From time to time, including in this Quarterly Report on Form 10-Q, we may make forward-looking statements relating to such matters as anticipated financial performance, business prospects, strategy, plans, regulatory, market and industry trends, and similar matters. The Private Securities Litigation Reform Act of 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 and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The factors that may affect the operations, performance, development and results of our business include those discussed under Part II, Item 1A, "Risk 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 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 for an additional fee.

Cost of 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 revenue is amortization expense related to capitalized software development costs and intangible assets related to developed software and courseware acquired in business combinations.

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 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 months ended April 30, 2009 met the requirements for capitalization in accordance with SFAS 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.

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 in connection with the SEC investigation relating to the restatement of SmartForce's financial statements for 1999, 2000, 2001 and the first two quarters of 2002, and more recently, the SEC's review of SmartForce's option granting practices prior to the SmartForce Merger.

BUSINESS OUTLOOK

In the three months ended April 30, 2009, we generated revenue of $76.4 million as compared to $81.6 million in the three months ended April 30, 2008. We reported operating income in the three months ended April 30, 2009 of $27.3 million as compared to $15.4 million in the three months ended April 30, 2008. We reported net income in the three months ended April 30, 2009 of $18.8 million as compared to $7.1 million in the three months ended April 30, 2008.

While we have achieved increased operating income and net income from last fiscal year's comparable period, we have experienced during the last nine months 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 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 constraints on IT and spending by our current and potential customers. While we have seen some customers put spending on hold, we have seen others increase spending and utilize e-learning as a cost effective alternative to traditional learning. Despite these challenges, our core business so far this fiscal year has performed in accordance with our expectations. We currently expect our revenue to decline approximately 5% to 9% this fiscal year as compared to last fiscal year primarily due to recent changes in foreign exchange rates and the 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 January 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 difficult economic conditions we are facing. Despite these cost-savings initiatives, we have recently added, and will continue to add, additional sales resources in response to the cautious customer spending environment, including our telesales business unit to continue pursuing the small and medium-sized business markets.

In fiscal 2010 we will continue to focus on revenue and earnings growth primarily by:

? cross selling and up selling;

? looking at new markets;

? acquiring new customers;

? carefully managing our 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. 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 "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 April 1, 2009. The policies set forth in our Form 10-K have not changed.

RESULTS OF OPERATIONS

THREE MONTHS ENDED APRIL 30, 2009 VERSUS THREE MONTHS ENDED APRIL 30, 2008

Revenue

                                         THREE MONTHS ENDED
                                             APRIL 30,               DOLLAR INCREASE/(DECREASE)         PERCENT CHANGE
                                        2009            2008
(In thousands, except percentages)
Revenue                                $   76,439     $   81,643        $                  (5,204 )               (6 )%
Operating income                           27,261         15,444                           11,817                 77  %

The decrease in revenue for the three months ended April 30, 2009 versus April 30, 2008 was primarily due to the negative effect foreign exchange rates had on our international subsidiaries' revenue when converted to U.S. dollars.

                                         THREE MONTHS ENDED
                                             APRIL 30,               DOLLAR INCREASE/(DECREASE)      PERCENT CHANGE
                                        2009            2008
(In thousands, except percentages)
Revenue:
United States                          $   58,712     $   59,052        $                    (340 )            (1 )%
International                              17,727         22,591                           (4,864 )           (22 )%
Total                                      76,439         81,643                           (5,204 )            (6 )%

The decrease in revenue internationally for the three months ended April 30, 2009 versus April 30, 2008 was primarily the result of the negative effect of foreign exchange rates as described above.

Costs and Expenses

                                         THREE MONTHS ENDED
                                              APRIL 30,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                         2009            2008
(In thousands, except percentages)
Cost of revenue                        $     7,473     $    8,808        $                  (1,335 )            (15 )%
As a percentage of revenue                      10 %           11 %
Cost of revenue - amortization of
intangible assets                               32          1,740                           (1,708 )            (98 )%
As a percentage of revenue                       -              2 %

The decrease in cost of revenue in the three months ended April 30, 2009 versus the three months ended April 30, 2008 was primarily due to a reduction in personnel as a result of our recent cost-saving initiatives carried out in the fourth quarter of fiscal 2009. In addition we had a reduction in outside contractor costs and maintenance fees primarily due to the completion during fiscal 2009 of certain NETg integration initiatives in the three months ended April 30, 2008.

The decrease in cost of revenue - amortization of intangible assets in the three months ended April 30, 2009 versus the three months ended April 30, 2008 was primarily due to certain intangible assets becoming fully amortized during fiscal 2009.

                                         THREE MONTHS ENDED
                                              APRIL 30,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                         2009            2008
(In thousands, except percentages)
Research and development               $     8,998     $   13,480        $                  (4,482 )            (33 )%
As a percentage of revenue                      12 %           17 %

The decrease in research and development expense in the three months ended April 30, 2009 versus the three months ended April 30, 2008 was primarily due to a reduction in outsourced development fees of $2.9 million as well as a decrease in compensation and benefits expense of $1.1 million primarily due to our recent the cost-saving initiatives instituted in the fourth quarter of fiscal 2009 and that continued into the current fiscal year. The reduction in professional fees was also due to the three months ended April 30, 2008 including costs attributable to the NETg acquisition, which included maintaining multiple platforms and product commitments assumed prior to the completion of the integration.

                                         THREE MONTHS ENDED
                                             APRIL 30,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                        2009            2008
(In thousands, except percentages)
Selling and marketing                  $   22,411     $   29,700        $                  (7,289 )            (25 )%
As a percentage of revenue                     29 %           36 %

The decrease in selling and marketing expense in the three months ended April 30, 2009 versus the three months ended April 30, 2008 was primarily due to a decrease in compensation and benefits expense of $4.7 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 which was primarily due to when certain commissions were earned as a result of changes to the structure of our compensation plan. We also had a reduction in marketing expense related to demand generation of $0.3 million and a reduction in travel expenses of $0.6 million as a result of our cost-saving initiatives. In addition, a major customer event which occurred during the first quarter of our last fiscal year will not occur until the second quarter of this fiscal year, and this resulted in a $1.0 million reduction in expenses for the three months ended April 30, 2009 versus the three months ended April 30, 2008.

                                         THREE MONTHS ENDED
                                              APRIL 30,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                         2009            2008
(In thousands, except percentages)
General and administrative             $     7,757     $    8,892        $                  (1,135 )            (13 )%
As a percentage of revenue                      10 %           11 %

The decrease in general and administrative expense in the three months ended April 30, 2009 versus the three months ended April 30, 2008 was primarily due to a reduction of $0.8 million in legal and professional fees. This was primarily due to the feasibility analysis related to our business realignment strategy becoming substantially complete during fiscal 2009 as well as a reduction in tax and accounting fees related to our ongoing operations. In addition, we had a decrease in compensation and benefits expense of $0.2 million as a result of a reduction in personnel as part of our cost-saving initiatives.

The decrease in amortization of intangible assets for the three months ended April 30, 2009 versus April 30, 2008 was primarily due to certain assets becoming fully amortized during fiscal 2009.

During the three months ended April 30, 2009, we incurred merger and integration expenses related to the NETg acquisition. We completed our efforts to integrate NETg's operations during fiscal 2009.

                                         THREE MONTHS ENDED
                                             APRIL 30,               DOLLAR INCREASE/(DECREASE)       PERCENT CHANGE
                                        2009            2008
(In thousands, except percentages)
Other expense, net                    $     (618 )    $     (403 )       $                   (215 )             53  %
As a percentage of revenue                    (1 )%            0 %
Interest income                               70      $      617                             (547 )            (89 )%
As a percentage of revenue                     0 %             1 %
Interest expense                          (2,445 )    $   (3,986 )                          1,541              (39 )%
As a percentage of revenue                    (3 )%           (5 )%


____________

The increase in other expense, net in the three months ended April 30, 2009 versus the three months ended April 30, 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 three months ended April 30, 2009 versus the three months ended April 30, 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.

The decrease in interest expense in the three months ended April 30, 2009 versus the three months ended April 30, 2008 was primarily due to a reduction of our long term debt as a result of $69.4 million in principal debt repayments made since April 30, 2008.

Provision for Income Taxes

                                         THREE MONTHS ENDED
                                              APRIL 30,               DOLLAR INCREASE/(DECREASE)        PERCENT CHANGE
                                         2009            2008
(In thousands, except percentages)
Provision for income taxes             $     5,489     $    4,506          $                   983                 22 %
As a percentage of revenue                       7 %            6 %

For the three months ended April 30, 2009 and 2008, our effective tax rates, exclusive of any discrete charges, were 24.3% and 35.9% respectively. The decrease in the current year effective tax rate is primarily due to a change in the geographical distribution of worldwide earnings, reflecting our business realignment strategy. For the three months ended April 30, 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.

LIQUIDITY AND CAPITAL RESOURCES

As of April 30, 2009, our principal source of liquidity was our cash and cash equivalents and short-term investments, which totaled $77.4 million. This compares to $39.0 million at January 31, 2009.

Net cash provided by operating activities of $65.0 million for the three months ended April 30, 2009 was primarily due to a decrease in accounts receivable of $81.2 million. Net cash provided by operating activities was also a result of net income from continuing operations of $18.8 million, which included the impact of non-cash expenses for depreciation and amortization and amortization of intangible assets of $3.8 million, non-cash provision for income taxes of $3.3 million and share-based compensation expense of $1.6 million. These amounts were partially offset by a decrease in accrued expenses of $12.3 million and deferred revenue of $29.2 million as well as a decrease in accounts payable of $3.4 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 three months ended April 30, 2009 the decrease in accounts receivable was $81.2 million as compared to $71.5 million during the three months April 30, 2008. This change is primarily due to the timing of collections.

Net cash used in investing activities was $0.5 million for the three months ended April 30, 2009, which includes the purchases of capital assets of approximately $1.0 million. This was partially offset by the maturity of investments, net of purchases, generating a cash inflow of approximately $0.5 million.

Net cash used in financing activities was $26.3 million for the three months ended April 30, 2009. During this period, we made principal payments on our debt of $18.3 million and purchased our own shares having a value of $9.4 million under our shareholder-approved share repurchase program. These uses of cash were partially offset by proceeds of $1.4 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.

We had a working capital deficit of approximately $9.8 million as of April 30, 2009 and approximately $11.9 million as of January 31, 2008. The increase in working capital was primarily due to net income from continuing operations of $18.8 million, which includes non-cash charges for depreciation and amortization of $3.8 million, share-based compensation expense of $1.6 million and a non-cash tax charge of $3.3 million. Additionally, we received proceeds of $1.4 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 $18.3 million and the purchase of treasury shares having a value of $9.4 million under our shareholder-approved share repurchase program.

As of January 31, 2009, we had U.S. federal NOL carryforwards of $214.2 million. These NOL carryforwards represent the gross carrying value of the operating loss carryforwards 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 $214.2 million of U.S. federal NOL carryforwards is $114.7 million of U.S. NOL carryforwards that were acquired in the SmartForce Merger and the purchase of Books24X7, $55.4 million of NOL carryforwards resulting from disqualifying dispositions and $44.1 million of U.S. NOL carryforwards that relate to our operations. We will realize the benefit of the disqualifying disposition losses through increases to shareholders' equity in the periods in which the losses are utilized to reduce tax payments. Additionally, we 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 which were acquired in the SmartForce Merger and $40.4 million of NOL carryforwards that relate to our Irish operations. We also had U.S. federal tax credit carryforwards of approximately $3.9 million at January 31, 2009.

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 5 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
Contractual Obligations            Total             1 Year           Years          Years          5 Years
Operating Lease Obligations   $         13,096     $     4,056      $   5,772      $    3,176     $         92
Debt Obligations                       105,091           1,070          2,140         101,881                -
Total Obligations             $        118,187     $     5,126      $   7,912      $  105,057     $         92

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.

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