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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2000
or

For the transition period from                to                

Commission File Number 000-24289

CLICK2LEARN.COM, INC.
(Exact name of registrant as specified in its charter)

(425) 462-0501
(Registrant's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share

    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 /x/                No / /

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

    The aggregate market value of common stock held by non-affiliates of the registrant as of March 1, 2001 was $34,204,360.

    The number of shares outstanding of the registrant's common stock as of March 1, 2001 was 18,127,974.

DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held are incorporated by reference into Part III.

CLICK2LEARN.COM, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000

INDEX

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PART I

    Except for historical information, this Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our anticipated costs and expenses and revenue mix. Such forward-looking statements include, among others, those statements including the words "expects", "anticipates", "intends", "believes" and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to those discussed in the section "Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results of Operations." You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Item 1. Business

Overview and History

    We provide e-Learning solutions to enable organizations to use knowledge as a means to increase effectiveness, develop new revenue streams and improve profitability by providing timely, appropriate and engaging learning to their extended enterprise of employees, suppliers, distributors and customers. Our e-Learning solutions include scalable learning management and delivery platforms, collaborative content creation and publishing technology, and a library of e-Learning content from third party publishers, all of which are supported by complementary professional services.

    Our e-Learning solutions focus on the needs of two primary markets: organizations seeking to increase their effectiveness and gain a competitive advantage by providing relevant and up-to-date knowledge when and where it is needed throughout the extended enterprise, and organizations seeking to use e-Learning to develop new lines of business or sources of revenue by leveraging existing intellectual capital or product lines. For simplicity, we refer to these two markets as "corporate solutions" and "commercial solutions" although customers of these solutions are not limited to corporations or commercial entities.

    Both our corporate and commercial solutions are highly scalable yet flexible enough to be tailored to the unique needs of each customer. Our knowledgeable and experienced professionals work together with our customers to deliver e-Learning initiatives with measurable results. We work collaboratively with our clients to develop business plans, evaluate e-Learning alternatives, plan, implement and support the solution best suited to their e-Learning goals, and provide ongoing evaluation to measure effectiveness and return on their e-Learning investment.

    We were originally incorporated as Asymetrix Corporation in the State of Washington in 1984 and developed and marketed a wide range of software products during that time. Since 1995 we have focused our business on the e-Learning market. As a result of our decision to focus on e-Learning, we divested several product lines and made a number of acquisitions to strengthen our position in this market, and we changed our name to Asymetrix Learning Systems, Inc. We also focused our research and development efforts on products and technology for e-Learning and developed our professional services organization. In connection with our initial public offering in June 1998, we reincorporated as a Delaware corporation and in 1999 we changed our name to Click2learn.com, Inc. to reflect the long-term strategic importance of Internet-based e-Learning solutions and our application service business.

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Products and Services

    Our flexible and scalable learning delivery and management platforms, processes to create and publish customer-specific content, wide range of learning content from third party publishers and supporting professional services enable us to tailor our e-Learning solutions to each customer's unique needs. We believe our ability to offer customers a single source for the platforms, processes, content and people necessary for a successful e-Learning initiative will enable us to become a strategic partner for our customers as they expand the use of e-Learning to additional business initiatives.

    Our solutions are based on the following products and services:

Delivery and Learning Management Platforms

    The e-Learning Network.  Our e-Learning Network is a centrally hosted application service platform we use to provide e-Learning web sites that are configured with our customers' choices of colors, graphics, logos and text. The e-Learning Network provides an easily implemented means for customers to create, publish and deliver appropriate learning content to employees, suppliers, distributors and customers. The e-Learning Network includes a variety of browser-based management, assessment and reporting tools that do not require proprietary plug-ins or other software. Our learning management and reporting tools enable managers to track learning activities of individual learners or all members of a designated group or cost center. The site management tools enable customers to modify the catalog of courses available at their e-Learning sites, add or remove users, change cost center or billing information, publish content to their e-Learning sites and modify the site logos, graphics, links and other information. The ability to manage their sites without involving our technical support staff increases the convenience to our customers while enhancing the scalability of our network.

    Because the e-Learning Network is centrally hosted and easily configurable, we can rapidly create sites that maintain each customer's unique look and feel while permitting our customers to focus on the nature of the e-Learning solution they want to provide, rather than on the technical aspects of hosting the site, enhancing functionality and integrating content. Moreover, we can maintain the entire network from our central location, simultaneously providing every customer the benefits of the most current version of our technology while reducing the support burden by ensuring that all customers are operating in a consistent technology environment. Our robust e-commerce infrastructure provides our corporate solution customers with flexible billing and payment options for their internal use of content and enables our commercial solution customers to sell learning content through the e-Learning Network.

    We generally charge our customers a fee for the initial set up and configuration of a site on the e-Learning Network and we charge monthly hosting fees that typically are based on the number of licensed users for our corporate solutions and on either the amount of custom e-Learning content delivered or revenue generated for our commercial solutions.

    Ingenium Learning Management System.  Our Ingenium enterprise learning management and skills assessment system is an alternative platform for delivering our e-Learning solutions. Because it supports the management and delivery of multiple types of learning activities, Ingenium is particularly attractive for customers seeking to manage both e-Learning and instructor-led training. Ingenium also enables customers to match and track employees' readiness to perform job functions based on the analysis of the skills required to accomplish relevant tasks and to prescribe learning based on skill deficiencies. Ingenium includes robust and user-friendly reporting capabilities that enable managers to track learning activities of individual learners or members of a designated group and a data update and import tool that that permits the synchronization of employee and training records with corporate information systems. Ingenium can also be connected to our library of e-Learning content from third party publishers, allowing that content to be purchased and delivered through the Ingenium system.

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    Ingenium can be licensed on a perpetual basis and installed on a customer's internal information systems or hosted at our data center. We also offer Ingenium on a subscription basis under which the customer pays a monthly subscription fee for access to the system. License fees, monthly hosting fees and monthly subscription fees are based on the number of licensed users of the Ingenium system and, for hosted or subscription implementations, the amount of custom e-Learning content we host for the customer.

Content Creation and Commercial Learning Content

    Rapid e-Learning Development System.  We offer a unique rapid e-Learning development system called ReDS. ReDS is our high-end content creation solution that permits instructional designers, web developers, graphic artists and subject matter experts to collaboratively create large amounts of sophisticated, web-based e-Learning content quickly and cost effectively. ReDS is an application service that uses the Internet to facilitate development on a centralized database using pre-programmed templates and navigational controls, allowing the development team to focus on the learning content and specialized tasks rather than on each element of every screen in the finished application. We generally charge a fee for a ReDS implementation, which includes training and development of customer specific ReDS templates, and a monthly subscription fee for ongoing access to the system.

    ToolBook II Products.  We also offer the ToolBook II Instructor and ToolBook II Assistant stand-alone software products as our mid-market solution for creating e-Learning content for deployment on CD-ROM or in a web-based environment. ToolBook II Instructor is a multimedia development system for creating sophisticated e-Learning applications and is targeted at professional software developers. ToolBook II Assistant is an easy-to-use authoring product that automates much of the process of developing e-Learning applications and is targeted at learning professionals or content experts rather than software developers. Both products enable users to publish their content directly to our e-Learning Network and are licensed on a per copy basis.

    Browser-based Authoring and Publishing Tools.  Our e-Learning Network also features hosted authoring and publishing tools called click2learn.author and click2learn.publisher. These basic tools allow users to create new, interactive web-based content and to upload existing content in a variety of formats, such as Microsoft Word or PowerPoint files, using only a standard web browser. These tools are available at no additional cost to users of the e-Learning Network.

    Commercial Learning Content.  We offer a library of commercial learning content from popular publishers covering a broad range of subjects relevant to organizations and business professionals. By aggregating content from top publishers, we can provide our customers with a broader range of content choices than if we were to develop, market and maintain our own proprietary content, while still offering customers a single source for obtaining commercial titles. General subject matter areas include business and management, computer skills, IT certification, health and safety, professional development and others.

Professional Services

    Strategic Consulting.  We offer a range of strategic consulting services related to our customers' e-Learning initiatives. We assist our customers in identifying ways that e-Learning can add value to current offerings, developing e-Learning business models, integrating e-Learning with existing business strategies, defining a solution that best meets their e-Learning needs and providing on-going consulting on the effectiveness of their solution and return on investment.

    Custom Content Development.  Our award-winning development services group offers a full range of customized services for the design and production of e-Learning content. Our instructional designers,

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web developers and graphic artists collaborate closely with our customers through ReDS to create engaging e-Learning content quickly and cost effectively.

    Systems Integration.  We also provide the services necessary to set up our customers' e-Learning solutions and to integrate existing customer content with e-Learning sites on our network. We also integrate Ingenium and our other e-Learning products with our customers' information systems in internal e-Learning implementations.

    Training and Technical Support.  We offer training that helps organizations become more self-reliant in the use of our products and in e-Learning generally. We also offer a variety of optional technical support and maintenance packages for our software products and for e-Learning sites on our network.

Customers

    We provide our network or our e-Learning products and services to customers across a broad range of industries including financial services, accounting, health care, insurance, computer hardware and software, manufacturing, networking, telecommunications, government and education. The following is a partial list of our significant customers in 2000:

    No single customer accounted for 10% or more of our total consolidated revenues in any of the last three fiscal years.

Competition

    The e-Learning market is a new market that is quickly evolving and subject to rapid technological change. The market is also highly fragmented, with no single competitor holding a dominant market position. Because there are no significant barriers to entry in this market, we expect a number of new competitors to enter this market in the future.

    Each of our products and services faces competition from a variety of companies in different segments of the e-Learning market. Our e-Learning Network faces competition from companies that offer web sites where they either aggregate off-the-shelf content or offer their own content, such as

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SmartForce and DigitalThink. Our Ingenium system faces competition from vendors of other learning management systems, such as Saba and Docent. Finally, our professional services face competition from many small, regional online learning and technology-based training service businesses as well as large professional consulting firms and in-house training departments.

    The principal competitive factors affecting the market for e-Learning include:

•

the scope and variety of e-Learning content;



•

the features and management functionality of e-Learning solutions;



•

scalability and the ability to integrate with other e-Learning and enterprise software products;



•

the scope and quality of professional services offered;



•

pricing;



•

customer service and support;



•

reputation and financial position of the provider; and



•

the effectiveness of sales and marketing efforts.

    Although we believe that we are one of only a few companies that provides a single source for e-Learning platforms, content and services and that our solutions compete favorably with respect to all these factors, we may not be able to maintain a competitive position against current and potential competitors as they move toward more complete solution offerings.

Sales and Marketing

    As of December 31, 2000, our combined sales and marketing organization consisted of 99 employees based at our corporate headquarters in Bellevue, Washington and at other locations throughout the United States and in the United Kingdom. We sell our solutions primarily through a direct sales force consisting of field sales representatives focused on selling large e-Learning solutions and inside sales representatives focused on sales of the ToolBook II authoring products and smaller e-Learning solutions. Our sales organization also includes sales engineers who provide technical expertise, architect the technical aspects of our e-Learning solutions, assist in proposal preparation and provide ongoing sales support. We have recently increased our direct sales force and expect to continue to add to our direct sales force in the future.

    Although we have not used resellers significantly in marketing our e-Learning solutions to date, certain of our commercial solutions customers are now reselling our e-Learning Network to their customers as part of their e-Learning initiatives. We are also negotiating strategic partnerships with a number of large organizations that are seeking to make e-Learning a significant part of their business strategy to enable these organizations to resell our solutions as the basis for their e-Learning offerings.

    International revenue, based on the origin of the customer, accounted for 12%, 16% and 6% of our total revenue for 1998, 1999 and 2000, respectively. We believe that the e-Learning market is still in the early stages of development outside the United States, but that businesses in other countries, particularly in Japan and Europe, are beginning to undertake e-Learning initiatives. In 2000, we formed a joint venture with SOFTBANK Media & Marketing Corp. and SOFTBANK Forums Japan, Inc. to bring a Japanese-language version of our e-Learning Network to the Japanese market. We intend to expand internationally by establishing similar joint ventures to bring localized versions of our e-Learning solutions to other countries and to provide a means to enable multi-national customers to centrally administer their worldwide e-Learning initiatives

    We conduct a variety of marketing programs to promote our e-Learning solutions, including advertising in national business and technology magazines and trade publications, major trade shows,

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direct mail and e-mail campaigns, public seminars, web-based seminars, and public relations activities focused on company news and successful applications of our e-Learning solutions. In cooperation with the publisher of Training and Online Learning magazines, we are founding sponsors of the largest e-Learning conference in the industry. The next conference will be held in October 2001 in Los Angeles. We also participate as an exhibitor and speaker at numerous training and e-Learning trade shows and we maintain an area on our web site where potential customers can obtain information about e-Learning and our solutions.

Research and Development

    We believe our long-standing focus on technology has attracted qualified engineering and other technical personnel and has contributed to our core technology capabilities. Our principal research and development groups are located in Bellevue, Washington; Rochester, New York and Nashua, New Hampshire. Research and development expenses were $6.1 million, $7.4 million and $9.5 million in 1998, 1999 and 2000, respectively and represented 18%, 21% and 22% of total revenue for those respective periods. We believe our future success will depend on our ability to continue to enhance our e-Learning solutions to keep pace with competitive product and service offerings, new technologies and industry standards, and diverse and changing customer requirements. As a result, we actively participate in a number of standards bodies and are taking an active role in defining standards for the e-Learning industry. We expect to continue to commit significant resources to research and development of our e-Learning solutions in the future.

Proprietary Rights

    Our e-Learning solutions are based on technology that is both internally developed and licensed from third parties. We rely on a combination of copyrights, trademarks, trade secret laws, restrictions on disclosure and other methods to protect our intellectual property and trade secrets. We also enter confidentiality agreements with our employees and consultants, and control access to our proprietary information. Despite our precautions, however, unauthorized parties may copy or otherwise obtain or use our intellectual property and other companies may independently develop equivalent technology or intellectual property.

    We use the following trademarks in the conduct of our business: CLICK2LEARN, INGENIUM, REDS, TOOLBOOK II ASSISTANT, TOOLBOOK II INSTRUCTOR, CLICK2LEARN.AUTHOR, CLICK2LEARN.PUBLISHER and CLICK2LEARN.MANAGER.

Employees

    As of December 31, 2000, we had 436 full-time employees, including 78 in research and development, 99 in sales and marketing, 209 in professional services and technical support and 50 in operations and administration. None of our employees are represented by a labor union. We have not experienced any work stoppages and we consider our relations with our employees to be good.

Item 2. Properties

    Our corporate headquarters and executive offices are located in Bellevue, Washington in approximately 35,293 square feet of leased office space, with the lease term expiring in October 2003. We also maintain regional offices in Atlanta, Georgia; Des Plaines, Illinois; Fort Worth, Texas; Halifax, Nova Scotia; London, England; Nashua, New Hampshire; Needham, Massachusetts; New York, New York; Rochester, New York and Santa Cruz, California. We believe that our current facilities will be adequate to meet our needs, or that alternate leased space will be available to meet our needs for the foreseeable future.

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Item 3. Legal Proceedings

    From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. We are not a party to any litigation or other legal proceeding that, in the opinion of management, could have a material adverse effect on our business, operating results and financial condition, except as described below.

    Richard B. Grant v. Asymetrix Corporation, No. CV-96-3635 HLH, Central District of California. On May 21, 1996, Richard B. Grant filed a complaint alleging that our ToolBook and Multimedia ToolBook products infringe a patent owned by him and is seeking unspecified damages. We have received an opinion from patent counsel that the products do not infringe this patent and that the patent is invalid. This action is still in the discovery stage, and it is not yet possible to assess the likelihood of its outcome. Currently discovery in the case has been stayed pending the court's ruling on the interpretation of the patent claims.

    Although we believe that we do not infringe this patent and that the patent is invalid, and although we intend to defend this action vigorously, the results of litigation can never be predicted with certainty. An adverse outcome in this litigation could have a material adverse effect on our business, operating results and financial condition. Moreover, the costs of defending the action, regardless of outcome, could be time-consuming, distract management personnel and have a negative effect on our business.

Item 4. Submission of Matters to a Vote of Securities Holders

    Not applicable.

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PART II

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

    Since the initial public offering, our common stock has been listed on the Nasdaq National Market, originally under the symbol ASYM and currently under the symbol CLKS. The following table sets forth the high and low sales prices per share for each fiscal quarter during 1999 and 2000.

    As of March 1, 2001, there were 177 holders of record of our common stock. Because brokers and other institutions hold many of the shares of our stock on behalf of stockholders, we are unable to estimate the actual number of stockholders represented by these record holders. We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings to finance future growth and, thus, we do not anticipate paying any cash dividends in the foreseeable future.

    The stock market from time to time has experienced significant price and volume fluctuations. In addition, the market price of our common stock has been highly volatile since the initial public offering. Factors such as fluctuations in our operating results, announcements of technological innovations or new products by us or our competitors, analysts' reports and projections and general market conditions may have a significant effect on the market price of our common stock. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against such a company. The institution of such litigation against us could result in substantial costs and a diversion of management's attention and resources, which could have a material adverse effect on our business.

Recent Sales of Unregistered Securities

    On December 12, 2000, we sold 410,678 shares of our common stock to Marshall Capital Management, Inc., an affiliate of Credit Suisse First Boston, for an aggregate purchase price of approximately $5 million in cash. In connection with the purchase of the common stock, we issued warrants for the purchase of 205,339 shares of common stock at an exercise price of $14.61 per share. We also issued warrants for the purchase of up to 176,177 additional shares of common stock at an exercise price of $.01 per share, which would be exercisable if the price of our common stock declined between the closing of the purchase and the effective date of a Registration Statement on Form S-3 registering the shares purchased and subject to the warrants for resale. The number of shares with respect to which this warrant actually became exercisable was based on the actual change in the price of our common stock.

    The sale of shares and warrants was made pursuant to Rule 506 of Regulation D and/or Section 4(2) under the Securities Act of 1933 as amended ("the Act") and was therefore exempt under the Act. The shares and warrants were sold to a single accredited investor, there was no general solicitation or advertising in connection with the sale of the shares and warrants, and we exercised

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reasonable care to assure that the purchaser was not an underwriter with the meaning of Section 2(11) of the Act. The proceeds will be used for working capital requirements.

    The warrants were exercised with respect to 74,759 shares on January 19, 2001. These warrants did not become exercisable with respect to the remaining 101,418 shares and the unexercised portion expired on January 20, 2001.

    The warrants to purchase 205,339 shares at $14.61 per share are exercisable at any time prior to 5:00 p.m. Eastern time on December 12, 2005 in whole or in part upon the payment of the exercise price for the number of shares with respect to which the warrants are being exercised. In addition, the warrants may be exercised on a net exercise basis, pursuant to which the exercise price for an exercise of warrants is paid by the cancellation of a portion of the shares being exercised having a fair market value equal to the exercise price for all the shares being exercised. However, a net exercise may only be made if there is not an effective registration statement in place on the date of such exercise covering the resale of the warrant shares.

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Item 6. Selected Consolidated Financial Data

(a)

Historical information was restated to reflect the combination of Click2learn and Meliora in 1998, accounted for as a pooling-of-interests.

(b)

Historical results of operations are not necessarily indicative of future results. Refer to the "Factors that May Affect Future Results of Operations" under Item 7: "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the discussion of factors which may impact future results.

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

    The following discussion of our financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and our Consolidated Financial Statements and related Notes thereto included elsewhere in this Report. This Report contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Factors that May Affect Future Results of Operations".

Overview

    The e-Learning market is made up of three distinct categories: content, services and delivery. Content represents off the shelf titles that provide training on a variety of general topics and customer specific content that must be custom developed. Services represent the outsourcing of e-Learning content, implementation or strategy development to third parties and delivery refers to the technology that manages and tracks e-Learning users and content.

    Click2learn has developed leading technology that addresses the delivery, management and the creation of e-Learning content. Complementing this technology is our service organization, which is the industry's largest, dedicated to the development of client specific e-Learning content as well as the implementation of delivery and content creation systems. Combined, we sell and market these offerings as solutions that enable organizations to take advantage of the many benefits of e-Learning.

    Our e-Learning solutions focus on the needs of two primary markets: organizations seeking to increase their effectiveness and gain a competitive advantage by providing relevant and up-to-date knowledge when and where it is needed throughout the extended enterprise, and organizations seeking to use e-Learning to develop new lines of business or sources of revenue by leveraging existing intellectual capital or product lines. For simplicity, we refer to these two markets as "corporate solutions" and "commercial solutions" although customers of these solutions are not limited to corporations or commercial entities.

    Both our corporate and commercial solutions are highly scalable yet flexible enough to be tailored to the unique needs of each customer. Our knowledgeable and experienced professionals work together with our customers to deliver e-Learning initiatives with measurable results. We work collaboratively with our clients to develop business plans, evaluate e-Learning alternatives, plan, implement and support the solution best suited to their e-Learning goals, and provide ongoing evaluation to measure effectiveness and return on their e-Learning investment.

    We group related revenues around the primary components of our solutions:  Platforms, Content Services and Tools. Platforms include software licenses, subscription and hosting fees, implementation, customization, training and support related to our Ingenium learning management system and e-Learning Network. Ingenium is a highly scalable skills and competency based system that manages traditional instructor lead training as well as e-Learning courses and can be installed on a client's server or hosted by Click2learn. The e-Learning Network is a robust internet based architecture system that manages the delivery of courses and e-commerce associated with commercial e-Learning implementations through an ASP environment. Content Services revenues are derived from the creation of custom e-Learning courses, consulting, licenses and hosting fees for the Rapid e-Learning Development System ("ReDS") and sales of third party off the shelf content. Our advanced content development technology, ReDS, is designed for use by teams of content developers to develop learning objects, large e-Learning courses and curriculum in a collaborative environment with our clients. Tools revenues include software licenses, technical support and training related to our award winning ToolBook II line of products as well as software license revenues from discontinued products sold before 2000. These include from a historical basis, Compel, IconAuthor, SuperCede and InfoModeler among others. We recognize revenues for software licenses upon shipment; for technical support,

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subscription and hosting evenly over the life of the contract; and for services such as content development and implementation based on the percentage of completion method or on a time and materials basis.

    Costs related to revenues consist of media, manuals, royalties, packaging and distribution for software licenses and primarily salaries and overhead for service related offerings. Costs of revenues for the Platforms and Tools category are similar due to a relatively high mix of software licenses versus services with cost averaging between 20% to 25% of related revenue. Contrasting the mix for Platforms and Tools, Content Services consist primarily of relatively high personnel costs associated with providing professional services compared to the lower materials, packaging and other costs of software. Costs for Content Services average between 70% to 80% of related revenues.

Results of Operations

    The following table presents Click2learn's results of operations as a percentage of total revenue for the periods indicated.

Year Ended December 31, 2000 Compared To Year Ended December 31, 1999

    Revenue.  Our total revenue increased 23% from $34.7 million in 1999 to $42.6 million in 2000. Revenue growth was attributable to a 121% growth in the Platforms category from $5.6 million in 1999 to $12.5 million in 2000. Additional growth was achieved through the Content Services category, which

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grew 56% from $13.8 million in 1999 to $21.5 million in 2000. These increases were due to our increased success at selling e-Learning solutions that include elements of each category. Solutions that include both our Platform and Content Services offerings grew 75% from $19.4 million in 1999 to $34.0 million in 2000 and now represent 80% of total revenues up from 56% in 1999. Offsetting the e-Learning solutions growth was a decline in the Tools category of 44% from $15.3 million in 1999 to $8.6 million in 2000. Our primary sales and marketing focus in 2000 was on our e-Learning solutions, which seldom include the products and services from the Tools category. As a result, little marketing or sales effort was focused on the Tools category contributing to the decline in revenues. We expect that we will continue to focus our sales and marketing efforts on our e-Learning solutions in 2001 and that revenues from the Tools category will continue to decline.

    Cost of Revenue.  Total cost of revenue increased 38% from $16.1 million in 1999 to $22.2 million in 2000. Increased costs of revenue were due primarily to higher total revenues and a change in the revenue mix between Tools, Content Services and Platforms. In 1999, Content Services represented 40% of total revenues and grew to 50% in 2000. The costs associated with Content Services are primarily labor and overhead and are therefore significantly