realignment strategy, which was substantially completed in fiscal 2009, and reductions in insurance premiums, banking service fees and outside contractor expenses of $0.8 million.

	THREE MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Amortization of intangible assets		$	2,117			$	2,741			$	(624	)		(23	)%
As a percentage of revenue			3	%			3	%
Merger and integration related expenses			—			$	240				(240	)		(100	)%
As a percentage of revenue			0	%			0	%
Restructuring			4			$	—				4			*
As a percentage of revenue			0	%			0	%
SEC investigation			—			$	(13	)			(13	)		(100	)%
As a percentage of revenue			0	%			0	%

____________

* Not meaningful

The decrease in amortization of intangible assets for the three months ended July 31, 2009 versus the three months ended ~~October~~July 31, ~~2007 was primarily due to a reduction in bad debt expense of $0.5 million resulting from an improvement in collection efforts on accounts receivable as compared to the third quarter of fiscal~~ 2008 as well as a reduction in depreciation of fixed assets of $0.3 million and lower facility charges of $0.2 million. This was partially offset by an increase of $0.6 million in professional fees, primarily related to an on-going feasibility analysis related to our business realignment strategy.

~~Amortization of intangible assets decreased $0.9 million, or 25%, to $2.7 million in the three months ended October 31, 2008 from $3.6 million in the three months ended October 31, 2007. This decrease~~ was primarily due to certain assets becoming fully amortized during fiscal 2009.

InDuring the three months ended ~~October~~July 31, 2008, we ~~did not incur material~~incurred merger and integration ~~related~~ expenses ~~as compared to the $2.6 million in the three months ended October 31, 2007. The significant charges in last year’s third quarter were primarily due~~related to the NETg acquisition. We ~~do not expect~~completed our efforts to ~~incur any significant additional merger-related expenses related to the NETg acquisition in future periods.~~integrate NETg’s operations during fiscal 2009.

	THREE MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Other (expense) income, net		$	(605	)		$	6			$	(611	)		*
As a percentage of revenue			(1	)%			0	%
Interest income			68			$	575				(507	)		(88	)%
As a percentage of revenue			0	%			1	%
Interest expense			(2,032	)		$	(3,664	)			1,632			(45	)%
As a percentage of revenue			(3	)%			(4	)%

THREE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Other income (expense), net $ 752 $ (642 ) $ 1,394 *
As a percentage of revenue 1 % (1 )%
Interest income 248 654 (406 ) (62 )%
As a percentage of revenue 0 % 1 %
Interest expense (3,103 ) (3,927 ) (824 ) (21 )%
As a percentage of revenue (4 )% (5 )%
____________

~~____________~~

* Not meaningful

~~Other Income (Expense), Net~~

The increase in other income (expense), net in the three months ended October 31, 2008 versus the three months ended October 31, 2007 was primarily due to foreign currency fluctuations. Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies used in our business. During the three months ended October 31, 2008 the strengthening of the U.S. dollar in relation to certain other foreign currencies resulted in significant gains, whereas in the same period of the prior year, the U.S. dollar declined in relation to foreign currencies.

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~~Interest Income~~

The reduction in interest income in the three months ended October 31, 2008 versus the three months ended October 31, 2007 was primarily due to a reduction in our short-term investments and lower interest rates.

~~Interest Expense~~

The decrease in interest expense in the three months ended October 31, 2008 versus the three months ended October 31, 2007 was primarily due to a reduction of our debt as a result of $55.3 million in principal debt repayments made in the first half of fiscal 2009.

~~Provision for Income Taxes~~

THREE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Provision (benefit) for income taxes
$ 7,438 $ 270 $ 7,168 2,655 %
As a percentage of revenue 9 % 0 %

For the three months ended October 31, 2008, the effective tax rate of 38.5% was higher than the Irish statutory rate of 12.5% primarily due to earnings realized in higher tax jurisdictions outside of Ireland. The tax benefit for the three months ended October 31, 2007 was influenced significantly by certain purchase accounting tax adjustments as a result of the NETg acquisition and the release of $49.1 million of our valuation allowance primarily related to U.S. net operating loss (NOL) carryforwards. Approximately $25 million of this valuation allowance was recorded through reductions to tax expense and $24.1 million was recorded through adjustments to goodwill.

~~Discontinued Operations~~

In connection with the NETg acquisition, we decided to discontinue four product lines that were acquired from NETg because we believed these product offerings did not represent businesses that could grow or produce operating results consistent with our profit model. The product lines that have been identified as discontinued operations are Wave, NETg Press, Interact Now and Financial Campus. We recorded a loss from discontinued operations, net of tax, of $37 thousand in the three months ended October 31, 2008 versus a loss, net of tax, of $0.4 million in the three months ended October 31, 2007. This was primarily due to NETg Press and Financial Campus being sold in the three months ended October 31, 2007. In addition, we exited the Wave business in the three months ended October 31, 2007. We do not anticipate operations from discontinued operation to materially affect our liquidity, financial condition or results of operations going forward.

~~NINE MONTHS ENDED OCTOBER 31, 2008 VERSUS NINE MONTHS ENDED OCTOBER 31, 2007~~

~~Revenue~~

NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Revenues $ 248,039 $ 203,733 $ 44,306 22 %
Operating income 57,796 23,420 34,376 147 %

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Revenue increased primarily due to the realization of additional revenue resulting from an increased customer base associated with the acquisition of NETg in May 2007 as well as from continued additional revenue earned under agreements with third party resellers of our products.

NINE MONTHS ENDED OCTOBER 31,
(In thousands) 2008 2007 CHANGE
Revenue:
United States $ 181,807 $ 160,161 $ 21,646
International 66,232 43,572 22,660
Total $ 248,039 $ 203,733 $ 44,306

Revenue increased by 14% and 52% in the United States and internationally, respectively, in the nine months ended October 31, 2008 as compared to the nine months ended October 31, 2007 as a result of increased revenue generated from the NETg acquisition and from existing customers and new business as well as from continued additional revenue earned under agreements with third party resellers of our products.

~~Costs and Expenses~~

NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Cost of revenues $ 28,013 $ 23,827 $ 4,186 18 %
As a percentage of revenue 11 % 12 %
Cost of revenues - amortization of intangible assets 5,170 3,683 1,487 40 %
As a percentage of revenue 2 % 2 %

The increase in ~~cost of revenue in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 was primarily due to increased revenue. Gross margin remained consistent during these periods.~~

The increase in cost of revenue — amortization of intangible assets in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 was primarily due to the amortization of the intangible assets acquired in the acquisition of NETg being included for the entire nine month period of fiscal 2009 versus less than six months in fiscal 2008, partially offset by certain intangible assets becoming fully amortized since October 31, 2007.

NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Research and development $ 38,136 $ 35,315 $ 2,821 8 %
As a percentage of revenue 15 % 17 %

The increase in research and development expense in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 was primarily due to additional contractor and outsource partner costs of $1.4 million to support expanded product and software development initiatives resulting from our larger customer base. A portion of these incremental costs are attributable to NETg integration initiatives, which include maintaining multiple platforms, fulfilling obligations of acquired customer contracts and product commitments assumed in the acquisition of NETg. In addition, we incurred an increase in compensation and benefits expense of $1.8 million as a result of an increase in our research and development headcount. The decrease in research and development expense as a percentage of revenue in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 reflects the growth of revenue partially offset by the aforementioned factors.

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NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Selling and marketing $ 82,185 $ 71,489 $ 10,696 15 %
As a percentage of revenue 33 % 35 %

The increase in selling and marketing expense in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 was primarily due to an increase in compensation and benefits of $8.6 million as a result of an increase in our sales and marketing headcount, which includes additional direct sales, telesales and field support personnel required to service our increased customer base as a result of the NETg acquisition, as well as incremental commissions resulting from increased order intake and billings from our larger base business and from the acquired NETg customer base. In addition, we incurred incremental marketing costs of $1.2 million to support our larger customer base, which includes the expense associated with our efforts to retain customers acquired in the NETg acquisition. The decrease in selling and marketing expense as a percentage of revenue in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 reflects the growth of revenue partially offset by the aforementioned factors.

NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
General and administrative $ 27,454 $ 25,572 $ 1,882 7 %
As a percentage of revenue 11 % 13 %

The increase in general and administrative expense in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 was primarily due to an increase of $3.4 million of professional fees primarily related to our share capital reduction initiative aimed at increasing distributable profits in our Irish parent entity as well as a feasibility analysis related to our business realignment strategy. This was partially offset by a reduction in bad debt expense of $0.5 million resulting from improved collection efforts on accounts receivable balances compared to the fiscal 2008 third quarter, as well as a reduction in depreciation of fixed assets of $0.7 million, which was due primarily to certain fixed assets related to the NETg acquisition becoming fully depreciated by the end of fiscal 2008 and lower facility charges of $0.3 million. The decrease in general and administrative expense as a percentage of revenue in the nine months ended October 31, 2008 versus the nine months ended October 31, 2007 reflects the growth of revenue partially offset by the aforementioned factors.

Amortization of intangible assets increased $0.5 million, or 7%, to $8.5 million in the nine months ended October 31, 2008 from $8.0 million in the nine months ended October 31, 2007. This was primarily due to the amortization of the intangible assets acquired in the acquisition of NETg being included for the entire nine month period of fiscal 2009 versus less than six months in fiscal 2008, partially offset by certain intangible assets becoming fully amortized since October 31, 2007.

Merger and integration related expenses decreased $10.3 million, or 93%, to $0.8 million in the nine months ended October 31, 2008 from $11.1 in the nine months ended October 31, 2007. This was primarily due to the significant charges in last year’s second and third quarter when the NETg acquisition was consummated, and the near completion of efforts undertaken to integrate NETg’s operations into ours during fiscal 2009.

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In the nine months ended October 31, 2008, we did not incur material SEC investigation expenses as compared to the $1.3 million in the nine months ended October 31, 2007. This is due to a decrease in legal activities related to the SEC’s informal inquiry into the pre-merger option granting practices at SmartForce.

NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Other expense, net $ (282 ) $ (1,026 ) $ (744 ) (73 )%
As a percentage of revenue (0 )% (1 )%
Interest income 1,440 2,990 (1,550 ) (52 )%
As a percentage of revenue 1 % 1 %
Interest expense (10,116 ) (7,741 ) 2,375 31 %
As a percentage of revenue (4 )% (4 )%

~~Other Expense, Net~~

~~The change in~~ other ~~expense,~~(expense) income, net in the ~~nine~~three months ended ~~October~~July 31, ~~2008~~2009 versus the ~~nine~~three months ended ~~October~~July 31, ~~2007~~2008 was primarily due to foreign currency fluctuations. Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies used in our business.

~~Interest Income~~

The reduction ofin interest income in the ~~nine~~three months ended ~~October~~July 31, ~~2008~~2009 versus the ~~nine~~three months ended ~~October~~July 31, ~~2007~~2008 was primarily due to a reduction in our short-term investments attributed to our share buyback program and our significant long term debt repayments as well as lower interest rates.

~~Interest Expense~~

The ~~increase~~decrease in interest expense in the ~~nine~~three months ended ~~October~~July 31, ~~2008~~2009 versus the ~~nine~~three months ended ~~October~~July 31, ~~2007~~2008 was primarily due to the interest expense on the debt incurred for the acquisition of NETg being incurred for the full nine months through October 31, 2008 versus only six months through October 31, 2007. This was partially offset by $55.3$49.2 million in ~~prepayments~~principal debt repayments made ~~during fiscal 2009 to reduce debt.~~against our long-term debt since July 31, 2008.

Provision for Income Taxes

	THREE MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)			PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Provision for income taxes		$	6,016			$	6,845			$	(829)		(12)	%
As a percentage of revenue			8	%			8	%

NINE MONTHS ENDED OCTOBER 31, 2008 DOLLAR INCREASE/(DECREASE) PERCENT CHANGE
2008 2007
(In thousands, except percentages)
Provision (benefit) for income taxes $ 18,790 $ (7,886 ) $ 26,676 (338 )%
As a percentage of revenue 8 % (4 )%

For the ~~nine~~three months ended ~~October~~July 31, 2009 and 2008, our effective tax rates were 25.9% and 38.8%, respectively. The decrease in the current year effective tax rate is primarily due to a change in the geographical distribution of worldwide earnings as a result of our business realignment strategy that took effect at the beginning of fiscal 2010. For the three months ended July 31, 2009 and 2008, the effective tax rate ~~of 38.5%~~ was higher than the Irish statutory rate of 12.5% due primarily ~~due~~ to earnings ~~realized~~ in higher tax jurisdictions outside of Ireland. For the nine month period ended October 31, 2007, the $8.2 million tax benefit was comprised of a $25 million deferred tax benefit related to the reduction in our deferred tax asset valuation allowance, which was partially offset by the effects of certain purchase accounting tax adjustments related to the NETg acquisition.

~~Discontinued Operations~~SIX MONTHS ENDED JULY 31, 2009 VERSUS SIX MONTHS ENDED JULY 31, 2008

~~Income from discontinued operations was $1.9 million~~Revenue

	SIX MONTHS ENDED JULY 31,						DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009			2008
(In thousands, except percentages)
Revenue:
United States		$	118,752		$	119,809		$	(1,057	)		(1	)%
International			36,613			45,166			(8,553	)		(19	)%
Total		$	155,365		$	164,975			(9,610	)		(6	)%

The decrease in both total and international revenue for the ~~nine~~six months ended ~~October~~July 31, 2009 versus the six months ended July 31, 2008 ~~versus $0.2 million during the nine months ended October 31, 2007. This increase~~ was primarily ~~due to~~ the ~~acquirer of our former NETg Press business prepaying the remaining portion~~result of the ~~purchase price for the NETg Press business during the nine months ended October 31, 2008, which resulted in a gain from the disposal of $2.0 million, net of income tax.~~negative effect foreign exchange rates had on our international subsidiaries’ revenue when converted to U.S. dollars.

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Costs and Expenses

	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Cost of revenue		$	14,997			$	18,639			$	(3,642	)		(20	)%
As a percentage of revenue			10	%			11	%
Cost of revenue – amortization of intangible assets			64				3,480				(3,416	)		(98	)%
As a percentage of revenue			—				2	%

The decrease in cost of revenue in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was partially due to a reduction in royalty fees of $0.9 million as a result of both the decrease in revenue and a shift in product mix away from royalty-bearing products. Also contributing to the decrease in cost of revenue was a $0.8 million decrease related to reductions in personnel and $1.7 million in lower expenses for hosting, outside contractor, maintenance and facility charges as a result of both our recent cost-saving initiatives carried out in the fourth quarter of fiscal 2009 and certain NETg integration initiatives being substantially completed in fiscal 2009.

The decrease in cost of revenue - amortization of intangible assets in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to certain intangible assets becoming fully amortized during fiscal 2009.

	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Research and development		$	18,704			$	25,998			$	(7,294	)		(28	)%
As a percentage of revenue			12	%			16	%

The decrease in research and development expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a reduction in outsourced development fees of $5.1 million as well as a decrease in compensation and benefits expense of $1.3 million primarily due to the cost-saving initiatives we instituted in the fourth quarter of fiscal 2009. The reduction in outsource development fees was also due to the inclusion of costs attributable to the NETg acquisition in the six months ended July 31, 2008, which included maintaining multiple platforms and product commitments assumed prior to the completion of the integration.

	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Selling and marketing		$	46,798			$	55,798			$	(9,000	)		(16	)%
As a percentage of revenue			30	%			34	%

The decrease in selling and marketing expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a decrease in compensation and benefits expense of $6.8 million. This decrease was primarily the result of a reduction in our field support personnel as part of our cost-saving initiatives as well as a reduction in commission expense attributed to when certain commissions were earned in fiscal 2008 as a result of a one-time change to the structure of our compensation plan that year. We also had a reduction in marketing expenses of $1.0 million and a reduction in travel expenses of $0.9 million as a result of our cost-saving initiatives.

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	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
General and administrative		$	17,157			$	18,324			$	(1,167	)		(6	)%
As a percentage of revenue			11	%			11	%

The decrease in general and administrative expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a reduction of $1.8 million in legal and professional fees associated with our business realignment strategy, which was substantially completed during fiscal 2009. In addition, we had a decreases in facility and rent expense of $0.4 million as well as decreases in banking fees and insurance expense of $0.4 million. These reductions in cost were partially offset by an increase in compensation and benefits of $1.5 million primarily due to executive bonuses recognized in the three months ended July 31, 2009.

	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Amortization of intangible assets		$	4,572			$	5,737			$	(1,165	)		(20	)%
As a percentage of revenue			3	%			3	%
Merger and integration related expenses			—			$	761				(761	)		(100	)%
As a percentage of revenue			0	%			0	%
Restructuring			56			$	—				56			*
As a percentage of revenue			0	%			0	%
SEC investigation			—			$	49				(49	)		(100	)%
As a percentage of revenue			0	%			0	%

____________

* Not meaningful

The decrease in amortization of intangible assets for the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to certain assets becoming fully amortized during fiscal 2009.

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During the six months ended July 31, 2008, we incurred merger and integration expenses related to the NETg acquisition. We completed our efforts to integrate NETg’s operations during fiscal 2009.

	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)				PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Other (expense) income, net		$	(1,223	)		$	(397	)		$	(826	)		208	%
As a percentage of revenue			(1	)%			0	%
Interest income			138			$	1,192				(1,054	)		(88	)%
As a percentage of revenue			0	%			1	%
Interest expense			(4,477	)		$	(7,650	)			3,173			(41	)%
As a percentage of revenue			(3	)%			(5	)%

The increase in other (expense) income, net in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to foreign currency fluctuations. Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies used in our business.

The reduction in interest income in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to a reduction in our cash, cash equivalents and short-term investments attributed to our share buyback program and our significant long term debt repayments as well as lower interest rates.

The decrease in interest expense in the six months ended July 31, 2009 versus the six months ended July 31, 2008 was primarily due to $49.2 million in principal debt repayments made against our long-term debt since July 31, 2008.

Provision for Income Taxes

	SIX MONTHS ENDED JULY 31,								DOLLAR INCREASE/(DECREASE)			PERCENT CHANGE
	2009				2008
(In thousands, except percentages)
Provision for income taxes		$	11,505			$	11,352			$	153		1	%
As a percentage of revenue			7	%			7	%

For the six months ended July 31, 2009 and 2008, our effective tax rates were 24.2% and 38.7% respectively. The decrease in the current year effective tax rate is primarily due to a change in the geographical distribution of worldwide earnings as a result of the business realignment strategy that took place at the beginning of fiscal 2010. For the six months ended July 31, 2009 and 2008, the effective tax rate was higher than the Irish statutory rate of 12.5% due primarily to earnings in higher tax jurisdictions outside of Ireland.

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LIQUIDITY AND CAPITAL RESOURCES

As of ~~October~~July 31, ~~2008,~~2009, our principal source of liquidity was our cash and cash equivalents and short-term investments, which totaled ~~$73.6~~$67.8 million. This compares to ~~$89.6~~$39.0 million at January 31, ~~2008.~~2009.

Net cash provided by operating activities of ~~$75.4~~$74.8 million for the ~~nine~~six months ended ~~October~~July 31, ~~2008~~2009 was primarily due to a decrease in accounts receivable of ~~$92.8~~$85.9 million. Net cash provided by operating activities was also a result of net income from continuing operations of ~~$30.0~~$36.0 million, which included the impact of non-cash expenses for depreciation and amortization and amortization of intangible assets of ~~$17.6~~$7.2 million, non-cash provision for income taxes of ~~$15.7~~$6.6 million and share-based compensation expense of ~~$4.5~~$3.2 million. These amounts were partially offset by a decrease in accrued expenses of ~~$23.4~~$12.0 million as well as a decrease in deferred revenue of ~~$68.6~~$52.0 million. These decreases in accounts receivable, accrued expenses and deferred revenue are primarily a result of the seasonality of our operations, with the fourth quarter of our fiscal year historically generating the most activity, including order intake and billing. During the six months ended July 31, 2009 the decrease in accounts receivable was $85.9 million as compared to a decrease of $88.8 million during the six months July 31, 2008. This change is primarily due to the timing of collections.

Net cash ~~provided by~~used in investing activities was ~~$0.7~~$4.7 million for the ~~nine~~six months ended ~~October~~July 31, ~~2008,~~2009, which includes ~~the maturities of investments, net of purchases, generating a cash inflow of approximately $4.8 million. This was partially offset by~~ the purchases of capital assets of approximately ~~$4.1~~$1.4 million. In addition, the purchase of investments, net of maturities, contributed a cash outflow of approximately $3.2 million.

Net cash used in financing activities was ~~$91.1~~$46.9 million for the ~~nine~~six months ended ~~October~~July 31, ~~2008.~~2009. During this period, we made principal payments on our debt of ~~$55.3~~$28.6 million and purchased our own shares having a value of ~~$56.5~~$19.9 million under our shareholder-approved share repurchase program. These uses of cash were partially offset by proceeds of ~~$19.5~~$1.5 million received from the exercise of share options under our various share option programs, including the related tax benefit, and share purchases made under our 2004 Employee Share Purchase Plan.

~~Cash provided from discontinued operations for the nine months ended October 31, 2008 included the gross proceeds of $6.9 million from the sale of NETg Press.~~

We had a working capital deficit of approximately ~~$6.0~~$1.6 million as of ~~October~~July 31, ~~2008~~2009 and approximately ~~$30.4~~$11.9 million as of January 31, ~~2008.~~2009. The ~~decrease~~increase in working capital was primarily due to ~~principal debt payments of $55.3 million and the purchase of treasury shares having a value of $56.5 million under our shareholder-approved share repurchase program. This was partially offset by~~ net income from continuing operations of ~~$30.0~~$36.0 million, which includes non-cash charges for depreciation and amortization of ~~$17.6~~$7.2 million, share-based compensation expense of ~~$4.5~~$3.2 million and a non-cash tax charge of ~~$15.7~~$6.6 million. Additionally, current deferred tax assets increased by $5.5 million which was primarily attributed to a long term deferred tax asset reclassification net of tax asset utilization and we received proceeds of ~~$19.5~~$1.5 million from the exercise of share options under our various share option programs and from share purchases made under our 2004 Employee Share Purchase Plan. This was partially offset by principal debt payments of $28.6 million and the purchase of treasury shares having a value of $19.9 million under our shareholder-approved share repurchase program.

As of January 31, ~~2008,~~2009, we had U.S. federal NOL carryforwards of ~~approximately $258.3~~$214.2 million. These ~~NOLs~~NOL carryforwards represent the gross carrying value of the operating loss ~~carryforwards. The NOL~~ carryforwards ~~which are subject to potential limitations based upon change in control provisions of Section 382 of the Internal Revenue Code,~~and are available to reduce future taxable income, if any, through 2025. We completed several financings since our inception and have incurred ownership changes as defined under Section 382 of the Internal Revenue Code. We completed an analysis of these changes and do not believe that the changes will have a material impact on our ability to use these net operating loss carryforwards. Included in the ~~$258.3~~$214.2 million of U.S. federal NOL carryforwards is ~~approximately $121.3~~$114.7 million of U.S. NOL carryforwards that were acquired in the SmartForce Merger and the purchase of ~~Book 24x7. Also included in the $258.3 million at January 31, 2008 is approximately $36.3~~Books24X7, $55.4 million of NOL carryforwards ~~in the United States~~ resulting from disqualifying ~~dispositions.~~dispositions and $44.1 million of U.S. NOL carryforwards that relate to our operations. We will realize the benefit of ~~these~~the disqualifying disposition losses through increases to ~~shareholder’s~~shareholders' equity in the periods in which the losses are utilized to reduce tax payments. Additionally, we ~~had approximately $193.0~~have $190.2 million of Irish NOL carryforwards. These NOL carryforwards represent the gross carrying value of the operating loss carryforwards. Included in the $190.2 million are $149.8 million of NOL carryforwards ~~in jurisdictions outside of the U.S. Included in the $193.0 million is approximately $142.2 million of NOL carryforwards~~, which were acquired in the SmartForce Merger ~~the purchase~~and $40.4 million of ~~Books24x7 and the purchase of NETg foreign entities. We will realize the benefits of these acquired~~ NOL carryforwards ~~through reductions~~that relate to ~~goodwill and non-goodwill intangible assets during the period that the losses are utilized.~~our Irish operations. We also had U.S. federal tax credit carryforwards of approximately ~~$2.5~~$3.9 million at January 31, ~~2008.~~2009.

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We lease certain of our facilities and certain equipment and furniture under operating lease agreements that expire at various dates through 2023. In addition, we have a term loan which will be paid out over the next 54 years. Future minimum lease payments, net of estimated sub-rentals, under these agreements and the debt repayments schedule are as follows (in thousands):

	Payments Due By Period
			Less Than		1 - 3		3 - 5		More Than		Payments Due by Period
Contractual Obligations	Total		1 Year		Years		Years		5 Years			Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Operating Lease Obligations	$	13,185	$	4,442	$	5,504	$	3,239	$	-		$	12,572	$	4,129	$	5,676	$	2,767	$	--
Debt Obligations		143,697		1,455		2,910		139,332		-			94,824		968		1,936		91,920		--
Total Obligations	$	156,882	$	5,897	$	8,414	$	142,571	$	-		$	107,396	$	5,097	$	7,612	$	94,687	$	--

We do not have any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating transactions that are not required to be reflected on our balance sheet.

In May 2007, we entered into a credit agreement with Credit Suisse and certain lenders providing for a $225.0 million senior credit facility comprised of a $200 million term loan facility and a $25.0 million revolving credit facility. On July 7, 2008, we entered into an amendment to the credit ~~agreement.~~agreement (the Amendment). The primary purpose of the ~~amendment~~Amendment was to expand our and our subsidiaries’ ability to make additional repurchases of our shares. The expanded repurchase ability under the ~~amendment~~Amendment is conditioned on the absence of an event of default and a requirement that (i) the leverage ratio shall be no greater than 2.75:~~1.0~~1 as of the most recently completed fiscal quarter ending prior to the date of such repurchase (0.79:1 at July 31, 2009) and (ii) that we make a prepayment of the term loan under the credit agreement in an amount equal to the dollar amount of any such repurchase. Such term loan prepayments ~~will~~were not, however, be required in connection with the first $24.0 million of repurchases made from and after July 7, 2008. The Amendment also provides for an increase in the annual interest rate on the term loan to, at our election, (i) base rate plus a margin of 2.5% or (ii) adjusted LIBOR plus margin of 3.5%.

Please see Note 10 of The Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K as filed with the SEC on ~~March 31, 2008 and our 8-K filed July 11, 2008,~~April 1, 2009 for a detailed description of the credit agreement, as amended.

We will continue to invest in research and development and sales and marketing in order to execute our business plan and achieve expected revenue growth. To the extent that our execution of the business plan results in increased sales, we expect to experience corresponding increases in deferred revenue, cash flow and prepaid expenses. Capital expenditures for the fiscal year ended January 31, 2009 are expected to be approximately $5.0 million to $7.0 million.

We expect that the principal sources of funding for our operating expenses, capital expenditures, debt payment obligations, share repurchases and other liquidity needs will be a combination of our available cash and cash equivalents and short-term investments, and funds generated from future cash flows from operating activities. We believe our current funds and expected cash flows from operating activities will be sufficient to fund our operations, including our debt repayment obligations, for at least the next 12 months. However, there are several items that may negatively impact our available sources of funds. In addition, our cash needs may increase due to factors such as unanticipated developments in our business or the marketplace for our products in general or significant ~~acquisitions (in addition to and including NETg).~~acquisitions. The amount of cash generated from operations will be dependent upon the successful execution of our business plan. Although we do not foresee the need to raise additional capital, any unanticipated economic or business events could require us to raise additional capital to support our operations.

EXPLANATION OF USE OF NON-GAAP FINANCIAL RESULTS

In addition to reporting our audited and unaudited financial results in accordance with United States generally accepted accounting principles (GAAP), to assist investors we ~~may~~ on occasion provide certain non-GAAP financial results as an alternative means to explain our periodic results. The non-GAAP financial results typically exclude non-cash or ~~one-time~~unusual charges or benefits.

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Our management uses the non-GAAP financial results internally as an alternative means for assessing our results of operations. By excluding non-cash charges such as share-based compensation, amortization of purchased intangible assets, impairment of goodwill and purchased intangible assets, management can evaluate our operations excluding these non-cash charges and can compare ~~its~~our results on a more consistent basis to the results of other companies in our industry. By excluding charges such as ~~restructuring charges (benefits) and~~ merger and integration related expenses and one-time or infrequent charges our management can compare our ongoing operations to prior quarters where such items may be materially different and to ongoing operations of other companies in our industry who may have materially different unusual charges. Our management recognizes that non-GAAP financial results are not a substitute for GAAP results, but believes that non-GAAP measures are helpful in assisting them in understanding and managing our business.

Our management believes that the non-GAAP financial results may also provide useful information to investors. Non-GAAP results may also allow investors and analysts to more readily compare our operations to prior financial results and to the financial results of other companies in the industry who similarly provide non-GAAP results to investors and analysts. Investors may seek to evaluate our business performance and the performance of our competitors as they relate to cash. Excluding one-time and non-cash charges may assist investors in this evaluation and comparisons. When we provide non-GAAP financial results, we will also provide reconciliations of such results to GAAP financial measures.

In addition, certain covenants in our credit agreement are based on non-GAAP financial measures, such as adjusted EBITDA, and evaluating and presenting these measures allows us and our investors to assess our compliance with the covenants in our credit agreement and thus our liquidity situation.

We intend to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations.

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of ~~October~~July 31, ~~2008,~~2009, we did not use derivative financial instruments for speculative or trading purposes.

INTEREST RATE RISK

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

In order to limit our exposure to interest rate changes associated with our term loan, we entered into an interest rate swap agreement with an initial notional amount of $160 million which amortizes over a period consistent with our anticipated payment schedule. This strategy uses an interest rate swap to effectively convert $160 million in variable rate borrowings into fixed rate liabilities at a 5.1015% effective interest rate. The interest rate swap is considered to be a hedge against changes in the amount of future cash flows associated with interest payments on a variable rate loan.

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FOREIGN CURRENCY RISK

Due to our ~~multi-national~~multinational operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies in which we collect ~~revenues~~revenue or pay expenses and the U.S. dollar. Our expenses are not necessarily incurred in the currency in which revenue is generated, and, as a result, we are required from time to time to convert currencies to meet our obligations. These currency conversions are subject to exchange rate fluctuations, in particular ~~with respect~~changes to ~~changes in~~ the value of the Euro, Canadian dollar, Australian dollar, New Zealand dollar, Singapore dollar, and pound sterling relative to the U.S. dollar, which could adversely affect our business and our results of operations. During the ~~nine~~six months ended ~~October~~July 31, ~~2008~~2009 and ~~2007,~~2008, we incurred a foreign currency exchange ~~gain~~losses of ~~$0.3~~$1.3 million and ~~a foreign currency exchange loss of $0.5~~$0.7 million, respectively.

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ITEM 4. — CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~October~~July 31, ~~2008.~~2009. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~October~~July 31, ~~2008,~~2009, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended ~~October~~July 31, ~~2008~~2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II ~~— OTHER INFORMATION~~

ITEM 1. — LEGAL PROCEEDINGS

See Part I Item 3 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2008 for a discussion of legal proceedings. There were no material developments in these proceedings during the quarter ended October 31, 2008.Not applicable.

ITEM 1A. – RISK FACTORS

Investors should carefully consider the risks described below before making an investment decision with respect to our shares. While the following risk factors have been updated to reflect developments subsequent to the filing of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2008,~~2009, there have been no material changes to the risk factors included in that report.

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RISKS RELATED TO THE OPERATION OF OUR BUSINESS

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, LIMITING YOUR ABILITY TO EVALUATE HISTORICAL FINANCIAL RESULTS AND INCREASING THE LIKELIHOOD THAT OUR RESULTS WILL FALL BELOW MARKET ANALYSTS’ EXPECTATIONS, WHICH COULD CAUSE THE PRICE OF OUR ADSs TO DROP RAPIDLY AND SEVERELY.

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

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Our operating results have historically fluctuated, and our operating results may in the future continue to fluctuate, as a result of factors, which include, without limitation:

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

royalty rates;

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

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

	FOR THE QUARTERLY PERIOD ENDED ~~OCTOBER~~JULY 31, ~~2008~~2009

OR

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

	FOR THE TRANSITION PERIOD FROM ~~________~~ TO ~~________~~

~~REPUBLIC OF IRELAND~~Republic of Ireland	~~N/A~~None
(~~STATE OR OTHER JURISDICTION OF~~State or Other Jurisdiction of	(I.R.S. ~~EMPLOYER~~Employer
~~INCORPORATION OR ORGANIZATION)~~Incorporation or Organization)	~~IDENTIFICATION NO.~~Identification No.)

107 ~~NORTHEASTERN BOULEVARD~~Northeastern Boulevard	03062
Nashua, New Hampshire	(Zip Code)
(Address of Principal Executive Offices)
~~NASHUA, NEW HAMPSHIRE~~	~~03062~~
~~(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)~~	~~(ZIP CODE)~~

	Large accelerated filer R	Accelerated filer £
	Non-accelerated filer £	Smaller reporting company £
	(Do not check if a smaller reporting company)

	PAGE NO.
PART I — FINANCIAL INFORMATION	3
Item 1. Unaudited Condensed Consolidated Financial Statements:	3
Condensed Consolidated Balance Sheets as of ~~October~~July 31, ~~2008~~2009 and January 31, ~~2008~~2009	3
Condensed Consolidated Income Statements for the Three and ~~Nine~~Six Months Ended ~~October~~July 31, ~~2008~~2009 and ~~2007~~2008	4
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~October~~July 31, ~~2008~~2009 and ~~2007~~2008	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures about Market Risk	30
Item 4. Controls and Procedures	31
PART II — OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4140
Item 3. Defaults Upon Senior Securities	4241
Item 4. Submission of Matters to a Vote of Security Holders	4241
Item 5. Other Information	4341
Item 6. Exhibits	4341
SIGNATURE	4442
EXHIBIT INDEX	4543
~~EX-31.1 Section 302 Certification of CEO~~EX-10.2 2001 Outside Director Option Plan, as amended
~~EX-31.2~~EX-31.1 Certification of SkillSoft PLC's Chief Executive Officer, Section 302 ~~Certification of CFO~~
~~EX-32.1 Section 906 Certification of CEO~~
EX-31.2 Certification of SkillSoft PLC's Chief Financial Officer, Section 302
EX-32.1 Certification of SkillSoft PLC's Chief Executive Officer, Section 906
EX-32.2 ~~Section 906~~ Certification of ~~CFO~~SkillSoft PLC's Chief Financial Officer, Section 906

	JULY 31, 2009 (Unaudited)			JANUARY 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	63,510		$	37,853
Short-term investments		4,265			1,099
Restricted cash		3,907			3,790
Accounts receivable, net		62,930			146,362
Prepaid expenses and other current assets		15,897			18,286
Deferred tax assets		31,976			26,444
Total current assets		182,485			233,834
Property and equipment, net		6,522			7,661
Intangible assets, net		8,836			13,472
Goodwill		238,550			238,550
Deferred tax assets		61,862			78,223
Other assets		7,809			3,360
Total assets	$	506,064		$	575,100
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long term debt	$	968		$	1,253
Accounts payable		1,636			5,648
Accrued compensation		10,101			13,513
Accrued expenses		16,179			23,760
Deferred revenue		155,245			201,518
Total current liabilities		184,129			245,692

Long term debt		93,856			122,131
Other long term liabilities		3,168			3,221
Total long term liabilities		97,024			125,352
Commitments and contingencies (Note 11)
Shareholders’ equity:
Ordinary shares, €0.11 par value: 250,000,000 shares authorized; 95,924,298 and 98,892,249 shares issued at July 31, 2009 and January 31, 2009, respectively		10,150			10,600
Additional paid-in capital		490,570			509,177
Treasury stock, at cost, 174,200 and 830,802 ordinary shares at July 31, 2009 and January 31, 2009, respectively		(1,398	)		(5,317	)
Accumulated deficit		(274,924	)		(310,874	)
Accumulated other comprehensive income		513			470
Total shareholders’ equity		224,911			204,056
Total liabilities and shareholders’ equity	$	506,064		$	575,100

	OCTOBER 31, 2008 (Unaudited)			JANUARY 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents	$	64,764		$	76,059
Short-term investments		8,804			13,525
Restricted cash		3,745			3,963
Accounts receivable, net		72,546			171,708
Prepaid expenses and other current assets		19,114			29,061
Deferred tax assets		10,326			13,476
Total current assets		179,299			307,792
Property and equipment, net		7,914			7,210
Intangible assets, net		16,242			29,887
Goodwill		256,606			256,196
Deferred tax assets		75,005			87,866
Other assets		3,702			7,730
Total assets	$	538,768		$	696,681
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long term debt	$	1,455		$	2,000
Accounts payable		1,772			2,139
Accrued compensation		7,952			24,577
Accrued expenses		19,528			29,507
Deferred revenue		142,642			219,161
Total current liabilities		173,349			277,384

Long-term debt		142,242			197,000
Other long-term liabilities		5,932			9,209
Total long-term liabilities		148,174			206,209
Commitments and contingencies (Note 12)
Shareholders' equity:
Ordinary shares, €0.11 par value: 250,000,000 shares authorized; 104,088,871 and 111,663,813 shares issued at October 31, 2008 and January 31, 2008, respectively		11,342			12,397
Additional paid-in capital		541,967			591,303
Treasury stock, at cost, 657,100 and 6,533,884 ordinary shares at October 31, 2008 and January 31, 2008, respectively		(5,401	)		(24,524	)
Accumulated deficit		(329,678	)		(361,663	)
Accumulated other comprehensive loss		(985	)		(4,425	)
Total stockholders' equity		217,245			213,088
Total liabilities and stockholders' equity	$	538,768		$	696,681

	THREE MONTHS ENDED						NINE MONTHS ENDED
	OCTOBER 31,						OCTOBER 31,
	2008			2007			2008			2007
Revenues	$	83,064		$	75,124		$	248,039		$	203,733
Cost of revenues (1)		9,374			8,282			28,013			23,827
Cost of revenues - amortization of intangible assets		1,690			1,740			5,170			3,683
Gross profit		72,000			65,102			214,856			176,223
Operating expenses:
Research and development (1)		12,138			13,710			38,136			35,315
Selling and marketing (1)		26,387			25,227			82,185			71,489
General and administrative (1)		9,130			9,449			27,454			25,572
Amortization of intangible assets		2,738			3,634			8,475			7,955
Merger and integration related expenses		-			2,616			761			11,144
SEC investigation		-			105			49			1,328
Total operating expenses		50,393			54,741			157,060			152,803
Operating income		21,607			10,361			57,796			23,420
Other income (expense), net		752			(642	)		(282	)		(1,026	)
Interest income		248			654			1,440			2,990
Interest expense		(3,103	)		(3,927	)		(10,116	)		(7,741	)
Income before provision (benefit) for income taxes from continuing operations		19,504			6,446			48,838			17,643
Provision (benefit) for income taxes		7,438			270			18,790			(7,886	)
Income from continuing operations		12,066			6,176			30,048			25,529
(Loss) income from discontinued operations, net of income taxes (2)		(37	)		(351	)		1,937			173
Net income	$	12,029		$	5,825		$	31,985		$	25,702
Net income per share (Note 10):
Basic - continuing operations	$	0.12		$	0.06		$	0.29		$	0.25
Basic - discontinued operations	$	(0.00	)	$	(0.00	)	$	0.02		$	0.00
	$	0.12		$	0.06		$	0.31		$	0.25
Basic weighted average common shares outstanding		104,182,736			104,789,720			104,779,876			104,165,555
Diluted - continuing operations	$	0.11		$	0.06		$	0.28		$	0.24
Diluted - discontinued operations	$	(0.00	)	$	(0.00	)	$	0.02		$	0.00
	$	0.11		$	0.05	†	$	0.29	†	$	0.24
Diluted weighted average common shares outstanding		107,500,272			108,552,456			108,656,388			108,018,673

	THREE MONTHS ENDED OCTOBER 31,				NINE MONTHS ENDED OCTOBER 31,
	2008		2007		2008		2007
Cost of revenues	$	52	$	54	$	163	$	119
Research and development		227		226		695		659
Selling and marketing		412		442		1,434		1,309
General and administrative		731		657		2,212		1,921

Description	Contracted Maturity	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash and cash equivalents:
Cash	N/A	$	61,674	$	-	$	-	$	61,674
Commercial paper	0-3 months		950		-		-		950
Federal agency notes	0-3 months		350		-		-		350
Corporate bonds	0-3 months		536		-		-		536
		$	63,510	$	-	$	-	$	63,510
Short-term investments:
Commercial paper	4-12 months	$	1,416	$	-	$	-	$	1,416
Federal agency notes	4-12 months		699		-		-		699
Corporate bonds	4-12 months		450		-		-		450
Treasury bills	4-12 months		1,299		1		-		1,300
Certificates of deposit	4-12 months		400		-		-		400
		$	4,264	$	1	$	-	$	4,265

Share Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding, January 31, 2008		16,630,763		$	7.05		4.76
Granted		50,000			10.81
Exercised		(3,636,058	)		4.51
Cancelled		(69,420	)		15.01
Outstanding, October 31, 2008		12,975,285		$	7.74		4.13	$	20,240
Exercisable, October 31, 2008		9,757,981		$	8.10		3.77	$	16,255
Vested and Expected to Vest, October 31, 2008 (1)		12,564,616		$	7.77		4.09	$	19,731

	NINE MONTHS ENDED OCTOBER 31, 2007

Revenue	$	266,233
Net income (loss)		(18,800	)
Net income (loss) per share - basic	$	(0.18	)
Net income (loss) per share - diluted	$	(0.17	)

	EMPLOYEE SEVERANCE AND RELATED COSTS			CLOSEDOWN OF FACILITIES			OTHER			TOTAL
Merger and exit accrual January 31, 2008	$	1,646		$	3,224		$	1,370		$	6,240
Adjustment to provision for merger and exit costs in connection with the acquisition of NETg		212			(139	)		(971	)		(898	)
Adjustment to provision for merger and exit costs in connection with the acquisition of SmartForce		(899	)		266			-			(633	)
Payments made during the nine months ended October 31, 2008		(959	)		(1,723	)		(164	)		(2,846	)
Merger and exit accrual October 31, 2008	$	-		$	1,628		$	235		$	1,863

Year Ended January 31,
2009 (remaining 3 months)	$	409
2010		452
2011		1,002
Total	$	1,863

Total restructuring accrual as of January 31, 2008	$	961
Payments made during the nine months ended October 31, 2008		(464	)
Restructuring charges incurred during the nine months ended October 31, 2008		-
Total restructuring accrual as of October 31, 2008	$	497


Gross carrying amount of goodwill, January 31, 2008	$	256,196
Payment of contingent purchase price of Targeted Learning Corporation		250
Adjustments to allocation of purchase price for NETg acquisition		953
Utilization of acquired tax benefit		(793	)
Gross carrying amount of goodwill, October 31, 2008	$	256,606

	NINE MONTHS ENDED OCTOBER 31, 2008			YEAR ENDED JANUARY 31, 2008
Unrealized (loss) gains on available-for-sale securities	$	(2	)	$	22
Change in fair value of interest rate hedge		(925	)		(2,080	)
Foreign currency adjustment		(58	)		(2,367	)
Total accumulated other comprehensive loss	$	(985	)	$	(4,425	)

	OCTOBER 31, 2008		JANUARY 31, 2008		JULY 31, 2009		JANUARY 31, 2009
Professional fees		3,555		5,308	$	2,945	$	4,237
Sales tax payable/VAT payable		1,324		4,366		1,159		3,806
Accrued royalties		2,246		6,892		1,600		1,650
Interest rate swap liability						485		1,581
Accrued tax						2,010		854
Other accrued liabilities		12,403		12,941		7,980		11,632
Total accrued expenses	$	19,528	$	29,507	$	16,179	$	23,760

	July 31, 2009		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:
Cash equivalents (1)	$	1,836	$	1,486	$	350	$	-
Available for sale securities (2)	$	4,265	$	2,266	$	1,999	$	-

Financial Liabilities:
Interest rate swap agreement (Note 18)	$	485	$	-	$	485	$	-

	October 31, 2008		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Financial Assets:
Cash equivalents (1)		30,821	$	15,625	$	15,196	$	-
Available for sale securities (2)		8,804	$	6,505	$	2,299	$	-

Financial Liabilities:
Interest rate swap agreement (Note 19)		1,542	$	-	$	1,542	$	-

Fiscal 2010 (remaining 6 months)	$	484
Fiscal 2011		968
Fiscal 2012		968
Fiscal 2013		968
Fiscal 2014		91,436
Total	$	94,824

Fiscal 2009 (remaining 3 months)	$	364
Fiscal 2010		1,455
Fiscal 2011		1,455
Fiscal 2012		1,455
Fiscal 2013		1,455
Thereafter		137,513
Total	$	143,697

	THREE MONTHS ENDED OCTOBER 31,
(In thousands)	2008		2007		CHANGE
Revenue:
United States	$	61,998	$	59,076	$	2,922
International		21,066		16,048		5,018
Total	$	83,064	$	75,124	$	7,940

Period	(a) Total Number of Shares Purchased (1)		(b) Average Price Paid per Share $		(c) Total Number of Shares Purchased as Part of Publicly Announced or Program (2)		(d) Maximum Number of Shares that May Yet Be Purchased Under the Program
May 1, 2009 – May 31, 2009		499,300	$	7.84		499,300		12,118,331
June 1, 2009 – June 30, 2009		421,473		7.88		421,473		11,696,858
July 1, 2009 – July 31, 2009		419,350		7.68		419,350		11,277,508
Total		1,340,123	$	7.80		1,340,123		11,277,508

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		4		0		0
ADS Holders		115,152,262		646		41,158

	SKILLSOFT PUBLIC LIMITED COMPANY

Date: ~~December~~September 9, ~~2008~~2009	By:	/s/ Thomas J. McDonald
		Thomas J. McDonald
		Chief Financial Officer

10.1	Summary of Fiscal 2009 Executive Cash Incentive Compensation Program (Incorporated by reference to Exhibit 99.1 to SkillSoft PLC’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 4, 2009 (File No. 000-25674).
10.2	2001 Outside Director Option Plan, as amended
31.1	Certification of SkillSoft PLC’s Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of SkillSoft PLC’s Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of SkillSoft PLC’s Chief Executive Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of SkillSoft PLC’s Chief Financial Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.