Risk Factors Regarding Prosoft

Prosoft has limited cash resources and may need to raise additional funds.

Prosoft is operating with limited cash resources. A moderate change to revenue-generating capability or expense structure could result in increased operating losses. Increased losses would erode Prosoft’s liquidity by further reducing cash resources.

Should Prosoft need to raise additional funds, the company cannot be certain that it will be able to obtain them on terms satisfactory to it. If Prosoft could not raise additional funds on terms satisfactory to it, the company would be forced to raise funds on terms that it would not otherwise accept or seek funds through other means such as the sale of some or all of its assets or operations.

Prosoft’s common stock could be delisted from the Nasdaq Stock Market.

On October 7, 2002, the trading of Prosoft’s common stock was transferred from the Nasdaq National Market System to the Nasdaq SmallCap Market as a result of Prosoft’s failure to satisfy the minimum $1.00 bid price per share requirement set forth in the Nasdaq Marketplace Rules. However, in order to remain on the Nasdaq SmallCap Market, Prosoft was required to satisfy the $1.00 bid price requirement by having a closing bid price of its common stock of at least $1.00 for a minimum of ten consecutive days, which the company, after several extensions from Nasdaq, achieved in April 2004.

If Prosoft again incurs a minimum bid price deficiency and if Nasdaq delists Prosoft’s common stock, then the common stock may be traded on the OTC Bulletin Board or the “pink sheets.” Many institutional and other investors refuse to invest in stocks that are traded at levels below the Nasdaq Markets, which could reduce the trading liquidity in Prosoft’s common stock or make the company’s effort to raise capital more difficult. OTC Bulletin Board and “pink sheets” stocks are often lightly traded or not traded at all on any given day. Any reduction in trading liquidity or active interest on the part of the investors in Prosoft’s common stock could have adverse consequences on its stockholders, either because of reduced market prices or lack of a regular, active trading market for Prosoft common stock.

Prosoft has incurred significant losses to date and may continue to incur losses in the future.

Prosoft has incurred net losses of approximately $100 million from inception through January 31, 2004. The company’s ability to generate revenue growth in the future is subject to uncertainty. There can be no assurance that Prosoft will be able to increase revenues, manage expenses, or maintain profitability. Should revenue

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Index to Financial Statements

decrease in the future, Prosoft may not be able to stem losses thereafter through expense reductions, given the magnitude of the reductions already implemented.

Prosoft faces intense competition in the training market.

Prosoft faces substantial competition in the education and training market. Competition in the ICT training market is intense and is affected by the rapidly evolving nature of the information technology industry. A number of other companies offer products and services similar to Prosoft’s, and additional new competitors may emerge in the future. Many of the company’s existing competitors have substantially greater capital resources, technical expertise, marketing experience, research and development status, established customers and facilities than does Prosoft. As a result, there is a risk that Prosoft will not be able to successfully compete with existing and future competitors, which would adversely affect the company’s financial performance.

Prosoft needs to respond to rapid technological changes.

In Prosoft’s industry, technology advances rapidly and industry standards change frequently. To remain competitive and improve profitability, the company must continually enhance its existing products and promptly introduce new products, services, and technologies to meet the changing demands of its customers. Prosoft’s failure to respond to technological changes quickly would adversely affect its financial performance.

The Prosoft stock price has historically been very volatile.

Prosoft’s common stock has experienced substantial price volatility, which may continue in the future. Additionally, the stock market from time to time experiences significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may also adversely affect the market price of Prosoft’s common stock. In addition to such broad market fluctuations, factors such as, but not limited to, the following may have a significant effect on the market price of Prosoft’s common stock: