<PAGE>
PROSPECTUS
Peregrine Systems, Inc.
12670 High Bluff Drive
San Diego, California 92130
Telephone Number: (858) 481-5000
[PEREGRINE SYSTEMS LOGO]
206,304 SHARES
COMMON STOCK
These shares may be offered and sold from time to time by a certain
stockholder of Peregrine Systems, or PSI, identified in this prospectus. See
"Selling Stockholder." The selling stockholder, SupplyAccess acquired 206,304
shares of PSI common stock in a private placement transaction on February 23,
2000.
The selling stockholder will receive all of the net proceeds from the
sale of the shares. The stockholder will pay all underwriting discounts and
selling commissions, if any, applicable to the sale of the shares. The Company
will not receive any proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 OF
THIS PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
PSI's common stock is quoted on the Nasdaq National Market under the
symbol "PRGN." On March 21, 2000, the last reported sale price of the common
stock was $63.0625 per share.
-----------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------------------------
March 22, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where to Find Additional Information about PSI.......................3
Information Incorporated by Reference................................3
Recent Developments..................................................4
Forward Looking Information..........................................4
Peregrine Systems....................................................5
Risk Factors.........................................................5
Use of Proceeds.....................................................16
Selling Stockholder.................................................16
Plan of Distribution................................................17
Legal Matters.......................................................18
Experts ...........................................................18
</TABLE>
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The selling stockholder is offering to sell,
and seeking offers to buy, shares of PSI common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the shares.
-2-
<PAGE>
WHERE TO FIND ADDITIONAL INFORMATION ABOUT PSI
We file annual, quarterly and special reports, proxy statements, and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms, including locations of regional offices. Our SEC filings
are also available to the public from our Web site at http://www.peregrine.com
or at the SEC's Web site at http://www.sec.gov. Information on our Web site does
not constitute part of this prospectus.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below, and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until
the selling stockholders sell all the shares. This prospectus is part of a
Registration Statement we filed with the SEC (Registration No. 333-31848).
The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the fiscal year ended March 31,
1999;
2. Our Current Report on Form 8-K dated April 16, 1999 relating to the
acquisition of F Print UK, Limited; and as amended on Form 8-K/A dated
May 18, 1999.
3. Our Current Report on Form 8-K/A dated May 11, 1999 relating to the
restatement of the our financial statements.
4. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
5. Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1999.
6. Our Current Report on Form 8-K dated December 21, 1999 relating to our
acquisition of a minority equity position in Goldmine Software
Corporation.
7. Our Quarterly Report on Form 10-Q for the quarter ended December 31,
1999.
8. The description of our common stock contained in the Registration
Statement on Form 8-A as filed with the SEC on March 7, 1997.
You may request a copy of these filings including any exhibits to
such filings, at no cost, by writing or telephoning us at the following
address: General Counsel, Peregrine Systems, Inc., 12670 High Bluff Drive,
San Diego, California 92130; telephone number (858) 481-5000.
-3-
<PAGE>
RECENT DEVELOPMENTS
In February 2000 PSI and Telco Research Corporation Limited entered
into a definitive merger agreement under which PSI will acquire all the
outstanding shares of Telco Research. The merger agreement is subject to
approval by the shareholders of Telco Research, regulatory approvals, and
other customary closing conditions. The transaction is structured as a
stock-for-stock exchange at a fixed ratio of .082511 shares of PSI common
stock for each share of Telco Research stock. As consideration for the
merger, PSI expects to issue approximately 2.56 million shares in exchange
for all of the outstanding equity securities of Telco Research. Under the
terms of the agreement, Telco Research will become a wholly-owned subsidiary
of Peregrine Systems. The acquisition transaction will be accounted for by
the purchase method and is to be treated as a tax-free reorganization for
U.S. federal income tax purposes. It is anticipated that the transaction will
be ocmpleted during the quarter ending March 31, 2000.
FORWARD LOOKING INFORMATION
This prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, expectations and intentions and other statements contained in the
prospectus that are not historical facts. When used in this prospectus, the
words "expects," "anticipates," "estimates" and similar expressions are intended
to identify forward-looking statements. Because these forward-looking statements
involve risks and uncertainties, there are important facts that could cause
actual results to differ materially from those expressed or implied by these
forward-looking statements, including statements under the caption "Risk
Factors." Our actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below. In
particular, please review the sections captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our annual report
on Form 10-K for the fiscal year ended March 31, 1999, and our quarterly reports
on Form 10-Q for the quarters ended June 30, 1999, September 30, 1999, and
December 31, 1999 which reports are incorporated herein by reference and such
section of any subsequently filed Exchange Act reports. In connection with
forward-looking statements which appear in these disclosures, prospective
purchasers of the shares offered hereby should carefully consider the factors
set forth in this prospectus under "Risk Factors."
-4-
<PAGE>
PEREGRINE SYSTEMS
We provide enterprise infrastructure management application software.
The objective of our infrastructure management strategy is to provide
organizations control over their infrastructure assets and related information
throughout the asset life cycle. Our applications enable customers to maximize
the availability of assets, minimize investments and expenses, consolidate
enterprise data, and interface to enterprise applications. We develop, market,
and support an integrated suite of applications that automates the management of
complex, enterprise-wide information and infrastructure assets. Our main product
suites, SERVICECENTER and ASSETCENTER, are designed to address the enterprise
service desk and asset management requirements of large organizations. These
product suites can be deployed across all major hardware platforms and network
operating systems and protocols. Each utilizes advanced client/server and
intelligent agent technologies and a modular architecture. To optimize
performance and minimize costs, the SERVICECENTER and ASSETCENTER product suites
are intended to provide organizations a single view of all elements of their
infrastructure.
RISK FACTORS
PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE STATEMENTS IN THIS
PROSPECTUS OR IN DOCUMENTS INCORPORATED BY REFERENCE HEREIN THAT ARE NOT
DESCRIPTIONS OF HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE CURRENTLY ANTICIPATED BECAUSE OF A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED HEREIN UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS OR IN
DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
WE HAVE A HISTORY OF LOSSES, WE CANNOT PREDICT OUR FUTURE OPERATING RESULTS AND
WE CANNOT ASSURE OUR FUTURE PROFITABILITY.
Through December 31, 1999, we have recorded cumulative net losses of
approximately $46.7 million, including approximately $40.0 million related to
the write-off of acquired in-process research and development in connection with
acquisitions. In addition, we have incurred, and expect to continue to incur,
substantial expense associated with the amortization of intangible assets,
related principally to acquisitions. Our applications have changed substantially
since the mid-1990s, and we have acquired or developed a significant number of
applications in the last three years, bringing our total number of applications
to more than 20. As a result, prediction of our future operating results is
difficult, if not impossible. Although we achieved profitability during the
years ended March 31, 1998 and 1999 and the nine months ended December 31, 1999
(excluding the impact of $40.0 million in charges related to acquired in-process
research and development in connection with acquisitions), there can be no
assurance that we will be able to remain profitable on a quarterly or annual
basis. In addition, we do not believe that the growth in revenues we have
experienced in recent years is indicative of future revenue growth or future
operating results.
FUTURE FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS DUE TO A NUMBER OF
FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL, COULD ADVERSELY AFFECT OUR STOCK
PRICE.
Our quarterly operating results have varied significantly in the past
and may vary significantly in the future depending upon a number of factors,
many of which are beyond our control. These factors include, among others, our
ability to develop, introduce and market new and enhanced versions of our
software on a timely basis; market demand for our software; the size, timing and
contractual terms of significant orders; the timing and significance of new
software product announcements or releases by us or our competitors; changes in
our pricing policies or those of our competitors; changes in our business
strategies; budgeting cycles of our potential customers; changes in the mix of
software products and services sold; reliance on indirect sales
-5-
<PAGE>
forces like systems integrators and channels; changes in the mix of revenues
attributable to domestic and international sales; the impact of acquisitions of
competitors; seasonal trends; the cancellations of licenses or maintenance
agreements; product life cycles; software defects and other product quality
problems; and personnel changes. We have often recognized a substantial portion
of our revenues in the last month or weeks of a quarter. As a result, license
revenues in any quarter are substantially dependent on orders booked and shipped
in the last month or weeks of that quarter. Due to the foregoing factors,
quarterly revenues and operating results are not predictable with any
significant degree of accuracy. In particular, the timing of revenue recognition
can be affected by many factors, including the timing of contract execution and
delivery. The timing between initial customer contact and fulfillment of
criteria for revenue recognition can be lengthy and unpredictable, and revenues
in any given quarter can be adversely affected as a result of such
unpredictability. In the event of any downturn in potential customers'
businesses or the economy in general, planned purchases of our products may be
deferred or canceled, which could have a material adverse effect on our
business, operating results and financial condition.
OUR SALES CYCLE IS LONG AND UNPREDICTABLE, AND POTENTIAL DELAYS IN THE CYCLE
MAKE OUR REVENUES SUSCEPTIBLE TO FLUCTUATIONS.
The licensing of our software generally requires us to engage in a
sales cycle that typically takes approximately six to nine months to complete.
The length of the sales cycle may vary depending on a number of factors over
which we may have little or no control, including the size of the transaction
and the level of competition we encounter in our selling activities. During the
sales cycle, we typically provide a significant level of education to
prospective customers regarding the use and benefits of our products. Any delay
in the sales cycle of a large license or a number of smaller licenses could have
a material adverse effect on our business, operating results and financial
condition.
SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS MAY AFFECT OUR QUARTERLY
OPERATING RESULTS.
Our business has experienced and is expected to continue to experience
seasonality. Our revenues and operating results in our December quarter
typically benefit from purchase decisions made by the large concentration of
customers with calendar year-end budgeting requirements, while revenues and
operating results in our March quarter typically benefit from the efforts of our
sales force to meet fiscal year-end sales quotas. In addition, we are currently
attempting to expand our presence in international markets, including Europe,
the Pacific Rim, and Latin America. International revenues comprise a
significant percentage of our total revenues, and we may experience additional
variability in demand associated with seasonal buying patterns in such foreign
markets.
OUR PAST ACQUISITIONS OF OTHER BUSINESSES AND POTENTIAL FUTURE ACQUISITIONS
PRESENT RISKS THAT COULD ADVERSELY AFFECT OUR BUSINESS.
Since September 1997, we have completed seven acquisitions. In the
future, we may acquire, or make large investments in, other businesses that
offer products, services, and technologies that further our goal of providing
integrated infrastructure management software solutions to businesses. Past
acquisitions and any future acquisitions or investments that we may complete
present risks commonly encountered with these types of transactions. The
following are examples of such risks:
- difficulty in combining the technology, operations, or work force of
the acquired business
- disruption of our on-going businesses
-6-
<PAGE>
- difficulty in realizing the potential financial and strategic position
of Peregrine through the successful integration of the acquired
business
- difficulty in maintaining uniform standards, controls, procedures, and
policies
- possible impairment of relationships with employees and clients as a
result of any integration of new businesses and management personnel
- difficulty in adding significant numbers of new employees, including
training, evaluation, and coordination of effort of all employees
towards our corporate mission
- diversion of management attention
- difficulty in obtaining preferred acquisition accounting treatment for
these types of transactions; likelihood that future acquisitions will
require purchase accounting resulting in increased intangible assets
and goodwill, substantial amortization of such assets and goodwill,
and a negative impact on reported earnings
- potential dilutive effect on earnings
- potential write-downs of investments made in other companies
resulting from the impairment of the market values of such companies
The risks described above, either individually or in the aggregate,
could result in decreases in our revenues and operating profits and could even
result in operating losses. Future acquisitions, if any, could provide for
consideration to be paid in cash, shares of our Common Stock, or a combination
of cash and our Common Stock. However, we may not be able to complete any such
future acquisitions.
IF THE MARKET FOR OUR INFRASTRUCTURE MANAGEMENT SOFTWARE SOLUTIONS DOES NOT
CONTINUE TO DEVELOP AS WE ANTICIPATE OUR ABILITY TO GROW OUR BUSINESS AND SELL
OUR PRODUCTS WILL BE ADVERSELY AFFECTED.
Until recently, our product strategy has focused on integrating a broad
array of information technology management applications with other traditional
internal help desk applications to create an Enterprise Service Desk capable of
managing multiple aspects of an enterprise's information technology structure.
We have recently broadened our product line beyond traditional management of
information technology assets to offer a more comprehensive product suite
capable of managing a business enterprise's information technology
infrastructure, physical plant and facilities, communications infrastructure,
distribution systems and fleets.
In recent years, the market for enterprise software solutions has been
characterized by rapid technological change, frequent new product announcements
and introductions, and evolving industry standards. In response to advances in
technology, customer requirements have become increasingly complex, resulting in
industry consolidation of product lines offering similar or related
functionality. In particular, we believe that a market for integrated
enterprise-wide infrastructure management solutions, including applications for
information technology management, asset management, building and facilities
management, communications resource management, distribution systems management
and fleet management, is evolving from existing requirements for specific
information technology management solutions. However, the existence of such a
market is unproven. If such a market does not fully develop, this could impair
our business. In particular, it could result in decreases in our revenues and
operating profits. If these decreases are large, we could incur operating
losses. Regardless of the development of a market for integrated infrastructure
management solutions, factors adversely affecting the pricing of, demand for, or
market acceptance of one or more of our infrastructure management applications
could have a material adverse effect on our business, results of operations, and
financial condition.
-7-
<PAGE>
IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S EVOLVING TECHNOLOGY STANDARDS
OR DO NOT CONTINUE TO MEET THE SOPHISTICATED NEEDS OF OUR CUSTOMERS, SALES OF
OUR PRODUCTS MAY DECLINE.
As a result of rapid technological change in our industry, our position
in existing markets or other markets that we may enter can be eroded rapidly by
product advances. The life cycles of our products are difficult to estimate. Our
growth and future financial performance depend in part upon our ability to
improve existing products and develop and introduce new products that keep pace
with technological advances, meet changing customer needs, and respond to
competitive products. Our product development efforts will continue to require
substantial investments. We may not have sufficient resources to make the
necessary investments.
OUR SENIOR MANAGEMENT AND OTHER KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS, AND
IF THEY CHOOSE TO LEAVE PSI, IT COULD HARM OUR BUSINESS.
Our success will depend to a significant extent on the continued
service of our senior management and certain other key employees, including
selected sales, consulting, technical and marketing personnel. Few of our
employees, including senior management, are bound by an employment or
noncompetition agreement. In addition, we do not generally maintain key man life
insurance on any employee. The loss of the services of one or more of our
executive officers or key employees or the decision of one or more such officers
or employees to join a competitor or otherwise compete directly or indirectly
with us could have a material adverse effect on our business, operating results
and financial condition.
WE WILL NEED TO RECRUIT AND RETAIN ADDITIONAL QUALIFIED PERSONNEL TO
SUCCESSFULLY GROW OUR BUSINESS.
Our future success will likely depend in large part on our ability to
attract and retain additional highly skilled technical, sales, management, and
marketing personnel. Competition for such personnel in the computer software
industry is intense, and in the past we have experienced difficulty in
recruiting qualified personnel. New employees generally require substantial
training in the use of our products. We may not succeed in attracting and
retaining such personnel. If we do not, our business, operating results, and
financial condition could be materially adversely affected.
FUTURE CHANGES IN THE FEDERAL IMMIGRATION LAWS COULD LIMIT OUR ABILITY TO
RECRUIT AND EMPLOY SKILLED TECHNICAL PROFESSIONALS FROM OTHER COUNTRIES, AND
THIS COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATING RESULTS.
To achieve our business objectives, we must be able to recruit and
employ skilled technical professionals from other countries. Any future shortage
of qualified technical personnel who are either United States citizens or
otherwise eligible to work in the United States could increase our reliance on
foreign professionals. Many technology companies have already begun to
experience shortages of such personnel. Any failure to attract and retain
qualified personnel as necessary could materially adversely affect our business
and operating results. Foreign computer professionals such as those employed by
us typically become eligible for employment in the United States by obtaining a
nonimmigrant visa. The number of nonimmigrant visas is limited by federal
immigration law. Currently, Congress is considering approving an increase in the
number of visas available. We cannot predict whether such legislation will
ultimately become law. We also cannot predict what effect any future changes in
the federal immigration laws will have on our business, operating results, or
financial condition.
-8-
<PAGE>
NEW PRODUCT INTRODUCTIONS AND THE ENHANCEMENT OF EXISTING PRODUCTS BY OUR
COMPETITORS COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS.
The market for our products is highly competitive and diverse. The
technology for infrastructure management software products can change rapidly.
New products are frequently introduced and existing products are continually
enhanced. Competitors vary in size and in the scope and breadth of the products
and services offered.
We have faced competition from a number of sources, including:
- providers of internal help desk software applications such as Remedy
Corporation and Software Artistry (now a division of Tivoli Systems)
- customer interaction software companies such as Clarify and The
Vantive Corporation (now a division of PeopleSoft), whose products
include internal help desk applications
- information technology and systems management companies such as IBM,
Computer Associates International, Network Associates, and
Hewlett-Packard Company
- providers of asset management and facilities management software
- the internal information technology departments of those companies
with infrastructure management needs
Some of our current and many of our potential competitors have much
greater financial, technical, marketing, and other resources than we do. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer needs. They may also be able to devote greater resources
to the development, promotion, and sale of their products than we can. We may
not be able to compete successfully against current and future competitors. In
addition, other competitive pressures we face may materially adversely affect
our business, operating results, and financial condition.
NEW COMPETITORS AND ALLIANCES AMONG EXISTING COMPETITORS COULD IMPAIR OUR
ABILITY TO RETAIN AND EXPAND OUR MARKET SHARE.
Because competitors can easily penetrate the software market, we
anticipate additional competition from other established and new companies as
the market for enterprise infrastructure management applications develops. In
addition, current and potential competitors have established or may in the
future establish cooperative relationships among themselves or with third
parties. Large software companies may acquire or establish alliances with our
smaller competitors. We expect that the software industry will continue to
consolidate. It is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share.
SYSTEM MANAGEMENT COMPANIES MAY ACQUIRE INFRASTRUCTURE MANAGEMENT AND/OR HELP
DESK SOFTWARE PROVIDERS AND CLOSE THEIR SYSTEMS TO OUR PRODUCTS, WHICH COULD
HURT OUR ABILITY TO SELL OUR PRODUCTS.
Our ability to sell our products depends in part on their compatibility
with and support by providers of system management products, including Tivoli,
Computer Associates, and Hewlett-Packard. Both Tivoli and Hewlett-Packard have
recently acquired providers of help desk software products. These providers of
system management products may decide to close their systems to competing
vendors like us. They may also decide to bundle their infrastructure management
and/or help-desk software products with other products for enterprise licenses
for promotional purposes or as part of a long-term pricing strategy. If that
were to happen,
-9-
<PAGE>
our ability to sell our products could be adversely affected. Increased
competition may result from acquisitions of help desk and other infrastructure
management software vendors by system management companies. The results of
increased competition, including price reductions of our products, reduced gross
margins, and reduction of market share, could materially adversely affect our
business, operating results, and financial condition.
WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS, AND
OUR ABILITY TO MANAGE THIS GROWTH AND ANY FUTURE GROWTH WILL AFFECT OUR ABILITY
TO ACHIEVE AND MAINTAIN PROFITABILITY.
We have grown significantly in recent periods, with total revenues
increasing from $35.0 million in fiscal 1997, to $61.9 million in fiscal 1998,
and to $138.1 million in fiscal 1999.
If we achieve our growth plans, including the integration of technology
acquired in acquisitions, such growth may burden our operating and financial
systems. This burden will require large amounts of senior management attention
and will require the use of other PSI resources. Our ability to compete
effectively and to manage future growth (and our future operating results) will
depend in part on our ability to implement and expand operational, customer
support, and financial control systems and to expand, train, and manage our
employees. In particular, in connection with acquisitions, we will be required
to integrate additional personnel and to augment or replace existing financial
and management systems. Such integration could disrupt our operations and could
adversely affect our financial results. We may not be able to augment or improve
existing systems and controls or implement new systems and controls in response
to future growth, if any. Any failure to do so could materially adversely affect
our business, operating results, and financial condition.
RISKS ASSOCIATED WITH CAPITAL COMMITMENT, CONSTRUCTION OVERSIGHT, AND MOVING OF
PERSONNEL AND FACILITIES ARISING OUT OF OUR JUNE 1999 LEASES FOR OFFICE SPACE
COULD RESULT IN PROBLEMS WHICH HARM OUR BUSINESS.
In June 1999, we entered into a series of leases providing
approximately 540,000 square feet of office space, including an option for
approximately 118,000 square feet of space. Even excluding the exercise of the
option, the leases require minimum lease payments of approximately $124 million
over the terms of the leases, approximately twelve years. This office space
(including the option) is intended for a five building campus setting in San
Diego, California. We took possession of the first building in October 1999.
Construction has commenced on the third building, and the final building is
scheduled for delivery in 2003. The capital commitments, construction oversight,
and moving of personnel and facilities involved in a transaction of this type
and magnitude present numerous risks involving estimation of future events and
execution of the transaction. Examples of the risks involved include: failure to
properly estimate the growth of our business in the future; inability to
sublease excess office space that may result; disruption of operations; and
inability to match substantially-fixed lease payments with fluctuating revenues.
WE WILL NEED TO CONTINUE TO EXPAND OUR DISTRIBUTION CHANNELS IN ORDER TO
DEVELOP OUR BUSINESS AND INCREASE REVENUE.
We sell our products through our direct sales force and a limited
number of distributors and we provide maintenance and support services
through our technical and customer support staff. We plan to continue to
invest large amounts of resources to our direct sales force, particularly in
North America where we have recently opened several new sales offices. In
addition, we are continuing to develop additional sales and marketing
channels through system integrators, original equipment manufacturers, and
other channel partners. We may not be able to attract channel partners that
will be able to market our products effectively or that will be qualified to
provide timely and cost-effective customer support and service. We are
continuing to establish distribution through indirect channels.
-10-
<PAGE>
However, such channel partners may also carry competing product lines. If we
do not continue to establish and maintain such distribution relationships,
this could materially adversely affect our business, operating results, and
financial condition.
THE INTENDED EXPANSION OF OUR INTERNATIONAL OPERATIONS INVOLVES RISKS, WHICH
COULD ADVERSELY AFFECT OUR BUSINESS.
International sales represented approximately 36% of our total revenue
both in fiscal 1998 and fiscal 1999. We currently have international sales
offices in Utrecht, Brussels, Stockholm, Copenhagen, Frankfurt, London, Paris,
Singapore, Tokyo, Milan, Rome and Sydney. Our continued growth and profitability
will require continued expansion of our international operations, particularly
in Europe, Latin America, and the Pacific Rim. Accordingly, we intend to expand
our current international operations and enter additional international markets.
Such expansion will require significant management attention and financial
resources. We have only limited experience in developing local-language versions
of our products and marketing and distributing our products internationally. We
may not be able to successfully translate, market, sell and deliver our products
internationally. If we are unable to expand our international operations
successfully and in a timely manner, our business, operating results, and
financial condition could be adversely affected.
THE SUCCESS OF OUR INTERNATIONAL OPERATIONS IS DEPENDENT UPON MANY FACTORS,
WHICH COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS INTERNATIONALLY
AND COULD AFFECT OUR PROFITABILITY.
Our international operations are subject to a variety of risks
associated with conducting business internationally, including the following:
- fluctuations in currency exchange rates
- longer payment cycles
- difficulties in staffing and managing international operations
- problems in collecting accounts receivable
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world
- increases in tariffs, duties, price controls, or other restrictions on
foreign currencies
- trade barriers imposed by foreign countries
These factors could materially adversely affect our business, operating
results, and financial condition. Furthermore, recent instability in the
Asian-Pacific economies and financial markets could adversely affect our
business, operating results, and financial condition in future quarters as well.
AS OUR EXPANDING INTERNATIONAL OPERATIONS IN EUROPE AND THE ASIA-PACIFIC REGION
ARE INCREASINGLY CONDUCTED IN CURRENCIES OTHER THAN THE U.S. DOLLAR,
FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
EXCHANGE LOSSES.
A large portion of our business is conducted in foreign currencies.
Fluctuations in the value of foreign currencies relative to the U.S. dollar have
caused and will continue to cause currency transaction gains and losses. We
cannot predict the effect of exchange rate fluctuations upon future operating
results. We may experience currency losses in the future. We currently maintain
a foreign exchange hedging program,
-11-
<PAGE>
consisting principally of purchases of one month forward-rate currency
contracts. However, our hedging activities may not adequately protect us against
the risks associated with foreign currency fluctuations.
ISSUES RELATED TO THE INTRODUCTION OF THE EURO AS THE CURRENCY OF CERTAIN MEMBER
STATES OF THE EUROPEAN ECONOMIC COMMUNITY MAY ADVERSELY IMPACT OUR PRODUCTS.
On January 1, 1999, certain member states of the European Economic
Community ("EEC"), fixed their respective currencies to a new currency, the
euro. On that date, the euro became a functional legal currency within these
countries. During the three years beginning on January 1, 1999, business in
these EEC member states will be conducted in both the existing national
currencies, such as the French franc or deutsche mark, and the euro. Companies
operating in or conducting business in EEC member states will need to ensure
that their financial and other software systems are capable of processing
transactions and properly handling the existing currencies, as well as the euro.
Our AssetCenter product was originally developed for the European market and is
capable of managing currency data measured in euros. We are still assessing the
impact that the euro will have on our internal systems and our other products.
We will take corrective actions based on the results of such assessment. We have
not yet determined the costs related to this problem. Issues related to the
introduction of the euro may materially adversely affect our business, operating
results, and financial condition.
BECAUSE OUR OFFICERS AND DIRECTORS OWN A LARGE PORTION OF PSI COMMON STOCK, THEY
WILL BE ABLE TO CONTROL MOST MATTERS REQUIRING STOCKHOLDER APPROVAL, AND THIS
MAY PREVENT OR DISCOURAGE POTENTIAL BIDS TO ACQUIRE PSI.
Based on shares outstanding as of December 31, 1999, our officers,
directors, and entities directly related to such individuals together
beneficially own approximately 20.1% of the outstanding shares of PSI Common
Stock. In particular, John J. Moores, Chairman of our board of directors,
beneficially owns approximately 14.9% of the outstanding shares of PSI Common
Stock. As a result, our officers and directors will be able to control most
matters requiring stockholder approval, including the election of directors and
the approval of mergers, consolidations, and sales of all or substantially all
of the assets of PSI. Such concentrated share ownership may prevent or
discourage potential bids to acquire PSI unless the terms of acquisition are
approved by such officers and directors.
WE MAY EXPERIENCE DELAYS IN DEVELOPING OUR PRODUCTS THAT COULD ADVERSELY AFFECT
OUR ABILITY TO INTRODUCE NEW PRODUCTS, MAINTAIN OUR COMPETITIVE POSITION AND
GROW OUR BUSINESS.
We have experienced product development delays in the past and may
experience delays in the future. Difficulties in product development could delay
or prevent the successful introduction or marketing of new or improved products.
Any such new or improved products may not achieve market acceptance. Our current
or future products may not conform to industry requirements. If, for
technological or other reasons, we are unable to develop and introduce new and
improved products in a timely manner, our business, operating results, and
financial condition could be adversely affected.
ERRORS IN OUR PRODUCTS COULD RESULT IN SIGNIFICANT COSTS TO US AND COULD IMPAIR
OUR ABILITY TO SELL OUR PRODUCTS.
Because our software products are complex, these products may contain
errors that could be detected at any point in a product's life cycle. In the
past, we have discovered software errors in certain of our products and have
experienced delays in shipment of our products during the period required to
correct these errors. Despite testing by PSI and by current and potential
customers, errors in our products may be found in the future. Detection of such
errors may result in, among other things, loss of, or delay in, market
acceptance
-12-
<PAGE>
and sales of our products, diversion of development resources, injury to our
reputation, or increased service and warranty costs. If any of these results
were to occur, our business, operating results, and financial condition could be
materially adversely affected.
IF WE FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, COMPETITORS MAY BE ABLE
TO USE OUR TECHNOLOGY OR TRADEMARKS AND THIS COULD WEAKEN OUR COMPETITIVE
POSITION, REDUCE OUR REVENUE AND INCREASE COSTS.
Our success will be heavily dependent upon proprietary technology. We
rely primarily on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. Such laws provide only limited protection. Despite precautions that we
take, it may be possible for unauthorized third parties to copy aspects of our
current or future products or to obtain and use information that we regard as
proprietary. In particular, we may provide our licensees with access to our data
model and other proprietary information underlying our licensed applications.
Such means of protecting our proprietary rights may not be adequate.
Additionally, our competitors may independently develop similar or superior
technology. Policing unauthorized use of software is difficult and, while we do
not expect software piracy to be a persistent problem, some foreign laws do not
protect our proprietary rights to the same extent as United States laws.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, or to determine the validity and scope of
the proprietary rights of others. Litigation could result in substantial costs
and diversion of resources, and could materially adversely affect our business,
operating results, and financial condition.
THIRD PARTIES COULD ASSERT, FOR COMPETITIVE OR OTHER REASONS, THAT OUR PRODUCTS
INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS, AND SUCH CLAIMS COULD INJURE OUR
REPUTATION, CONSUME TIME AND MONEY, AND ADVERSELY AFFECT OUR ABILITY TO SELL OUR
PRODUCTS.
While we are not aware that any of our software product offerings
infringe the proprietary rights of third parties, third parties may claim
infringement with respect to our current or future products. We expect that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in the software industry segment grows
and the functionality of products in different industry segments overlaps. Any
such claims, with or without merit, could be time consuming, result in costly
litigation, cause product shipment delays, or require us to enter into royalty
or licensing agreements. Royalty or licensing agreements may not be available on
acceptable terms or at all. As a result, infringement claims could have a
material adverse affect on our business, operating results, and financial
condition.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN SIGNIFICANT
COSTS TO US.
Our license agreements with our customers typically contain provisions
designed to limit exposure to potential product liability claims. Such
limitation of liability provisions may, however, not be effective under the laws
of certain jurisdictions. Although we have not experienced any product liability
claims to date, the sale and support of our products entails the risk of such
claims. We may be subject to such claims in the future. A product liability
claim could materially adversely affect our business, operating results, and
financial condition.
PROVISIONS IN OUR CHARTER DOCUMENTS AND IN DELAWARE LAW MAY DISCOURAGE POTENTIAL
ACQUISITION BIDS FOR PSI AND MAY PREVENT CHANGES IN OUR MANAGEMENT, WHICH OUR
STOCKHOLDERS FAVOR.
Certain provisions of PSI's charter documents eliminate the right of
stockholders to act by written consent without a meeting and specify certain
procedures for nominating directors and submitting proposals for consideration
at stockholder meetings. Such provisions are intended to increase the likelihood
of continuity and stability in the composition of the PSI board of directors and
in the policies set by the board. These provisions also discourage certain types
of transactions, which may involve an actual or threatened
-13-
<PAGE>
change of control transaction. These provisions are designed to reduce the
vulnerability of PSI to an unsolicited acquisition proposal. As a result, these
provisions could discourage potential acquisition proposals and could delay or
prevent a change in control transaction. These provisions are also intended to
discourage certain tactics that may be used in proxy fights. However, they could
have the effect of discouraging others from making tender offers for PSI's
shares. As a result, these provisions may prevent the market price of PSI Common
Stock from reflecting the effects of actual or rumored takeover attempts. These
provisions may also prevent changes in the management of PSI.
PSI's board of directors has the authority to issue up to 5,000,000
shares of preferred stock in one or more series. The board of directors can fix
the price, rights, preferences, privileges, and restrictions of such preferred
stock without any further vote or action by PSI's stockholders. The issuance of
preferred stock allows PSI to have flexibility in connection with possible
acquisitions and other corporate purposes. However, the issuance of shares of
preferred stock may delay or prevent a change in control transaction without
further action by the PSI stockholders. As a result, the market price of the PSI
Common Stock and the voting and other rights of the holders of PSI Common Stock
may be adversely affected. The issuance of preferred stock may result in the
loss of voting control to others. PSI has no current plans to issue any shares
of preferred stock.
PSI is subject to the antitakeover provisions of the Delaware General
Corporation Law, which regulates corporate acquisitions. The Delaware law
prevents certain Delaware corporations, including PSI, from engaging, under
certain circumstances, in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder became an
interested stockholder. For purposes of Delaware law, a "business combination"
includes, among other things, a merger or consolidation involving PSI and the
interested stockholder and the sale of more than 10% of PSI's assets. In
general, Delaware law defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of a
company and any entity or person affiliated with or controlling or controlled by
such entity or person. Under Delaware law, a Delaware corporation may "opt out"
of the antitakeover provisions. PSI has not "opted out" of the antitakeover
provisions of Delaware Law.
OUR STOCK WILL LIKELY BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME FLUCTUATIONS,
WHICH MAY PREVENT STOCKHOLDERS FROM RESELLING THEIR SHARES AT OR ABOVE THE PRICE
AT WHICH THEY PURCHASED THEIR SHARES.
We completed the initial public offering of PSI Common Stock in April
1997. Prior to April 1997, no public market existed for PSI Common Stock. In the
past, the market price of our Common Stock has varied greatly and the volume of
our Common Stock traded has fluctuated greatly as well. We expect such
fluctuation to continue. The fluctuation results from a number of factors
including:
- any shortfall in revenues or net income from revenues or net income
expected by securities analysts
- announcements of new products by PSI or our competitors
- quarterly fluctuations in our financial results or the results of
other software companies, including those of our direct competitors
- changes in analysts' estimates of our financial performance, the
financial performance of our competitors, or the financial performance
of software companies in general
- general conditions in the software industry
-14-
<PAGE>
- changes in prices for our products or the products of our competitors
- changes in our revenue growth rates or the growth rates of our
competitors
- sales of large blocks of the PSI Common Stock
- conditions in the financial markets in general
In addition, the stock market may from time to time experience extreme
price and volume fluctuations. Many technology companies, in particular, have
experienced such fluctuations. Often, such fluctuations have been unrelated to
the operating performance of the specific companies. The market price of our
Common Stock may experience significant fluctuations in the future.
-15-
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares by
SupplyAccess. SupplyAccess will receive all net proceeds from the sale of PSI
common stock under this prospectus.
SELLING STOCKHOLDER
The information in this section is current as of the date of this
prospectus. The shares are being registered to permit public secondary
trading of the shares, and SupplyAccess may offer the shares for resale from
time to time.
The 206,304 PSI shares being offered by SupplyAccess were acquired from
PSI in connection with a private placement transaction on February 23, 2000.
In the private placement transaction, the shares of common stock were issued
pursuant to an exemption from the registration requirements of the Securities
Act. In connection with the placement, we agreed to register the shares of
PSI common stock received by the selling stockholder SupplyAccess. The shares
of our common stock issued to SupplyAccess in connection with the private
placement represent less than 1% of the outstanding common stock of PSI.
SupplyAccess only holds this 206,304 shares and after the sale of the shares
under this prospectus will no longer hold any shares of capital stock of PSI.
-16-
<PAGE>
PLAN OF DISTRIBUTION
PSI will not receive any proceeds from the sale of the shares. The
shares may be sold or distributed from time to time by the selling
stockholder, or by pledgees, donees, transferees of, or other successors in
interest directly to one or more purchasers (including pledgees) or
through brokers, dealers or underwriters who may act solely as agents or may
acquire shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated
prices, or at fixed prices, which may be changed. The distribution of the
shares may be effected in one or more transactions that may take place
through the Nasdaq National Market, including block trades or ordinary
broker's transactions, or through privately negotiated transactions, or
through a combination of any such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the selling stockholder in
connection with such sales.
In addition, the selling stockholder or its successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of shares in the course of hedging the positions they assume with the
selling stockholder. The selling stockholder or its successors in interest may
also enter into option or other transactions with the broker-dealers that
require the delivery by such broker-dealers of the shares, which shares may be
resold thereafter pursuant to this prospectus.
The aggregate proceeds to the selling stockholder from the sale of the
shares will be the purchase price of the common stock sold less the aggregate
agents' commissions, if any, and other expenses of issuance and distribution not
borne by PSI. The selling stockholder and any dealers or agents that participate
in the distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit on the sale of the shares by them
and any commissions received by any such dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
To the extent required, the specific shares of common stock to be sold,
the name of the selling stockholder, purchase price, public offering price, the
names of any such agent, dealer or underwriter, and any applicable commission or
discount with respect to a particular offering will be set forth in an
accompanying prospectus supplement.
PSI has agreed to bear certain expenses of registration of the
common stock under the federal and state securities laws and of any offering
and sale hereunder not including certain expenses, such as commissions of
dealers or agents, and fees attributable to the sale of the shares. PSI has
agreed to indemnify SupplyAccess against certain liabilities, including
certain potential liabilities under the Securities Act. SupplyAccess has also
agreed to indemnify PSI against certain liabilities, including certain
potential liabilities under the Securities Act.
Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this prospectus.
There can be no assurance that SupplyAccess will sell any or all of
the shares of common stock offered by it under this prospectus.
-17-
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The audited consolidated financial statements of the Company as of
March 31, 1998 and 1999 and for each of the three years in the period ended
March 31, 1999, incorporated by reference in this prospectus and the
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and
are incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said report.
-18-
