UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the quarterly period ended July 31, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the transition period from ____________ to ____________

Commission File Number: 001-35992

Skillsoft Corp.

(Exact name of registrant as specified in its charter)


Delaware		83-4388331
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

300 Innovative Way, Suite 201 Nashua, New Hampshire 03062 (Address of principal executive offices)

Tel: (603) 324-3000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

Warrants, each whole warrant exercisable for one Class A

SKIL

SKIL.WS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding as of September 9, 2021 was: 133,059,021.

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SKILLSOFT CORP.

FORM 10-Q

FOR THE QUARTER ENDED JULY 31, 2021

INDEX

	PAGE NO.
PART I — FINANCIAL INFORMATION - UNAUDITED
Item 1. Financial Statements:	4
Condensed Consolidated Balance Sheets as of July 31, 2021 (Successor) and January 31, 2021 (Predecessor (SLH))	4
Condensed Consolidated Statement of Operations for the Period from June 12, 2021 through July 31, 2021 (Successor), Period from May 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), and for the three and six months ended July 31, 2020 (Predecessor (PL))	5
Condensed Consolidated Statement of Comprehensive Loss for the Period from June 12, 2021 through July 31, 2021 (Successor), Period from May 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), and for the three and six months ended July 31, 2020 (Predecessor (PL))	6
Condensed Consolidated Statement of Stockholders’ (Deficit) Equity for the Period from June 12, 2021 through July 31, 2021 (Successor), Period from May 1, 2021 through June 11, 2021 (Predecessor (SLH)), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), and for the three and six months ended July 31, 2020 (Predecessor (PL))	7
Condensed Consolidated Statements of Cash Flows for the Period from June 12, 2021 through July 31, 2021 (Successor), Period from February 1, 2021 through June 11, 2021 (Predecessor (SLH)), and for the six months ended July 31, 2020 (Predecessor (PL))	8
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures about Market Risk	51
Item 4. Controls and Procedures	51
PART II — OTHER INFORMATION	53
Item 1. Legal Proceedings	53
Item 1A. Risk Factors	53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3. Defaults Upon Senior Securities	53
Item 4. Mine Safety Disclosures	53
Item 5. Other Information	53
Item 6. Exhibits	54
SIGNATURES	57

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CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook, our product development and planning, our pipeline, future capital expenditures, financial results, the impact of regulatory changes, existing and evolving business strategies and acquisitions and dispositions, demand for our services and competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, our ability to successfully implement our plans, strategies, objectives, expectations and intentions are forward-looking statements. Also, when we use words such as “may,” “will,” “would,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “projects,” “forecasts,” “seeks,” “outlook,” “target,” goals,” “probably,” or similar expressions, we are making forward-looking statements. Such statements are based upon the current beliefs and expectations of Skillsoft’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including:

●

our ability to realize the benefits expected from the business combination between Skillsoft, Churchill Capital Corp. II and Global Knowledge;

●

the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability;

●

the impact of the ongoing COVID-19 pandemic on our business, operating results and financial condition;

●

fluctuations in our future operating results;

●

our ability to successfully identify, consummate and achieve strategic objectives in connection with our acquisition opportunities and realize the benefits expected from the acquisition;

●

the demand for, and acceptance of, our products and for cloud-based technology learning solutions in general;

●

our ability to compete successfully in competitive markets and changes in the competitive environment in our industry and the markets in which we operate;

●

our ability to develop new products;

●

a failure of our information technology infrastructure or any significant breach of security;

●

future regulatory, judicial and legislative changes in our industry;

●

our ability to comply with laws and regulations applicable to its business;

●

the impact of natural disasters, public health crises, political crises, or other catastrophic events;

●

our ability to attract and retain key employees and qualified technical and sales personnel;

●

fluctuations in foreign currency exchange rates;

●

our ability to protect or obtain intellectual property rights;

●

our ability to raise additional capital;

●

the impact of our indebtedness on our financial position and operating flexibility;

●

our ability to meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;

●

our ability to successfully defend ourselves in legal or regulatory proceedings;

●

our ability to remediate any material weaknesses or maintain effective internal controls over financial reporting; and

●

our ability to continue to meet applicable listing standards.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information, please see the risk factors included in Churchill Capital Corp. II’s Annual Report on Form 10-K/A for the year ended December 31, 2020 in Part I, Item 1A and in the registration statement on Form S-4 filed by Churchill Capital Corp. II and declared effective by the Securities and Exchange Commission (the “SEC”) on May 27, 2021, and subsequent filings with the SEC.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. Given the significant

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uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. Additionally, statements as to market share, industry data and our market position are based on the most currently available data available to us and our estimates regarding market position or other industry data included in this document or otherwise discussed by us involve risks and uncertainties and are subject to change based on various factors, including as set forth above.

Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless required by applicable law. With regard to these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

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PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS.

SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)


	Successor		Predecessor (SLH)
	July 31, 2021		January 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	90,772	$	71,479
Restricted cash		14,742		2,964
Accounts receivable, less reserves of approximately $2,662 and $294 as of July 31, 2021 and January 31, 2021, respectively		120,980		179,784
Prepaid expenses and other current assets		48,584		30,326
Total current assets		275,078		284,553
Property and equipment, net		15,055		13,780
Goodwill		761,177		495,004
Intangible assets, net		946,731		728,633
Right of use assets		24,578		15,131
Deferred tax asset		3,710		—
Other assets		8,092		8,636
Total assets	$	2,034,421	$	1,545,737
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt	$	3,600	$	5,200
Borrowings under accounts receivable facility		24,822		17,022
Accounts payable		34,514		7,425
Accrued compensation		41,097		36,375
Accrued expenses and other current liabilities		62,473		23,125
Lease liabilities		9,662		4,740
Deferred revenue		165,900		257,549
Total current liabilities		342,068		351,436

Long-term debt		463,799		510,236
Warrant liabilities		28,525		900
Deferred tax liabilities		116,462		81,008
Long term lease liabilities		16,098		13,155
Deferred revenue - non-current		1,749		3,035
Other long-term liabilities		5,045		5,998
Total long-term liabilities		631,678		614,332
Commitments and contingencies		—		—
Shareholders’ equity :
(Predecessor SLH) Shareholders’ common stock- Class A and Class B common shares, $0.01 par value: 1,000,000,000 shares authorized (800,000,000 Class A, 200,000,000 Class B) at January 31, 2021; 4,000,000 shares issued and outstanding (3,840,000 Class A, 160,000 Class B) at January 31, 2021		—		40
(Successor) Shareholders’ common stock- Class A common shares, $0.0001 par value: 375,000,000 shares authorized and 133,059,021 shares issued and outstanding at July 31, 2021		11		—
Additional paid-in capital		1,297,716		674,333
Accumulated deficit		(237,958)		(93,722)
Accumulated other comprehensive income (loss)		906		(682)
Total shareholders’ equity		1,060,675		579,969
Total liabilities and shareholders’ equity	$	2,034,421	$	1,545,737

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

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SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


	Successor		Predecessor (SLH)				Predecessor (PL)
	From		From		From
	June 12,		May 1, 2021		February 1,		Three months		Six months
	2021 to July		to June 11,		2021 to June		ended July 31,		ended July 31,
	31, 2021		2021		11, 2021		2020		2020
Revenues:
Total revenues	$	57,912		47,935		139,636		116,835		235,164
Operating expenses:
Cost of revenues		28,006		11,360		35,881		21,618		45,831
Content and software development		9,878		7,477		24,084		16,835		33,778
Selling and marketing		22,234		13,438		41,940		34,033		66,769
General and administrative		17,073		4,855		17,217		15,324		32,015
Amortization of intangible assets		20,023		15,959		50,902		12,779		30,148
Impairment of goodwill and intangible assets		—		—		—		—		332,376
Recapitalization and transaction-related costs		9,995		5,006		6,938		16,659		32,035
Restructuring		316		(1,240)		(703)		771		1,141
Total operating expenses		107,525		56,855		176,259		118,019		574,093
Operating loss		(49,613)		(8,920)		(36,623)		(1,184)		(338,929)
Other (expense) income, net		(697)		(41)		(493)		898		1,809
Fair value adjustment of warrants		17,115		800		900		—		—
Interest income		12		54		64		65		84
Interest expense, net		(9,856)		(5,371)		(16,820)		(61,076)		(167,054)
Reorganization items, net		—		—		—		(10,593)		(10,593)
Loss before benefit from income taxes		(43,039)		(13,478)		(52,972)		(71,890)		(514,683)
Benefit from income taxes		(5,504)		(1,619)		(3,708)		(909)		(9,800)
Net loss	$	(37,535)		(11,859)		(49,264)		(70,981)		(504,883)

Loss per share:
Ordinary – Basic and Diluted (Predecessor (PL))		*		*		*	$	(709.10)	$	(5,043.79)
Class A and B – Basic and Diluted (Predecessor (SLH))		*	$	(2.96)	$	(12.32)		*		*
Ordinary – Basic and Diluted (Successor)	$	(0.28)		*		*		*		*
Weighted average common share outstanding:
Ordinary – Basic and Diluted (Predecessor (PL))		*		*		*		100.1		100.1
Class A and B – Basic and Diluted (Predecessor (SLH))		*		4,000		4,000		*		*
Ordinary – Basic and Diluted (Successor)		133,059		*		*		*		*

*Not applicable

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

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SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)


	Successor		Predecessor (SLH)		Predecessor (PL)
	From		From	From
	June 12,		May 1, 2021	February 1,	Three months	Six months
	2021 to July		to June 11,	2021 to June	ended July 31,	ended July 31,
	31, 2021		2021	11, 2021	2020	2020
Comprehensive loss:
Net loss	$	(37,535)	(11,859)	(49,264)	(70,981)	(504,883)
Other comprehensive income (loss) — Foreign currency adjustment, net of tax		906	(202)	(431)	(1,731)	(2,360)
Comprehensive loss	$	(36,629)	(12,061)	(49,695)	(72,712)	(507,243)

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

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SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT NUMBER OF SHARES)


							Accumulated		Total
	Ordinary Shares		Additional				Other		Shareholders’
	Number of	Par	Paid-In		Accumulated		Comprehensive		Equity
	Shares	Value	Capital		Deficit		(Loss) Income		(Deficit)
Balance January 31, 2020 (Predecessor (PL))	100,100	138		83		(2,761,499)		(466)	(2,761,744)
Translation adjustment	—	—		—		—		(629)	(629)
Net loss	—	—		—		(433,902)		—	(433,902)
Balance April 30, 2020 (Predecessor (PL))	100,100	138		83		(3,195,401)		(1,095)	(3,196,275)
Translation adjustment	—	—		—		—		(1,731)	(1,731)
Net loss	—	—		—		(70,981)		—	(70,981)
Balance July 31, 2020 (Predecessor (PL))	100,100	138		83		(3,266,382)		(2,826)	(3,268,987)

Balance January 31, 2021 (Predecessor (SLH))	4,000,000	40	$	674,333	$	(93,722)	$	(682)	579,969
Translation adjustment	—	—		—		—		(228)	(228)
Net loss	—	—		—		(37,405)		—	(37,405)
Balance April 30, 2021 (Predecessor (SLH))	4,000,000	40	$	674,333	$	(131,127)	$	(910)	542,336
Translation adjustment	—	—		—		—		(202)	(202)
Net loss	—	—		—		(11,859)		—	(11,859)
Balance June 11, 2021 (Predecessor (SLH))	4,000,000	40	$	674,333	$	(142,986)		(1,112)	530,275

Balance June 12, 2021 (Successor)	51,559,021	3		305,447		(200,423)		—	105,027
Issuance of shares, PIPE Investment	53,000,000	5		608,161		—		—	608,166
Issuance of shares, Skillsoft merger consideration	28,500,000	3		306,372		—		—	306,375
Issuance of shares, Global Knowledge acquisition	—	—		14,000		—		—	14,000
Reclassify Public Warrants to equity	—	—		56,120		—		—	56,120
Reclassify Private Placement Warrants - CEO to equity	—	—		2,800		—		—	2,800
Repurchase fractional shares	—	—		(1)		—		—	(1)
Share-based compensation	—	—		4,817		—		—	4,817
Translation adjustment	—	—		—		—		906	906
Net loss	—	—		—		(37,535)		—	(37,535)
Balance July 31, 2021 (Successor)	133,059,021	11		1,297,716		(237,958)		906	1,060,675

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

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SKILLSOFT CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)


	Successor		Predecessor (SLH)		Predecessor (PL)
	From		From
	June 12, 2021		February 1, 2021		Six months ended
	to July 31, 2021		to June 11, 2021		July 31,2020
Cash flows from operating activities:
Net loss	$	(37,535)	$	(49,264)	$	(504,883)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation		4,817		—		—
Depreciation		1,705		3,572		5,120
Amortization of intangible assets		20,023		50,902		30,148
Change in bad debt reserve		(170)		(174)		19
Provision for (benefit from) income taxes – non-cash		(6,180)		(5,886)		(11,478)
Non-cash interest expense		434		487		2,829
Impairment of goodwill and intangible assets		--		—		332,376
Right-of-use assets amortizations		1,445		748		1,435
Fair value adjustment to warrants		(17,115)		(900)		—
Non-cash reorganization items, net		—		—		4,818
Changes in current assets and liabilities, net of effects from acquisitions:
Accounts receivable		6,963		88,622		93,124
Prepaid expenses and other assets		(13,065)		3,379		(9,265)
Accounts payable		5,175		(6,417)		(5,520)
Accrued expenses and non-current liabilities		18,026		(18,592)		159,565
Lease liability		(1,690)		(1,301)		(1,942)
Deferred revenue		17,905		(31,365)		(84,773)
Net cash provided by operating activities		738		33,811		11,573
Cash flows from investing activities:
Purchases of property and equipment		(75)		(641)		(2,985)
Internal use software development costs		(881)		(2,350)		(3,401)
Acquisition of Skillsoft, net of cash received		(386,035)		—		—
Acquisition of Global Knowledge, net of cash received		(156,926)		—		—
Acquisition of Pluma, net of cash received		(18,646)		—		—
Net cash used in investing activities		(562,563)		(2,991)		(6,386)
Cash flows from financing activities:
Borrowings under revolving line of credit, net of repayments		—		—		19,500
Borrowings under DIP Facility		—		—		60,000
Proceeds from issuance of Term Loan, net of fees		464,290		—		—
Proceeds from equity investment (PIPE)		530,000		—		—
Principal repayments of capital lease obligations		(137)		(370)		(430)
Repayments of accounts receivable facility, net of borrowings		(9,456)		16,577		(19,270)
Repayments of First and Second Out loans		(605,591)		(1,300)		—
Net cash provided by financing activities		379,106		14,907		59,800
Effect of exchange rate changes on cash and cash equivalents		(250)		203		(2,264)
Net (decrease) increase in cash, cash equivalents and restricted cash		(182,969)		45,930		62,723
Cash, cash equivalents and restricted cash, beginning of period		288,483		74,443		33,804
Cash, cash equivalents and restricted cash, end of period	$	105,514	$	120,373	$	96,527
Supplemental disclosure of cash flow information:
Cash and cash equivalents	$	90,772	$	117,299	$	61,139
Restricted cash		14,742		3,074		35,388
Cash, cash equivalents and restricted cash, end of period	$	105,514	$	120,373	$	96,527

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

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SKILLSOFT CORP.

UNAUDITED SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

(IN THOUSANDS)


	Successor		Predecessor (SLH)		Predecessor (PL)
	From		From
	June 12, 2021		February 1, 2021		Six months ended
	to July 31, 2021		to June 11, 2021		July 31,2020
Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Cash paid for interest	$	5,030	$	16,439	$	—
Cash paid for income taxes, net of refunds	$	272	$	1,161	$	1,598
Unpaid capital expenditures	$	335	$	39	$	829
Note issued to parent entity for paid in kind interest	$	—	$	—	$	160,000
Lease liabilities arising from right-of-use assets and tenant improvements recognized upon adoption of new accounting standard	$	—	$	—	$	(19,415)
Share issued in connection with business combinations	$	306,375	$	—	$	—
PIPE subscription liability and warrants reclassified to equity	$	134,286	$	—	$	—
Debt issued in connection with business combinations	$	90,000		—		—
Warrants issued in connection with business combinations	$	14,000	$	—	$	—

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

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SKILLSOFT CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Description of Business

The Company

Skillsoft Corp (“Successor”)

On October 12, 2020, Software Luxembourg Holding S.A. (“Software Luxembourg” or “Predecessor (SLH)”) and Churchill Capital Corp II, a Delaware corporation (“Churchill”), entered into an Agreement and Plan of Merger (the “Skillsoft Merger Agreement”) by and between Churchill and Software Luxembourg. Pursuant to the terms of the Skillsoft Merger Agreement, a business combination between Churchill and Software Luxembourg was effected through the merger of Software Luxembourg with and into Churchill (the “Skillsoft Merger”), with Churchill being the surviving company. At the effective time of the Skillsoft Merger (the “Effective Time”), (a) each Class A share of Software Luxembourg, with nominal value of $0.01 per share (“Skillsoft Class A Shares”), outstanding immediately prior to the Effective Time, was automatically canceled and Churchill issued as consideration therefor (i) such number of shares of Churchill’s Class A common stock, par value $0.0001 per share (the “Churchill Class A Common Stock”) as would be transferred pursuant to the Class A First Lien Exchange Ratio (as defined in the Skillsoft Merger Agreement), and (ii) Churchill’s Class C common stock, par value $0.0001 per share (the “Churchill Class C Common Stock”), as would be transferred pursuant to the Class C Exchange Ratio (as defined in the Skillsoft Merger Agreement), and (b) each Class B share of Software Luxembourg, with nominal value of $0.01 per share (“Skillsoft Class B Shares”), was automatically canceled and Churchill issued as consideration therefor such number of shares of Churchill Class A common stock equal to the Per Class B Share Merger Consideration (as defined in the Skillsoft Merger Agreement). Immediately following the Effective Time, Churchill redeemed all of the shares of Class C Common Stock issued to the holders of Skillsoft Class A Shares for an aggregate redemption price of (i) $505,000,000 in cash and (ii) indebtedness under the Existing Second Out Credit Agreement (as defined in the Skillsoft Merger Agreement), as amended by the Existing Second Out Credit Agreement Amendment (as defined in the Skillsoft Merger Agreement), in the aggregate principal amount equal to the sum of $20,000,000 to be issued by the Surviving Corporation (as defined in the Skillsoft Merger Agreement) or one of its subsidiaries, in each case, pro rata among the holders of Churchill Class C Common Stock issued in connection with the Skillsoft Merger.

Prior to the closing of the Skillsoft Merger Agreement, the Company consummated the PIPE Investments and issued 53,000,000 shares of its Class A common stock and warrants to purchase 16,666,667 shares of its Class A common Stock for aggregate gross proceeds of $530 million. In connection with the consummation of these investments, the Company reclassified amounts recorded for stock subscriptions and warrants which previously had been accounted for as liabilities of $78.2 million as additional paid in capital.

On June 11, 2021 (“closing date”), Churchill completed its acquisition of Software Luxembourg, and changed its corporate name from Churchill to Skillsoft Corp. (the “Company”). In addition, the Company changed its fiscal year end from December 31 to January 31.

On June 11, 2021, the Company completed the acquisition of Albert DE Holdings Inc. (“Global Knowledge” and such acquisition, the “Global Knowledge Merger”), a worldwide leader in IT and professional skills development.

Software Luxembourg Holding (“Predecessor (SLH)”) and Pointwell Limited (“Predecessor (PL)”)

Software Luxembourg, a public limited liability company incorporated and organized under the laws of the Grand Duchy of Luxembourg, was established on August 27, 2020 for the purpose of acquiring the ownership interest in Pointwell Limited (“Pointwell”), an Irish private limited company, through a plan of reorganization under Chapter 11 subsequent to August 27, 2020. Pointwell is a wholly owned subsidiary of Software Luxembourg, held indirectly through two holding companies, Software Luxembourg Intermediate S.à r.l. and Software Luxembourg Acquisition S.à r.l, both private limited liability companies incorporated and organized under the laws of the Grandy Duchy of Luxembourg. Prior to August 28, 2020, Pointwell had been a direct wholly owned subsidiary of Evergreen Skills Lux S.à r.l., with an ultimate parent company of Evergreen Skills Top Holding Lux, both private limited liability companies incorporated and organized under the laws of the Grand Duchy of Luxembourg.

Successor and Predecessor Periods

References to “Successor” or “Successor Company” relate to the consolidated financial position and results of operations of Skillsoft subsequent to June 11, 2021, the date when the acquisitions of Predecessor (SLH and Global Knowledge were completed. References to “Predecessor (SLH)” relate to the consolidated financial position and results of operations of Software Luxembourg Holding between August 28, 2020 and June 11, 2011 (its last date of operations prior to the merger). Operating results for the acquired business on June

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11, 2021 were credited to the Predecessor (SLH) in the accompanying consolidated statement of operations. The funds received from the PIPE investments and transferred for the business combinations closing on June 11, 2021 recorded in the Successor period of the consolidated statement of cash flows. References to “Predecessor (PL)” relate to the consolidated financial position and results of operations of Pointwell prior to August 28, 2020.

Description of Business

The Company provides, through its Skillsoft, Global Knowledge (“GK”) and SumTotal brands, enterprise learning solutions designed to prepare organizations for the future of work, overcome critical skill gaps, drive demonstrable behavior-change, and unlock the potential in their people. Skillsoft offers a comprehensive suite of premium, original, and authorized partner content, featuring one of the broadest and deepest libraries of leadership & business, technology & developer, and compliance curricula. With access to a broad spectrum of learning options (including video, audio, books, bootcamps, live events, and practice labs), organizations can meaningfully increase learner engagement and retention. Skillsoft’s offerings are delivered through Percipio, its award-winning, AI-driven, immersive learning platform purpose built to make learning easier, more accessible, and more effective.

References in the accompanying footnotes to the Company’s fiscal year refer to the fiscal year ended January 31 of that year (e.g., fiscal 2021 is the fiscal year ended January 31, 2021).

Basis of Financial Statement Preparation

The accompanying condensed consolidated financial statements include the accounts of Skillsoft (Successor), Software Luxembourg (Predecessor (SLH)) and Pointwell (Predecessor (PL)) and their wholly owned subsidiaries. These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. We prepared the accompanying unaudited condensed consolidated financial statements in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, include all information and footnotes necessary for a complete presentation of operations, comprehensive income (loss), financial position, changes in stockholders’ equity (deficit) and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated balance sheet as of January 31, 2021 was derived from the audited consolidated financial statements of Software Luxembourg (Predecessor (SLH)) and does not include all disclosures required by U.S. GAAP for annual financial statements. The audited consolidated financial statements as of and for the year ended January 31, 2021 of Software Luxembourg (Predecessor (SLH)), which were included in the Company’s Form 8-K/A filing on June 17, 2021, contains the information and footnotes necessary for such presentation. Accordingly, the financial statements contained in these interim financial statements should be read in conjunction with the audited consolidated financial statements of Software Luxembourg (Predecessor (SLH)) for the year ended January 31, 2021.

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS” Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 40 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from our estimates.

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(2) Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2—Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Software Luxembourg audited financial statements for the year ended January 31, 2021, which were included in the Company’s Form 8-K/A filing on June 17, 2021. There have been no changes to these policies during the period ended July 31, 2021, except as noted below.

Stock-based Compensation

The Company recognizes compensation expense for stock options and time-based restricted stock units granted to employees on a straight-line basis over the service period that awards are expected to vest, based on the estimated fair value of the awards on the date of the grant. For restricted-stock units that have market conditions or performance conditions, the Company recognizes compensation expense using an accelerated attribution method. The Company calculates the fair value of stock-based awards on the date of grant and uses the Black-Scholes model to estimate the fair value of stock options. In estimating the fair value of options, the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time to vesting and the contractual life of the options. The Company recognizes forfeitures as they occur.

Derivative Liabilities

The Company accounts for debt and equity issuances as either equity-classified or liability-classified instruments based on an assessment of the instruments specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common stock and whether the holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the instruments and as of each subsequent quarterly period end date while the instruments are outstanding.

For issued or modified instruments that meet all of the criteria for equity classification, the instruments are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified instruments that do not meet all the criteria for equity classification (which includes 16.3 million of private placement warrants held by the sponsors for Churchill), the instruments are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the instruments are recognized as a non-cash gain or loss on the statements of operations.

Contract Acquisition Costs

The Company recognizes deferred contract acquisition costs over (i) the expected customer relationship period in the case of new customers, which is typically 3 to 5 years for initial commissions, and (ii) the contractual term for existing customers for commissions paid in connection with renewals. For each of the Predecessor periods, the Company applied the practical expedient allowing for recognizing expense as incurred sales commissions and other contract acquisition costs, where the amortization period would be one year or less. The Company does not apply the practical expedient for the Successor period.

(3) Business Combinations

(a) Software Luxembourg Holdings S.A. (“Predecessor (SLH)” or “Skillsoft Legacy”)

On June 11, 2021, Software Luxembourg Holding S.A. merged with and into Churchill Capital Corp II (Churchill) which subsequently changed its name to Skillsoft Corp..

The Skillsoft Merger was considered a business combination under ASC 805, Business Combinations and will be accounted for using the acquisition method of accounting, whereby Churchill was been determined to be the accounting acquirer based on their rights to

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nominate six members of the initial Board of Directors, the size of their voting interest and their rights to appoint the Chief Executive Officer of Skillsoft Corp. and other members of management of the combined company prior to closing.

Under the acquisition method, the acquisition date fair value of the consideration paid by the Company was allocated to the assets acquired and the liabilities assumed based on their estimated fair values.

The following summarized the purchase consideration (in thousands):


Description	Amount
Class A Common Stock issued	$	258,000
Class B Common Stock issued ^*		48,375
Cash payments		505,000
Second Out Term Loan		20,000
Cash settlement of seller transaction costs		1,308
Total Purchase Price	$	832,683

^*Shares of Class B common stock was converted into Successor Class A common stock at the time of the Merger

The Company preliminarily recorded the fair value of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):


Description	Amount
Cash, cash equivalents and restricted cash	$	120,273
Current assets		118,847