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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-89615
PROSPECTUS
2,464,017 SHARES
ASYMETRIX LEARNING SYSTEMS, INC.
COMMON STOCK
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All of the 2,464,017 shares of common stock of Asymetrix Learning Systems,
Inc. are being sold by stockholders of Asymetrix. Asymetrix will not receive any
proceeds from the sale of shares offered by the selling stockholders. See
"Selling Stockholders" and "Plan of Distribution."
The common stock is listed on the Nasdaq National Market under the symbol
"CLKS." The shares of common stock offered will be sold as described under "Plan
of Distribution."
On October 20, 1999, the closing price per share of the common stock on the
Nasdaq National Market was $10.25.
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THE COMMON STOCK OFFERED INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
ON PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
COMMISSION, HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 3, 1999.
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ASYMETRIX LEARNING SYSTEMS, INC.
DOING BUSINESS AS
CLICK2LEARN.COM, INC.
Asymetrix provides learning solutions designed to help organizations more
effectively organize, manage, increase and use knowledge as a competitive
advantage. Asymetrix conducts two primary lines of business related to online
learning: (1) a comprehensive enterprise learning solution that consists of a
technology platform and related professional services; and (2) click2learn.com,
an Internet web site that provides a single source for both online learning
delivered over the Internet as well as more traditional forms of learning such
as books and video tapes, and that provides a free authoring environment to
encourage the creation of online content to be licensed through click2learn.com.
Asymetrix's enterprise learning technology platform includes ToolBook II
Instructor and ToolBook II Assistant, which enable customers to author online
learning applications, and Librarian and Ingenium, learning management and
skills assessment systems designed to enable customers to deploy and manage all
aspects of their training needs and to assess the learning needs of their
employees. Asymetrix's professional services include consulting services, custom
development services, systems integration, hosting of customer's training
content and management systems and training services to enable organizations to
establish and maintain a learning solution that is tailored to such
organization's unique needs.
Asymetrix's click2learn.com web site allows customers to purchase learning
content from a variety of well-known vendors for online delivery over the
Internet as well as in tangible formats such as books, videos and CD-ROMs.
Asymetrix intends to include the ability to register online for instructor-led
training provided by a variety of vendors. Click2learn.com also includes a free,
server-based authoring tool with which users can create their own online
learning courses and publish them to click2learn.com, earning royalties on any
purchases of such courses over click2learn.com The click2learn.com site can be
modified to include the look and feel of corporate customers' intranets or of
other high-traffic Internet sites, allowing it to be adopted as the integrated
"training channel" for these sites.
Asymetrix was incorporated in the State of Washington in 1984. In connection
with Asymetrix's initial public offering in June 1998, Asymetrix reincorporated
as a Delaware corporation through a merger with a Delaware subsidiary. In
October 1999 Asymetrix began doing business as click2learn.com, inc. to reflect
the increasing importance of its click2learn.com web site to its overall
business. Asymetrix will be submitting a proposal to its stockholders to amend
its corporate charter to change the corporate name from Asymetrix Learning
Systems, Inc. to click2learn.com, inc.
Our executive offices are located at 110-110th Avenue, NE, Bellevue,
Washington 98004. Our telephone number at this location is (425) 462-0501. Our
web sites are located at http:// www.asymetrix.com and
http://www.click2learn.com. Information contained in our web sites is not part
of this prospectus.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
AND IN THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE MAKING
AN INVESTMENT DECISION. THESE RISKS AND UNCERTAINTIES ARE NOT THE ONLY ONES
FACING ASYMETRIX. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US
OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION OR OPERATING RESULTS COULD BE MATERIALLY HARMED. IN SUCH CASE, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU MAY LOSE ALL OR PART OF
YOUR INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS
INCLUDING THE RISKS FACED BY US DESCRIBED BELOW AND ELSEWHERE IN THIS
PROSPECTUS.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY IN OUR TARGET MARKETS WHICH MAKES IT
DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS
Until early 1995, we were engaged in various research and development
activities and in developing and marketing of multimedia authoring products,
database and Internet tools, web publishing products and other ancillary
products, most of which we do not currently sell. Starting in 1995, we began to
focus our development and marketing efforts on products and services for the
enterprise learning market. We announced our click2learn.com web site in July
1999. Accordingly, we have a limited operating history on which to evaluate our
current business and prospects. Risks we face under our new business models
include, but are not limited to, the demand for technology-based training and
online learning applications, demand for our products and services, competition
and those other risks described in this section. To address these risks, we
must, among other things:
- successfully introduce and build our click2learn.com web site
- continue to establish relationships with leading providers of learning
content to sell content over the click2learn web site
- continue to establish relationships with high-traffic Internet sites and
corporate customers for the use of click2learn.com as the "learning
channel" for their web sites;
- respond to competitive developments;
- attract, integrate, retain and motivate qualified personnel;
- successfully introduce new products and services; and
- address and establish new technologies and technology standards.
Many of these risks are described in more detail in this "Risk Factors"
section. We may not successfully address any of these risks. If we do not
successfully address these risks, our business would be seriously harmed.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE
We incurred net losses of $6.5 million in 1998 and $4.4 million in the six
months ended June 30, 1999. As of June 30, 1999, we had an accumulated deficit
of approximately $169.9 million. Despite our recent announcement of our
click2learn.com web site, we expect to derive most of our revenues for at least
the next twelve months from our enterprise learning software products and
services. Although revenues from our enterprise learning software products have
grown in the past, we may not be able to sustain these growth rates and our
revenues could decline. In fact, our total revenues for the six
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months ended June 30. 1999 were less than our total revenues for the six months
ended June 30, 1998. Over the longer term, we expect to derive additional
revenues from our click2learn.com web site, which is based on an unproven
business model. However, we expect to incur significant sales and marketing,
research and development, and general and administrative expenses in connection
with our click2learn.com web site. As a result, we expect to incur losses for
the foreseeable future.
WE HAVE RECENTLY INTRODUCED OUR ONLINE LEARNING WEB SITE AND THIS WEB SITE MAY
NOT BE SUCCESSFUL
Asymetrix has recently announced its click2learn.com learning portal web
site. Broad and timely acceptance of this web site is important to the future
success of the Asymetrix business and is subject to a number of significant
risks:
- education and instruction over the Internet and on the world wide web is a
new market;
- Asymetrix has not previously hosted, operated and managed an e-commerce
web site;
- Asymetrix will need to enter into distribution relationships with high
traffic web sites as well as with creators of learning content; and
- Asymetrix will need to attract user traffic to this web site and establish
relationships with corporate customers.
If this new click2learn.com web site is not successful, the business of
Asymetrix could be materially harmed.
OUR PRICING AND REVENUE MODEL FOR OUR CLICK2LEARN.COM WEB SITE HAS NOT YET BEEN
WIDELY TESTED IN THE MARKETPLACE
Although we intend to derive revenue from our click2learn.com web site, our
pricing, expense and revenue model for this site has not been broadly tested in
the marketplace. If our pricing, expense and revenue model is not acceptable to
users, customers, content providers or advertisers, our click2learn.com may not
be commercially successful. This would seriously harm our business, particularly
if we experience a decline in the growth of revenues from our enterprise
learning products and services.
OUR QUARTERLY OPERATING RESULTS COULD FLUCTUATE SIGNIFICANTLY FROM QUARTER TO
QUARTER
Our quarterly operating results have varied significantly in the past and
are expected to fluctuate significantly in the future as a result of a variety
of factors, many of which are outside our control. Factors that may adversely
affect our quarterly operating results include:
- the demand for technology-based training and demand for online learning
solutions;
- the size and timing of product orders and the timing and execution of
professional services engagements;
- the mix of revenue from products and services;
- the mix of products sold;
- our ability to meet client project milestones;
- market acceptance of our or competitors' products and services;
- our ability to develop and market new or enhanced products, and services
in a timely manner and the market acceptance of these products and
services;
- timing of revenues and expenses relating to click2learn.com; and
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- the timing of revenue recognition.
It is difficult to predict our future revenues and we may not be able to
adjust spending in response to shortfalls. Our limited operating history under
our current business model, including click2learn.com, possible acquisitions and
dispositions and the emerging nature of our market make prediction of future
revenue and expenses difficult. Our expense levels are based, in part, on our
expectations as to future revenue and to a large extent are fixed in the short
term. We may not be able to predict our future revenue accurately and we may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall.
WE EXPECT TO BE DEPENDENT ON SALES OF OUR ENTERPRISE LEARNING PRODUCTS AND
SERVICES
For the six months ended June 30, 1999, we derived substantially all of our
revenue from the sale and licensing of our enterprise learning products and
services. These products and services are expected to continue to account for
substantially all of our revenue for at least the next twelve months.
Sales of these products and services may not grow. As a result, a reduction
in demand or an increase in competition with respect to any of our enterprise
learning products and services, including price competition, or a decline in
sales, particularly in the near term, could have a material adverse effect on
our overall revenues, particularly if revenues from our click2learn.com web site
do not grow.
OUR MARKET IS A DEVELOPING MARKET AND CUSTOMERS MAY NOT CHOOSE OUR PRODUCTS AND
SERVICES OVER TRADITIONAL TRAINING AND EDUCATION METHODS
Corporate training and education has historically been conducted primarily
through classroom instruction and has traditionally been performed by a
company's internal personnel. Many companies have invested heavily in their
current training solutions. Although technology-based training applications have
been available for several years, they currently account for only a small
portion of the overall training market.
Accordingly, our future success will depend upon, among other factors, the
extent to which companies adopt technology-based training solutions,
particularly online learning solutions, and the extent to which companies
utilize the services or purchase products of third-party providers.
Technology-based training or online learning applications may not become
widespread and our products and services may not achieve commercial success. In
addition, companies that have already invested substantial resources in other
methods of corporate training may be reluctant to adopt a new strategy that may
limit or compete with their existing investments.
Even if companies implement technology-based training or online learning
solutions, they may still choose to design, develop, deliver or manage all or a
part of their education and training internally. The failure of technology-based
training or online learning to gain wider market acceptance or the failure of
companies to utilize third parties to design, develop, deliver or manage their
education and training applications would materially and adversely affect our
business.
COMPETITION
The online learning market is highly fragmented and competitive, rapidly
evolving and subject to rapid technological change, with no single competitor
accounting for a dominant market share. Because of the lack of significant
barriers to entry in our market, we expect that new competitors will enter this
market in the future. Our competitors vary in size and scope and the breadth of
products and services offered. We face competition from
- developers of multimedia authoring tools with respect to our authoring and
authoring support products,
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- sellers of off-the-shelf technology-based training courses that sell
management systems with their titles with respect to our learning
management systems,
- many small, regional online learning and technology-based training
services businesses,
- other web sites focused on learning and education, such as learn2.com and
HowtoHQ.com, with respect to our click2learn.com web site, as well
developers or resellers of training content who make their content
available over the Internet; and
- large professional consulting firms and in-house training departments,
with respect to all aspects of our enterprise learning solutions.
Increased competition could result in pricing pressures, reduced margins or
the failure of our products and services to achieve or maintain market
acceptance, any of which could have a material adverse effect on our business.
Several of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources and therefore may be able to respond more quickly to new or changing
opportunities, technologies, standards and customer requirements. Many of these
competitors also have broader and more established distribution channels that
may be used to deliver competing products or services directly to customers. If
these competitors were to bundle competing products or services for their
customers, the demand for our products and services might be substantially
reduced and our ability to market and sell products and services successfully
may be substantially diminished. In addition, the existence or announcement of
collaborative relationships involving our competitors could adversely affect our
ability to attract and retain customers.
WE WILL NEED TO ESTABLISH AND MAINTAIN DISTRIBUTION RELATIONSHIPS WITH OTHER WEB
SITES IN ORDER TO ATTRACT TRAFFIC TO CLICK2LEARN.COM
We intend to pursue distribution relationships with high-traffic web sites
in an effort to attract traffic to private-labeled areas of the click2learn.com
web site, as well as to the click2learn.com branded areas. There is intense
competition for placements on these sites, and we may not be able to enter into
these relationships on commercially reasonable terms, or at all. Even if we
enter into distribution relationships with these web sites, they themselves may
not attract significant numbers of users. Therefore, click2learn.com may not
receive additional users from these relationships. Moreover, we may have to pay
significant fees to establish these relationships or issue securities to
companies that operate these web sites, even if click2learn.com does not receive
additional users as a result.
WE COULD FACE LIABILITY FOR INFORMATION DISPLAYED ON OUR CLICK2LEARN.COM WEB
SITE
We intend to post content developed by third parties on our click2learn.com
web site. Therefore, we may be subjected to claims for defamation, negligence,
copyright or trademark infringement or based on other theories relating to the
information we publish on our click2learn.com web site. There types of claims
have been brought, sometimes successfully, against online services as well as
other print publications in the past. Our insurance may not adequately protect
us against these types of claims.
WE MUST KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY
The market for online learning products and services, particularly Internet
or intranet-based products and services, is characterized by rapid technological
advances, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products or services
embodying new technologies and the emergence of new industry standards could
render our existing products obsolete and unmarketable. We must respond rapidly
to developments related to Internet technology, hardware platforms and operating
systems and applicable programming languages and these developments will require
us to continue to make substantial product development
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investments. If we do not anticipate or respond adequately to technological
developments or customer requirements, we could lose revenue or our competitive
position.
WE DEPEND ON THE INTRODUCTION OF NEW VERSIONS OF OUR SOFTWARE PRODUCTS AND
CLICK2LEARN.COM AND WE MUST RELEASE OUR NEW PRODUCTS OR ENHANCEMENTS IN A
TIMELY MANNER
The life cycles of our products are difficult to predict because the market
for our products is new and emerging and is characterized by rapid technological
change, changing customer needs and evolving industry standards. Therefore, we
must develop and sell new software products and enhancements to our existing
products on a timely and cost-effective basis. To be successful, our products
must keep pace with technological developments and emerging industry standards,
address the ever-changing and increasingly sophisticated needs of our customers
and achieve market acceptance. Likewise, we must continue to update and improve
our click2learn.com web site in order to continue attracting new users and
retaining existing users..
In developing new products or updating click2learn.com, we may:
- fail to develop and market products or implement updates to
click2learn.com that respond to technological changes or evolving industry
standards in a timely or cost-effective manner;
- encounter products, capabilities or technologies developed by others that
render our products or the click2learn.com web site obsolete or
noncompetitive or that shorten the life cycles of our existing products or
the click2learn.com web site;
- experience difficulties that could delay or prevent the successful
development, introduction and marketing of these new products or updates
to the click2learn.com web site; or
- fail to develop new products or updates to the click2learn.com web site
that adequately meet the requirements of the marketplace or achieve market
acceptance.
We may fail to introduce or deliver new products or updates to the
click2learn.com web site on a timely basis or at all. In the past, we have
experienced delays in the commencement of commercial shipments of our new
releases of products, and we have not had significant experience in managing or
updating an e-commerce web site. If new releases or potential new products or
updates to click2learn.com are delayed or do not achieve market acceptance, we
could experience a delay or loss of revenues and customer frustration. Customers
may also delay purchases of our products in anticipation of future releases.
WE COULD BE SUBJECT TO LIABILITY IF OUR SOFTWARE OR THIRD PARTY SOFTWARE
DISTRIBUTED BY CLICK2LEARN.COM CONTAINS DEFECTS
Software products frequently contain errors or failures, especially when
first introduced or when new versions are released. We have in the past
discovered errors in our products and those of third parties after their initial
release. Because our enterprise learning products are targeted for enterprise
customers in an emerging market, customers and potential customers may have a
greater sensitivity to product defects than the market for software products
generally. These companies may also have more sensitivity to product integration
and interoperability of commercial shipments, product defects could result in
loss of revenue or delay in market acceptance, diversion of development
resources, damage to our reputation, or increased service and warranty costs.
IF OUR PROFESSIONAL SERVICES DO NOT MEET CUSTOMER EXPECTATIONS, WE COULD LOSE
CUSTOMERS AND BRAND REPUTATION
We could face liability from our customers if we do not meet their
expectations. Many of our professional services engagements require us to
develop learning applications to suit unique customer
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requirements. Our failure or inability to meet a customer's expectations or
requirements in the performance of services could injure our business reputation
or result in a claim for damages against us, regardless of our responsibility
for the failure. We attempt to limit contractually our liability for damages
arising from product defects, negligent acts, errors, mistakes or omissions in
rendering professional services, however, these contractual protections are not
always obtained and may not be enforced or otherwise protect us from liability
for damages. Our insurance may not be sufficient to cover one or more claims.
WE COULD INCUR LOSSES IF WE DO NOT ACCURATELY PRICE OUR FIXED-PRICE PROFESSIONAL
SERVICES ENGAGEMENTS
Many of our professional services projects are performed on a fixed-price
basis rather than on a time and materials basis. If we do not accurately predict
the costs of these projects, we could incur unexpected costs. If we do not
complete fixed-price engagements within budget, on time and to clients'
satisfaction, we would bear the risk of cost overruns.
CHANGING ECONOMIC CONDITIONS COULD AFFECT OUR POTENTIAL CUSTOMERS' WILLINGNESS
TO PURCHASE OUR PRODUCTS OR SERVICES
Our revenues are subject to fluctuation as a result of general economic
conditions. A significant portion of our revenues are derived from the sale of
products and services to Fortune 1000 companies or government agencies, which
historically have adjusted their expenditures for education and training during
economic downturns. Should the economy weaken in any future period, these
organizations may not increase or may reduce their expenditures on education and
training, which could have an adverse effect on our business.
OUR SUCCESS DEPENDS ON RETAINING OUR CURRENT KEY PERSONNEL AND ATTRACTING
ADDITIONAL KEY PERSONNEL
Our future success depends on the performance of our senior management team
and other key employees. Our success will also depend on our ability to attract,
integrate, motivate and retain additional highly skilled technical, sales and
marketing and professional services personnel. There is intense competition for
these personnel. We do not have employment agreements with most of our
executives or other key employees. In addition, we do not maintain key person
life insurance for any of our officers or key employees.
THE MEASURES WE HAVE TAKEN TO PROTECT OUR INTELLECTUAL PROPERTY MAY NOT BE
SUFFICIENT
Despite our precautions, it may be possible for a third party to copy or
otherwise obtain and use our intellectual property or trade secrets without
authorization. In addition, others could independently develop substantially
equivalent intellectual property. 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. This
litigation could result in substantial costs and diversion of management and
technical resources.
WE DEPEND ON LICENSES OF THIRD PARTY CONTENT AND TECHNOLOGY AND IT WOULD BE
DIFFICULT TO RUN OUR BUSINESS WITHOUT THEM
We use licensed third party technology in our products and in our
click2learn.com web site and license content from third parties for our
click2learn.com web site. We may not be able to continue to license technology
or content from third parties. We could also face liability if this licensed
technology or content infringed the rights of another party. Future licenses to
this technology and content may not be available to us on commercially
reasonable terms or at all. The loss of or inability to obtain or maintain any
of these technology or content licenses could result in delays in introduction
of our products or could force us to discontinue permitting access to portions
of the click2learn.com web site
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until equivalent technology, if available, is identified, licensed and
integrated. It could also require us to obtain content from other sources, which
we may not be able to do in a timely manner or at all.
WE COULD BE SUBJECT TO LITIGATION WITH RESPECT TO ALLEGED INFRINGEMENT OF
OTHERS' INTELLECTUAL PROPERTY
From time to time we have received, and we may in the future receive, notice
of claims of infringement of other parties' proprietary rights. We are currently
involved in litigation filed in May 1996 relating to a claim that our ToolBook
product lines infringe a patent owned by Richard B. Grant and seeking an
unspecified amount of damages. This action is still in the discovery stage and
it is not yet possible to assess its outcome. Although we have received an
opinion that our products do not infringe this patent and that the patent is
invalid, the outcome of litigation can never be predicted with certainty and the
cost of our defense of this claim, regardless of outcome, could have a material
adverse effect on our business.
Infringement or other claims could be asserted or prosecuted against us in
the future. Any such claims, with or without merit, could be time-consuming,
result in costly litigation and diversion of technical and management personnel.
They could also cause product shipment delays or require us to develop
non-infringing technology or enter into royalty or licensing agreements. These
royalty or licensing agreements, if required, may not be available on reasonable
terms, or at all.
WE MAY NEED TO OBTAIN ADDITIONAL CAPITAL TO RUN OUR BUSINESS
As of June 30, 1999, we had cash and cash equivalents of $16.2 million. We
anticipate that this cash together with the proceeds we received from our sale
of stock to Go2Net, Inc. and to the selling stockholders will be sufficient to
meet our working capital and capital expenditures for at least the next 12
months. Our long-term liquidity will be affected by numerous factors, including:
- demand for our products and services;
- the extent to which our products and services achieve market acceptance;,
- the timing of and extent to which we invest in new technology;
- the expenses of sales and marketing and new product development;
- the extent to which competitors are successful in developing their own
products and services and increasing their own market share;
- the level and timing of revenues;
- the expenses of marketing our click2learn.com web site;
- the success of our click2learn.com web site;
- amounts we pay for distribution relationships with other web sites; and
- the amount we pay for content for click2learn.com.
To the extent that resources are insufficient to fund activities, we may
need to raise additional funds. Additional funding, if needed, may not be
available on attractive terms, or at all. If adequate funds are not available on
acceptable terms, we may be unable to expand our business, develop or enhance
our products and services, adequately market the click2learn.com web site, take
advantage of future opportunities or respond to competitive pressures. If we
raise additional funds in an equity-based financing transaction, your equity
could be significantly diluted.
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OUR BUSINESS COULD BE ADVERSELY AFFECTED IF THE SYSTEMS WE USE ARE NOT YEAR 2000
COMPLIANT OR IF OUR CUSTOMERS OR POTENTIAL CUSTOMERS ALTER THEIR PURCHASING
PATTERNS AS A RESULT OF THE YEAR 2000 PROBLEM
Although we believe that our software products, click2learn.com and our
internally developed systems and technology are Year 2000 compliant, our
information technology systems nevertheless could be substantially impaired or
cease to operate due to Year 2000 problems and our products and click2learn.com
could contain undetected Year 2000 problems. Additionally, we rely on
information technology supplied by third parties. Year 2000 problems experienced
by us or any of these third parties could materially adversely affect our
business. Additionally, the Internet could face serious disruptions arising from
the Year 2000 problem.
Many potential customers have implemented policies that prohibit or strongly
discourage making changes or additions to their internal computer systems until
after January 1, 2000. We will experience fewer sales if potential customers who
might otherwise purchase our software products delay the purchase and
implementation of our products or services until after January 1, 2000 in an
effort to stabilize their internal computer systems in order to cope with the
Year 2000 problem or because their information technology budgets have been
diverted to address Year 2000 issues.
WE MAY NEED TO MAKE ACQUISITIONS IN ORDER TO REMAIN COMPETITIVE IN OUR MARKET,
AND OUR BUSINESS COULD BE ADVERSELY AFFECTED AS A RESULT OF ANY OF THESE
FUTURE ACQUISITIONS
In the past, we have completed a number of acquisitions. In order to remain
competitive in the future, we may find it necessary to acquire additional
businesses, products or technologies. If we identify an appropriate acquisition
candidate, we may not be able to negotiate the terms of the acquisition
successfully, finance the acquisition, or integrate the acquired business,
products or technologies into our existing business and operations. Further,
completing a potential acquisition and integrating an acquired business will
cause significant diversions of management time and resources. If we consummate
one or more significant acquisitions in which the consideration consists of
stock or other securities, your equity could be significantly diluted. If we
were to proceed with one or more significant acquisitions in which the
consideration included cash, we could be required to use a substantial portion
of our available cash to consummate any acquisition. Acquisition financing may
not be available on favorable terms, or at all. In addition, we may be required
to amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions.
OUR STOCK PRICE HAS BEEN AND LIKELY WILL CONTINUE TO BE VOLATILE
The market price of our common stock has been highly volatile since our
initial public offering. The stock market in general, and the stock prices of
technology companies in particular, has experienced significant price and volume
fluctuations. Factors that may have an impact on the price of our stock include:
- fluctuations in our operating results;
- announcements of technological innovations or new products or services by
us or our competitors;
- analysts' reports and projections; and
- general market conditions.
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. This type of litigation could result in
substantial costs and a diversion of our management's attention and resources.
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ONE OF OUR STOCKHOLDERS WILL HAVE THE ABILITY TO INFLUENCE MATTERS TO BE VOTED
UPON BY STOCKHOLDERS
As of October 12, 1999, Paul Allen and Vulcan Ventures, Inc., an entity
owned and controlled by Paul Allen, owned approximately 41.58% of our
outstanding common stock, assuming the maximum number of shares of common stock
issuable upon conversion of the Series A Convertible Preferred Stock and
assuming the exercise of the warrants held by Vulcan Ventures, Inc. and no
exercise of the warrants held by the other selling stockholders. Vulcan
Ventures, Inc. is a selling stockholder offering shares pursuant to this
prospectus. However, even if Vulcan Ventures, Inc., were to sell all of its
shares of common stock, Paul Allen would continue to own approximately 35.71% of
our outstanding common stock, based on the same assumptions regarding conversion
of the preferred stock and exercise of the warrants.
As a result, these stockholders will be able to influence all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions such as a merger, consolidation or sale of
substantially all of our assets. This concentration of ownership might have the
effect of delaying or preventing a change in control.
RISKS RELATED TO THE INTERNET INDUSTRY
WE DEPEND ON INCREASING USE OF THE INTERNET. IF THE USE OF THE INTERNET DOES NOT
GROW AS ANTICIPATED, OUR BUSINESS WILL BE SERIOUSLY HARMED
Our click2learn.com web site depends on the increased acceptance and use of
the Internet, both generally and as means for the purchase and delivery of
learning content. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use may not continue to develop at
historical rates and a sufficiently broad base of business customers or
consumers may not adopt or continue to use the Internet, particularly for
training and education. Demand and market acceptance for recently introduced
services and products over the Internet are subject to a high level of
uncertainty, and there exist few proven services and products.
Our business would be seriously harmed if:
- use of the Internet and other online services does not continue to
increase or increases more slowly than expected;
- the technology underlying the Internet and other online services does not
effectively support any expansion that may occur;
- the Internet and other online services do not create a viable commercial
marketplace, reducing the need for our services;
- the necessary communication and computer network technology for the
Internet does not continue to develop; or
- governmental regulation of the Internet increases.
SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR TRAINING AND
EDUCATION
A significant barrier to the widespread use of the Internet for applications
such as training and education is the secure transmission of confidential
information over public networks. Advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments could
result in compromises or breaches of our security systems or those of other web
sites to protect proprietary information. If any well-publicized security breach
were to occur, the Internet may not become widely accepted for commerce and
communications. Anyone who circumvents our security measures could
misappropriate proprietary information or cause interruptions in our services or
operations.
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<PAGE>
The Internet is a public network, and data is sent over this network from
many sources. In the past, computer viruses, software programs that disable or
impair computers, have been distributed and have rapidly spread over the
Internet. Computer viruses could be introduced into our systems or those of our
customers or content providers, which could disrupt our click2learn.com web site
or make it inaccessible to users. We may be required to expend significant
capital and other resources to protect against the threat of security breaches
or to alleviate problems caused by breaches. To the extent that our activities
may involve the storage and transmission of proprietary information, such as
personal information or credit card numbers, security breaches could expose us
to a risk of loss or litigation and possible liability.
OUR CLICK2LEARN.COM WEB SITE MAY EXPERIENCE PERFORMANCE PROBLEMS OR DELAYS AS A
RESULT OF HIGH VOLUMES OF TRAFFIC OR CONTENT
Our click2learn.com web site has only been recently introduced. If the
volume of traffic or content on the web site increases, the site may experience
slower response times or other problems. In addition, both Asymetrix and users
depend on Internet service providers, telecommunications companies and the
efficient operation of their computer networks and other computer equipment for
the operation of and access to our click2learn.com web site. Each of these has
experienced significant outages in the past and could experience outages, delays
and other difficulties due to system failures unrelated to our systems. Any
delays in response time or performance problems could cause users of our
click2learn.com web site to perceive this service as not functioning properly
and therefore not use our web site.
INCREASING GOVERNMENT REGULATION COULD LIMIT THE USE OF THE INTERNET FOR
TRAINING AND EDUCATION
As Internet commerce evolves, we expect that federal, state or foreign
agencies will adopt regulations covering issues such as user privacy, pricing,
content and quality of products and services. It is possible that legislation
could expose companies involved in electronic commerce to liability, which could
limit the growth of electronic commerce generally. Legislation could dampen the
growth in Internet usage and decrease its acceptance as a communications and
commercial medium. If enacted, these laws, rules or regulations could limit the
market for our products and services.
We collect sales taxes in respect of services that can be purchased through
our click2learn.com web site only in those jurisdictions in which we collect
sales taxes on our enterprise software and services. However, one or more states
may seek to impose sales tax collection obligations on out-of-state companies
like us that engage in or facilitate electronic commerce. A number of proposals
have been made at the state and local level that would impose additional taxes
on the sale of goods and services over the Internet. These proposals, if
adopted, could substantially impair the growth of electronic commerce and could
adversely affect our opportunity to derive financial benefit from such
activities.
USE OF PROCEEDS
If the warrants described under "Selling Stockholders" are exercised for
cash, then we would receive the proceeds from exercise of the warrant. However,
Asymetrix will not receive any of the proceeds from the sale of shares by the
selling stockholders.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information known to Asymetrix with
respect to the beneficial ownership of Asymetrix's common stock as of October
12, 1999 by the selling stockholders listed below. The selling stockholders
purchased 10,000 shares of Series A convertible preferred stock. Each share of
this preferred stock is currently convertible into approximately 129.0322 shares
of common stock although, as provided by the terms of the preferred stock, if
the average trading price of Asymetrix common stock declines this number could
increase to 146.6275 shares. The selling stockholders also received warrants to
purchase an aggregate of 997,742 shares of common stock at an exercise price of
$9.30 per share.
The percentage of shares beneficially owned is based on 16,205,926 shares
consisting of 14,739,651 shares of common stock outstanding as of October 12,
1999, and assuming that the maximum number of shares of common stock will be
issuable upon conversion of preferred stock. In addition, shares of common stock
subject to warrants are deemed outstanding for the purpose of computing the
percentage ownership of the person holding such warrants but are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person The table assumes that each of the selling stockholders sell all of the
shares offered by it in this offering. However, Asymetrix is unable to determine
the exact number of shares that will actually be sold or when or if such sales
will occur. Asymetrix will not receive the proceeds of any shares sold under
this prospectus.
The selling stockholders have advised Asymetrix that they are the beneficial
owners of the shares being offered.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING SHARES OWNED AFTER OFFERING
----------------------- BEING --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ---- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Marshall Capital Management, Inc........... 1,460,411(1) 8.70% 1,460,411(1) -- --
Vulcan Ventures, Inc....................... 6,898,606 41.58 973,606 5,925,000 35.71%
Alpine Capital Partners, Inc............... 30,000 * 30,000 -- --
Total.................................. 8,389,017 2,464,017
</TABLE>
- ------------------------
* representing less than 1%
(1) Except under certain limited circumstances, no holder of Preferred Shares is
entitled to convert such securities to the extent that the shares of Common
Stock to be received by such holder upon such conversion would cause such
holder to hold more than 4.9% of the outstanding shares of Common Stock.
Accordingly, the number of shares of Common Stock beneficially owned by
Marshall Capital may be less than that expressed in this table.
The amounts for Marshall Capital Management, Inc. include 580,646 shares
subject to a warrant. The remaining shares represent shares issuable upon
conversion of preferred stock and assumes that the maximum number of shares of
common stock will be issuable upon conversion of preferred stock.
The amounts for Vulcan Ventures, Inc. include 387,096 shares subject to a
warrant, and 5,925,000 shares of common stock held of record by Paul Allen, who
owns and controls Vulcan Ventures, Inc. The remaining shares represent shares
issuable upon conversion of preferred stock and assumes that the maximum number
of shares of common stock will be issuable upon conversion of preferred stock.
Vulcan Ventures, Inc. disclaims beneficial ownership of the 5,925,000 shares
held of record by Paul Allen. None of the shares held of record by Paul Allen
are being offered pursuant to this prospectus, and the column "Shares
Beneficially Owned After Offering" reflects the shares held of record by Paul
Allen.
The amount for Alpine Capital Partners, Inc. represents shares subject to a
warrant.
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<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares of common stock under (1) a Securities
Purchase Agreement, or the Agreement, dated as of September 30, 1999 by and
among Asymetrix and the selling stockholders (other than Alpine Capital
Partners, Inc.) and (2) a common stock purchase warrant, or the warrant, dated
September 30, 1999 by and among Asymetrix and the selling stockholders. Each
warrant is exercisable until October 6, 2004 and has an exercise price of $9.30
per share. We have filed a registration statement of which this prospectus forms
a part pursuant to registration rights we granted to the selling stockholders
pursuant to the Agreement and the Warrant. To Asymetrix's knowledge, the selling
stockholders have not entered into any agreement, arrangement or understanding
with any particular broker or market maker with respect to the shares offered
hereby, nor does Asymetrix know the identity of the brokers or market makers
that will participate in the offering.
The shares of common stock may be offered and sold from time to time by the
selling stockholders or by pledgees, donees, transferees and other successors in
interest. The selling stockholders will act independently of Asymetrix in making
decisions with respect to the timing, manner and size of each sale. Such sales
may be made over the Nasdaq National Market or otherwise, at then prevailing
market prices, at prices related to prevailing market prices or at negotiated
prices. The shares may be sold by one or more of the following:
- a block trade in which the broker-dealer engaged by the selling
stockholders will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
- purchases by the broker-dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus; and
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
Asymetrix has been advised by each of the selling stockholders that it has
not, as of the date hereof, entered into any arrangement with a broker-dealer
for the sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer. In effecting sales, broker-
dealers engaged by the selling stockholders may arrange for other broker-dealers
to participate. Broker-dealers will receive commissions or discounts from the
selling stockholders in amounts to be negotiated immediately prior to the sale.
In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with these transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with selling
stockholders. The selling stockholders may also sell shares short and redeliver
the shares to close out such short positions. The selling stockholders may also
enter into option, derivative or other transactions with broker-dealers which
require the delivery to the broker-dealer of the shares, which the broker-dealer
may resell or otherwise transfer under this prospectus. The selling stockholders
may also loan or pledge the shares to a broker-dealer and the broker-dealer may
sell the shares so loaned or, upon a default, the broker-dealer may effect sales
of the pledged shares under this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders in amounts
to be negotiated in connection with the sale. Broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with the sales, and any commission,
discount or concession may be deemed to be underwriting discounts or commissions
under the Securities Act. In addition, any securities covered by this prospectus
which qualify for sale under Rule 144 of the Securities Act may be sold under
Rule 144 rather than under this prospectus.
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<PAGE>
Asymetrix has advised the selling stockholders that the anti-manipulation
rules under the Exchange Act may apply to sales of shares in the market and to
the activities of the selling stockholders and its affiliates. Each selling
stockholder has advised Asymetrix that during such time as it may be engaged in
the attempt to sell shares registered, it will:
- not engage in any stabilization activity in connection with any of
Asymetrix's securities;
- not bid for or purchase any of Asymetrix's securities or any rights to
acquire Asymetrix's securities, or attempt to induce any person to
purchase any of Asymetrix's securities or rights to acquire Asymetrix's
securities other than as permitted under the Exchange Act;
- not effect any sale or distribution of the shares until after the
prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof; and
- effect all sales of shares in broker's transactions through broker-dealers
acting as agents, in transactions directly with market makers or in
privately negotiated transactions where no broker or other third party
(other than the purchaser) is involved.
Under certain circumstances, Asymetrix has the ability to suspend the use of
this prospectus if, in the good faith judgment of the Board of Directors of
Asymetrix, it would be seriously detrimental to Asymetrix and its stockholders
for resales of shares to be made due to:
- the existence of a material development or potential material development
with respect to or involving Asymetrix which Asymetrix would be obligated
to disclose in the prospectus, which disclosure would in the good faith
judgment of the Board of Directors of Asymetrix be premature or otherwise
inadvisable at such time and would have a material adverse affect upon
Asymetrix and its stockholders, or
- the occurrence of any event that makes any statement made in the
prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or which requires the
making of any changes in the prospectus so that it will not contain any
untrue statement of a material fact required to be stated therein or
necessary to make the statements therein not misleading or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
This offering will terminate on the earlier of:
- the termination of the period during which Asymetrix is required to
maintain the effectiveness of the Registration Statement of which this
prospectus forms a part, or
- the date on which all shares offered have been sold by the selling
stockholder.
Asymetrix has agreed to pay the expenses of registering the shares under the
Securities Act, including registration and filing fees, printing expenses,
administrative expenses and certain legal and accounting fees including fees and
disbursements of one counsel for the selling stockholders. The selling
stockholders will bear all discounts, commissions or other amounts payable to
underwriters, dealers or agents.
Asymetrix and the selling stockholders have agreed to indemnify each other
and certain other related parties for certain liabilities in connection with the
registration of the shares offered hereby.
Upon the occurrence of any of the following events, this prospectus will be
amended to include additional disclosure before offers and sales of the
securities in question are made:
- to the extent the securities are sold at a fixed price or at a price other
than the prevailing market price, such price would be set forth in the
prospectus,
15
<PAGE>
- if the securities are sold in block transactions and the purchaser acting
in the capacity of an underwriter wishes to resell, such arrangements
would be described in the prospectus,
- if the selling stockholder sells to a broker-dealer acting in the capacity
as an underwriter, such broker-dealer will be identified in the prospectus
and
- if the compensation paid to broker-dealers is other than usual and
customary discounts, concessions or commissions, disclosure of the terms
of the transaction would be included in the prospectus.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Asymetrix by Fenwick & West LLP, Palo Alto, California.
EXPERTS
The consolidated balance sheets of Asymetrix Learning Systems, Inc., and
subsidiaries as of December 31, 1998 and 1997 and the consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent auditors, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
16
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
IN THIS PROSPECTUS
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
IN THIS DOCUMENT OR DELIVERED WITH THIS DOCUMENT.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act, after the date of this prospectus are incorporated
by reference into and to be a part of this prospectus from the date of filing of
those documents.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.
The following documents which were filed by Asymetrix with the Securities
and Exchange Commission, are incorporated by reference into this prospectus.
- Asymetrix's Report on Form 8-K filed on October 13, 1999 ("Form 8-k");
- Asymetrix's Annual Report on Form 10-K for the year ended December 31,
1998 and Asymetrix's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999;
- Asymetrix's definitive Proxy Statement dated April 22, 1999, filed in
connection with the 1999 annual meeting of stockholders;
- Asymetrix's Registration Statement on Form 8-A (SEC file number 000-24289
originally filed on May 19, 1998 and declared effective June 12, 1998,
which describes Asymetrix's common stock);
- All documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act, after the date of this prospectus are
incorporated by reference into and to be a part of this prospectus from
the date of filing of those documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference will be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or any other subsequently filed document that is deemed to be
incorporated in this prospectus by reference modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated by reference into this prospectus are available
from us upon request. We will provide a copy of any and all of the information
that is incorporated by reference in this prospectus, not including exhibits to
the information unless those exhibits are specifically incorporated by reference
into this proxy statement prospectus, to any person, without charge, upon
written or oral request.
Requests for documents should be directed to Asymetrix Learning Systems,
Inc., Attention: Investor Relations, 110-110th Avenue NE, Suite 700 Bellevue,
Washington 98004, telephone number (425) 637-1581.
17
<PAGE>
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Copies of our reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 5000 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a web site that contains reports, proxy statements and other
information regarding each of us. The address of the SEC web site is
http://www.sec.gov.
Asymetrix has filed a registration statement under the Securities Act with
the Securities and Exchange Commission with respect to the shares to be sold by
the selling stockholder. This prospectus has been filed as part of the
registration statement. This prospectus does not contain all of the information
set forth in the registration statement because certain parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. The registration statement is available for inspection and copying
as set forth above.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR
FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH OR INCORPORATED HEREIN BY REFERENCE OR IN OUR AFFAIRS
SINCE THE DATE OF THIS PROSPECTUS.
18
<PAGE>
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ASYMETRIX LEARNING SYSTEMS, INC.
2,464,017 SHARES OF
COMMON STOCK
----------------------
PROSPECTUS
----------------------
- --------------------------------------------------------------------------------
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