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As filed Pursuant to Rule 424(b)(1)
Registration No. 333-90983
PROSPECTUS
LEARN2.COM, INC.
1,135,709 SHARES OF
COMMON STOCK
We are furnishing this document to you to allow the selling stockholders to
sell up to 1,135,709 shares of our common stock. The selling stockholders may
sell these shares from time to time in regular brokerage transactions, in
transactions directly with market makers or in certain privately negotiated
transactions.
Our common stock is quoted on The Nasdaq Stock Market under the symbol
"LTWO". On November 9, 1999, the closing price of our common stock as reported
by The Nasdaq Stock Market was $3.09 per share.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE 3
WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH LEARN2.COM, INC. AND THESE
SECURITIES BEFORE YOU MAKE YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 13, 1999.
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LEARN2.COM, INC.
We develop and distribute online advanced learning and training products and
technologies. To strengthen our position in the marketplace, we have acquired
three companies. Street Technologies, Inc., now known as Learn2, Inc., which we
acquired in February 1999, markets and distributes multimedia tutorials over the
Internet and corporate intranets utilizing its internally developed
technologies. Panmedia Corporation, which we acquired in May 1999, offers a wide
spectrum of step-by-step instructions on skills, activities and tasks through
www.learn2.com. ViaGrafix Corporation, which we acquired in August 1999, is a
leading provider of multimedia tutorials on a wide variety of computer software
topics.
Our goal is to become the world's leading provider of engaging learning
products and services. Our mission is to provide our customers, including
consumers, corporations, government agencies and educational organizations, with
a complete solution for learning.
Our products provide an engaging learning experience to consumer and
corporate customers by allowing interactive multimedia and animated courseware
to be accessed instantly on the Internet. Through our website, www.learn2.com,
we are also an Internet learning community that offers consumers tips and
step-by-step instructions on a broad spectrum of skills, activities and tasks,
as well as immediately accessible multimedia consumer training courses and
tutorials. Corporations have access to the same high quality tutorials through
Learn2University, which includes additional features such as reporting and
administration.
Learn2.com was incorporated on April 28, 1993 under the laws of the State of
Delaware. Our principal executive offices are located at 1311 Mamaroneck Avenue,
White Plains, New York 10605. Our telephone number is (914) 682-4300. Our
Website is at www.learn2.com. Information contained on our Website is not part
of this Prospectus.
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RISK FACTORS
WE HAVE A LIMITED OPERATING HISTORY.
We have an evolving and unpredictable business model. In addition, we face
intense competition and we must effectively manage our growth and respond
quickly to rapid changes in customer demands and industry standards. We may not
succeed in addressing these challenges and risks.
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT.
As of December 31, 1998, we had an accumulated deficit of approximately $83
million. We expect to incur net losses through at least the end of 2000 and may
continue to incur net losses thereafter.
SIMILAR TO OTHER INTERNET COMPANIES, WE ARE MAKING A SUBSTANTIAL INVESTMENT IN
OUR BUSINESS AND MAY NEED TO RAISE ADDITIONAL FUNDS.
Additional funds may be raised through joint ventures, the sale of assets,
the incurrence of debt, or the issuance of securities. If additional funds are
raised through the issuance of equity or convertible securities, your percentage
ownership in Learn2.com will be reduced. Also, these securities may have rights,
preferences or privileges senior to common stock. However, it is possible that
additional financing may not be available on terms favorable to us, or at all.
If adequate funds are not available or are not available on acceptable terms, we
may not be able to realize our business plan.
DUE TO OUR LIMITED OPERATING HISTORY AND THE UNPREDICTABILITY OF OUR INDUSTRY,
WE CANNOT ACCURATELY FORECAST OUR REVENUES.
Our quarterly operating results will fluctuate for many reasons, including:
- Seasonal buying patterns by our customers.
- Our ability to retain existing customers, attract new customers and
satisfy our customers' demand.
- Changes in gross margins of our current and future products and services.
- Introduction of our new web sites, services and products or those of our
competitors.
- Changes in usage of the Internet and online services and consumer
acceptance of the Internet and electronic commerce.
- Timing of upgrades and developments in our systems and infrastructure.
- The level of traffic on our web sites.
- The effects of acquisitions and other business combinations, and related
integration.
- Technical difficulties, system downtime or Internet brownouts.
You should not rely on period-to-period comparisons of our financial results
to forecast our future performance. Our future operating results may fall below
the expectations of securities analysts or investors, which would likely cause
the trading price of our common stock to decline.
WE FACE RAPID TECHNOLOGICAL CHANGE AND FREQUENT NEW PRODUCT INTRODUCTIONS.
The markets for our products and services are characterized by rapid
technological change, frequent new product introductions and evolving industry
standards. We believe that our future success depends upon our ability to
develop and market products and services that incorporate and apply new
technologies, and our ability to enhance and expand our existing product lines
and services. We will
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need to spend significant amounts of capital to develop, market and enhance our
products and services to meet and take advantage of technological changes. We
may not be:
- Able to develop or market new products or services successfully
- Successful in commercially developing new products and services
- Able to respond effectively to technological changes, new industry
standards, or new products or services offered by our competitors
- Able to raise sufficient capital when required to implement our strategies
Our future success will depend upon, among other factors, the extent to
which companies continue to adopt web based learning programs, the proliferation
of multimedia PCs inside corporations and the acceptance of the Internet as a
viable distribution medium. If our solutions do not become widespread or we do
not achieve market acceptance, or are unable to anticipate technological change
or evolving industry standards and successfully introduce new products our
business, results of operations, and financial condition could be adversely
affected. The Internet may not prove to be a viable commercial marketplace for a
number of reasons, including the lack of acceptable security technologies,
potentially inadequate development of the necessary infrastructure, or the lack
of timely development and commercialization of performance improvements. If the
market develops more slowly than expected or becomes saturated with competitors,
or if our products and services do not sustain market acceptance, our business,
operating results and financial condition could be materially and adversely
affected.
WE FACE A RISK OF SYSTEM FAILURE.
Our operations depend to a significant extent on our ability to maintain our
computer and telecommunications systems. We must also protect our systems
against damage from fire, natural disaster, power loss, telecommunications
failure or similar events. Although we have arranged for back-up for our network
control, this measure does not eliminate the risk to our operations from a
natural disaster or system failure. In addition, growth of our customer base may
strain the capacity of our computer operations center and telecommunications
systems and/or lead to degradations in performance or system failure. Any damage
to or loss of our computer and telecommunications networks including our
operations center could adversely affect the performance of our business.
CERTAIN EVENTS COULD RESULT IN A DILUTION OF YOUR OWNERSHIP OF OUR COMMON STOCK.
As of September 30, 1999, we had 50,993,030 shares of common stock
outstanding and 11,247,153 common stock equivalents including convertible notes,
warrants and stock options. The exercise prices and conversion prices, as the
case may be, of the common stock equivalents range from $.01 and $11.50 per
share. These common stock equivalents also provide for antidilution protection
upon the occurrence of stock splits, redemptions, mergers and other similar
transactions. If one or more of these events occurs the number of shares of our
common stock that may be acquired upon conversion or exercise would increase. If
converted or exercised these securities will result in a dilution to your
percentage ownership of our common stock. If we continue to acquire new
companies through the issuance of common or preferred stock your percentage of
ownership may be diluted.
WE ANTICIPATE INCREASED OPERATING EXPENSES AND MAY EXPERIENCE LOSSES.
We expect our operating expenses to continue to increase significantly as we
expand our sales and marketing operations, continue to develop and extend our
products and services, and develop and acquire complementary businesses and
technologies. As a result, we may experience significant losses on a quarterly
and annual basis.
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WE HAVE A SUBSTANTIAL INVESTMENT IN PURSUING CORPORATE SALES.
We recently began major efforts to sell directly to corporate customers, and
have incurred costs and made investments in a direct corporate sales force and
the infrastructure to support this sales force. We expect to incur significant
additional costs as we continue to pursue corporate sales. Direct sales to
corporate customers have long sales cycles which can be in excess of one year.
The sales and timing of licensing agreements to corporate customers could cause
volatility in, and materially adversely affect, our quarterly operating results.
If this strategy is unsuccessful, we may not be able to recover the significant
costs of pursuing this strategy. Further, we could be at a competitive
disadvantage by not having allocated our resources to other sales opportunities.
WE WILL CONTINUE TO EXPAND INTO INTERNATIONAL MARKETS IN WHICH WE HAVE LIMITED
EXPERIENCE.
A part of our strategy is to develop international markets. We have entered
into distribution arrangements in the United Kingdom, France, Germany, Japan,
Australia, Turkey and Canada. We or our partners may not be able to successfully
market our products and services in foreign markets.
We have limited experience in developing localized versions of our products
and marketing our products and services internationally. We rely on the efforts
and abilities of our international business partners in those activities.
In addition to uncertainty about our ability to continue to generate
revenues and expand our international presence, there are certain risks inherent
in doing business internationally, including:
- local economic and market conditions.
- difficulties in enforcing intellectual property and contractual rights.
- the need for compliance with a variety of international and United States
export regulations.
- unexpected changes in regulatory requirements.
- trade barriers.
- difficulties in staffing and managing international operations because of
distance, language and cultural differences.
- longer payment cycles.
- currency exchange rate fluctuations.
- problems in collecting accounts receivable.
- political and economic instability.
- export restrictions.
- seasonal fluctuations in business activity.
- potentially adverse tax consequences.
One or more of theses factors could have a material adverse effect on our
future international presence and, consequently, on our business, operating
results and financial condition.
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WE MUST MANAGE OUR RECENT GROWTH AND SUCCESSFULLY INTEGRATE RECENTLY ACQUIRED
COMPANIES IN ORDER TO ACHIEVE DESIRED RESULTS.
As part of our business strategies, we have completed several acquisitions
including our recent acquisitions of Street Technologies, Panmedia and
ViaGrafix. We may enter into additional business combinations and acquisitions.
However, each acquisition brings challenges associated with integrating acquired
businesses, services, product lines or technologies. Among risks associated even
with successful acquisitions are:
- the difficulty of assimilating the operations and personnel of the
acquired companies.
- the potential disruption of the ongoing business and distraction of
management.
- the difficulty of incorporating acquired or licensed technology or content
into our products and services.
- the impairment of relationships with employees and customers as a result
of integration of new management personnel.
- the potential unknown liabilities associated with acquired businesses.
OUR EXPECTED BENEFITS OF THE VIAGRAFIX ACQUISITION MAY NOT BE REALIZED.
If we are not able to effectively integrate our operations and personnel in
a timely and efficient manner, then the benefits of the merger will not be
realized. In particular, if the integration is not successful:
- Our operating results may be adversely affected
- We may lose key personnel
In addition, the market price of Learn2.com common stock may decline as a
result of the merger if:
- We do not achieve the perceived benefits of the merger as rapidly or to
the extent we anticipate.
- The effect of the merger on our financial results is not consistent with
the expectations of securities analysts.
- The dilution of Learn2.com common stock negatively affects our stock
price.
- The attention and effort devoted to the integration of the two companies
diverts management's attention from other important issues.
WE MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH STRATEGY.
Successfully achieving our growth plan depends on our ability to:
- Continue to develop and market our products and services.
- Maintain and increase our customer base.
- Effectively integrate businesses and technologies.
- Continue to identify, attract, retain and motivate qualified personnel.
THE ACQUISITION OF VIAGRAFIX COULD ADVERSELY AFFECT COMBINED FINANCIAL RESULTS.
If the benefits of the merger do not exceed the costs associated with the
merger, including the dilution to our stockholders resulting from the issuance
of our common stock in connection with the merger, then our financial results,
including earnings per share, could be adversely affected.
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THE FAILURE OF OUR MERGER WITH PANMEDIA OR VIAGRAFIX TO QUALIFY AS A POOLING OF
INTERESTS COULD NEGATIVELY AFFECT OUR COMBINED FINANCIAL RESULTS.
The failure of our merger with Panmedia or ViaGrafix to qualify as a pooling
of interests could materially and adversely affect our reported earnings and
could also adversely affect the market price of our common stock. The
eligibility to qualify as a pooling of interests depends upon circumstances and
events occurring after the effective time of the Panmedia or ViaGrafix merger,
some of which are outside of our control.
OUR STOCK PRICE HAS HISTORICALLY BEEN VOLATILE, WHICH MAY MAKE IT MORE DIFFICULT
FOR YOU TO RESELL SHARES WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE.
The trading price of our common stock can fluctuate significantly. For
example, during the 52-week period ended September 30, 1999, the market price of
our common stock ranged from $1.81 to $10.00. The stock price may fluctuate in
response to a number of events and factors, including:
- quarterly variations in operating results.
- announcements of technological innovations or new products and services by
us or our competitors.
- changes in financial estimates and recommendations by securities analysts.
- the operating and stock price performance of other companies that
investors may deem comparable.
- news reports relating to trends in our markets.
In addition, the stock market in general, and the market prices for
Internet-related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of those companies.
These broad market and industry fluctuations may adversely affect the price of
our common stock, regardless of operating performance. A drop in the market
price of our common stock may adversely affect our business and financial
opportunities.
WE EXPECT TO RELY ON RESELLERS, INCLUDING INTERNET MERCHANTS, TO ENHANCE SALES.
Our resellers may not devote the resources necessary to provide effective
sales and marketing to support us. A significant portion of our growth strategy
is to increase sales of our products and services over the Internet. We
currently have relationships with online services and Internet content
providers. Additionally, we have relationships with authorized resellers. Our
distribution agreements are not exclusive and may be terminated upon certain
conditions. Certain agreements with our distribution partners do not require
minimum purchase commitments or have payment terms for periods up to one year
and allows them to return products. These contracts may not result in revenues.
We may not be successful in either expanding our current relationships, or
attracting new Internet merchants. The failure to do so could significantly
impact our ability to increase sales.
Some of our resellers are small organizations with limited capital.
Accordingly, if a significant number of these resellers were to experience
financial difficulties, or otherwise become unable or unwilling to promote, sell
or pay for our products, our results of operations could be adversely affected.
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OUR PRODUCTS ARE DESIGNED FOR MICROSOFT TECHNOLOGIES.
Our products are designed primarily for Microsoft technologies. We believe
that Microsoft technologies are, and will continue to be, widely utilized by our
customers. However, if these customers do not actually adopt and continue to
utilize these technologies as anticipated or in the future migrate to other
computing technologies that we do not support, we may have to spend significant
capital and other resources including personnel to adapt our products to these
alternative technologies.
WE DEPEND ON OUR ABILITY TO RETAIN KEY PERSONNEL AND ATTRACT NEW QUALIFIED
PERSONNEL.
We are substantially dependent on the continued services of Stephen P. Gott,
President, Chief Executive Officer of Learn2.com and a Director, Jason R.
Roberts, a Director, and Michael A. Webster, a Director. If any of them were to
leave our employ, we could face substantial difficulty in hiring a qualified
successor and could experience a loss in productivity while any successor
obtains the necessary training and experience.
We expect that we will need to hire additional personnel in all areas. The
competition for qualified personnel is intense. At times, we have experienced
difficulties in hiring personnel with the right training or experience. If we do
not succeed in attracting new personnel, or retaining and motivating existing
personnel, our business may be adversely affected.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH ARE COSTLY
TO DEFEND AND COULD LIMIT OUR ABILITY TO USE CERTAIN TECHNOLOGIES IN THE
FUTURE.
Many parties are actively developing and improving technologies which
compete with our proprietary technologies and patents. We believe that these
parties will continue to take steps to protect these technologies, including
seeking patent protection. As a result, we believe that disputes regarding the
ownership of these technologies could arise in the future.
Third parties may assert claims against us alleging infringement of patents,
copyrights, trademark rights, trade secret rights or other proprietary rights or
alleging unfair competition. In the event that we determine that licensing
patents or other proprietary rights is appropriate, we may not be able to
license proprietary rights on reasonable terms or at all. As the number of
products in our target markets increase and the functionality of these products
further overlap, we may become increasingly subject to infringement claims. We
may incur substantial expenses in defending against third-party infringement
claims regardless of the merit of those claims. In the event that there is a
determination that we have infringed third-party proprietary rights, we could
incur substantial monetary liability and be prevented from using the rights in
the future.
OUR INTELLECTUAL PROPERTY RIGHTS ARE COSTLY AND DIFFICULT TO PROTECT.
We rely on a combination of the following to protect our intellectual
property rights:
- patents.
- trade secrets.
- copyright and trademark laws.
- nondisclosure agreement.
- other contractual provisions and technical measures.
None of these protections may be adequate to prevent our competitors from
copying or reverse-engineering our products, concepts, tradenames and trade
dress. Further, none of these protections prohibit our competitors from
independently developing technologies that are substantially equivalent or
superior to our technologies.
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We license certain products under shrink-wrap licenses that are not signed
by our licensees. These shrink-wrap licenses may be unenforceable under the laws
of certain jurisdictions. In addition, the laws of certain countries in which
our products are or may be licensed do not protect us to the same extent as the
laws of the United States.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND WE MAY BE
LIABLE FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Third parties may infringe or misappropriate our patents, trademarks or
other proprietary rights, which could have a material adverse effect on our
business, results of operations or financial condition. While we enter into
confidentiality agreements with our material employees, guides, consultants and
strategic partners, and generally control access to and distribution of our
proprietary information, the steps we have taken to protect our proprietary
rights may not prevent misappropriation. We also attempt to register our
trademarks and service marks. However, we cannot assure you that any of
trademark registrations or patent applications will be approved. Even if they
are approved, such trademarks or patents may be successfully challenged by
others or invalidated. In addition, we do not know whether we will be able to
defend our proprietary rights since the validity, enforceability and scope of
protection of proprietary rights in Internet-related industries is uncertain and
still evolving.
Third parties may assert infringement claims against us. From time to time
in the ordinary course of business we have been, and we expect to continue to
be, subject to claims of alleged infringement of the trademarks and other
intellectual property rights of third parties. These claims and any resultant
litigation, should it occur, could subject us to significant liability for
damages. In addition, even if we prevail, litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention. Any claims from third parties may also result in limitations on our
ability to use the intellectual property subject to these claims unless we are
able to enter into agreements with the third parties making these claims.
WE MAY BE EXPOSED TO PRODUCT LIABILITY CLAIMS.
Our license agreements with customers typically contain provisions designed
to limit our exposure to potential product liability claims. It is possible,
however, that the limitation of liability provisions contained in our license
agreements may not be effective under the laws of certain state and foreign
jurisdictions.
THE SUCCESSFUL OPERATION OF OUR BUSINESS DEPENDS UPON THE SUPPLY OF CONTENT
OTHER THAN RELATED TO OUR CURRENT LIBRARY.
Our inability in the future to obtain content from third parties or to
develop our own content could result in delays in products introductions or
shipments. We depend on the quality and reliability of the content licensed and
timely delivery of this content by our sources. Although we have agreements
specifying the terms of the licenses, these agreements may not be enforceable.
We believe that we can arrange alternate sources for some or all of our content,
but the inability of any of these content providers to provide content to us on
a timely basis could affect the performance of our business.
NET OPERATING LOSS CARRYFORWARDS MAY BE SEVERELY LIMITED.
Our net operating loss carryforwards were approximately $80 million as of
December 31, 1998. These net operating loss carryforwards expire at various
dates through 2018 and under Section 382 of the Internal Revenue Code may be
limited due to ownership changes. Future stock issuances may result in an
ownership change of Learn2.com under Section 382. Section 382 contains rules
that limit the ability of a company to offset pre-ownership change net operating
losses and credit carryovers
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against post-ownership change taxable income. As a result, our net operating
loss carryforwards could be severely limited in the future for use to offset any
income of ours in any particular year.
THE DEVELOPMENT OF OUR GRAPHICS SOFTWARE PRODUCTS AND STREAMING TECHNOLOGIES IS
COMPLEX.
The development of our graphics software products and streaming technologies
is a complex process. This can result in lengthy development cycles, extended
testing periods and undetected errors or bugs in the software programs. These
factors can result in loss of market acceptance, loss of reputation, and loss of
market share if products of competitors either are available on the market
first, or are viewed as more reliable than our products.
A SIGNIFICANT PORTION OF OUR PRODUCTS ARE SOLD TO MAJOR DISTRIBUTORS.
Historically, we have relied upon sales to Ingram Micro, Inc., a distributor
that supplies resellers, including major retailers. Recently, we have begun to
rely on sales to both Ingram and Tech Data Corporation, another major
distributor. We do not have a written agreement with Ingram, and neither Ingram
nor Tech Data are required to make any minimum purchases. If either or both of
these distributors do not actively market our products or if they fail to
maintain their relationships with major retailers, our sales could be materially
adversely impacted. Also, both Ingram and Tech Data do and may continue to sell
competitors' products.
WE ALSO DEPEND ON MAJOR RETAILERS TO MARKET OUR PRODUCTS.
We rely on certain retailers to market our products to end-users. The major
retailers selling our products are:
- America Online, Inc.
- Best Buy Company, Inc.
- CompUSA Inc.
- Fry's Electronics, Inc.
- Hastings Entertainment, Inc.
- Micro Center, trade name of Micro Electronics, Inc.
- Office Max, Inc.
- Staples, Inc.
Our direct and indirect sales to our six top retailers accounted for
approximately 41% of our 1998 revenues. Indirect sales of products are supplied
to certain retailers through distributors including Ingram and Tech Data.
We will continue to invest significant resources to expand our relationships
with these retailers and to develop relationships with new retailers. However,
these retailers or other retailers may not continue to provide shelf space and
marketing for our products. The failure of retailers to effectively market our
products could have a material adverse effect on our business and financial
condition.
THE YEAR 2000 PROBLEM COULD CAUSE OUR SOFTWARE PRODUCTS AND THOSE OF OUR
SUPPLIERS TO MALFUNCTION.
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish
twenty-first century dates from twentieth century dates. To function properly,
these date-code fields must distinguish twenty-first century dates from
twentieth century dates and as a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with those "Year
2000" requirements.
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We are dependent on the operation of numerous systems that may be adversely
affected by the Year 2000 problem, including:
- our internal systems.
- equipment, software and content supplied to us by third-party vendors
including outside providers of web-hosting services.
In addition, our future business depends on the successful operation of the
Internet following the commencement of the Year 2000. If the Internet is
inaccessible for an appreciable period of time, or if customers and users are
unable to access our web sites, our business and revenues could be materially
and adversely affected. We are also subject to external factors that might
generally affect industry and commerce, including Year 2000 compliance failures
in the telecommunications, banking, utilities and transportation industries.
CLASS ACTION.
On May 22, 1998, a lawsuit was filed in the United States District Court for
the Northern District of Texas by Jonathan L. Gordon, as a punitive class action
against ViaGrafix Corporation and certain of its officers and directors claiming
violations of the Securities Act for alleged misrepresentations and omissions in
ViaGrafix's prospectus issued in connection with its initial public offering
made in March 1998. Mr. Gordon and certain others have sought designation as
lead plaintiffs in the action. We believe the lawsuit is without merit. Our
response is not yet due.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the common stock
described in this document. The selling stockholders will receive all of the
proceeds from the sale of the common stock described in this prospectus.
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DIVIDEND POLICY
We have never declared cash dividends on our common stock. We intend to
retain any earnings to finance the development and growth of our business.
Accordingly, we do not anticipate that we will declare any cash dividends on our
common stock for the foreseeable future. Our payment of cash dividends, if any,
will depend upon our general financial condition and other factors deemed
relevant by our board of directors.
SELLING STOCKHOLDERS
FLETCHER INTERNATIONAL LIMITED
On December 15, 1998, Fletcher purchased 1,666,667 shares of our common
stock and rights to purchase an additional 750,000 shares of our common stock.
Fletcher has exercised 100,000 shares of the 750,000 shares and with this
100,000 shares consequently they are left with a warrant to purchase 650,000
shares at $4.50 per share plus the direct ownership of 250,000 shares. On
March 16, 1999, we granted Fletcher the right to purchase an additional 100,000
shares of our common stock for $.01 per share. Fletcher was also entitled to
obtain additional shares of our common stock because of the late effectiveness
of the Registration Statement dated May 5, 1999.
On November 12, 1999, we entered into another agreement with Fletcher
pursuant to which we sold 50,000 shares of our common stock for $.01 per share
as payment for our obligations incurred due to the late effectiveness of the
Registration Statement. In addition, Fletcher is no longer entitled to any
adjustment to obtain additional shares of our common stock and we no longer have
a right to require Fletcher to obtain additional shares of our common stock.
Fletcher has not held any position of office or had any material relationship
with us during the past three years. We have been informed by Fletcher that
Alphonse Fletcher, Jr. will exercise the voting and investment authority over
the shares of our common stock owned by Fletcher.
SCOTT NEAR, SAFA ALAI AND WARD BITTER
Messrs. Near, Alai and Bitter were founding employees and stockholders of
Street and received their shares of our common stock and Series D Preferred
Stock as payment for their shares of Street's common stock. Their Series D
Preferred Stock was converted into shares of our common stock upon our
stockholders' approval. Messrs. Near and Alai are scheduled to leave the employ
of Learn2, Inc. on December 31, 1999.
TOM RANDOLPH
On September 28, 1999, we entered into a settlement agreement with Tom
Randolph pursuant to which, among other things, we issued 90,000 shares of our
common stock to Mr. Randolph.
JILL CHERNIN-MARKS
Ms. Chernin-Marks received 17 shares of our Series D Preferred Stock when
she exercised stock options under the Street Stock Option Plan. Ms.
Chernin-Marks' Series D Preferred Stock was converted into 5,667 shares of our
common stock.
The following table provides information regarding the selling stockholders'
beneficial ownership of our common stock as of August 31, 1999 and as adjusted
to reflect the sale of the shares of common stock offered under this prospectus.
Beneficial ownership as defined in the Exchange Act includes options and other
convertible securities which are exercisable within 60 days.
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Unless we have indicated otherwise, to our knowledge, each of the selling
stockholders has sole voting and investment power with respect to its
securities. On September 30, 1999, we had 50,993,030 shares of common stock
outstanding.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP NUMBER BENEFICIAL OWNERSHIP
OF COMMON STOCK OF OF COMMON STOCK
PRIOR TO OFFERING SHARES TO AFTER OFFERING
------------------- BE SOLD IN ------------------------
STOCKHOLDER NUMBER PERCENT OFFERING NUMBER PERCENT
- ----------- -------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Fletcher International Limited............... 900,000 1.76% 150,000 750,000(1) 1.47%
Scott Near................................... 442,521 * 442,521 -- 0%
Safa Alai.................................... 442,521 * 442,521 -- 0%
Ward Bitter.................................. 545,336 1.07% 5,000 540,336 1.06%
Tom Randolph................................. 90,000 * 90,000 -- 0%
Jill Chernin-Marks........................... 5,667 * 5,667 -- 0%
</TABLE>
- ------------------------
* Less Than 1%
(1) Registered under the Registration Statement dated May 5, 1999 and includes a
warrant to purchase 650,000 shares of our common stock at $4.50 per share.
PLAN OF DISTRIBUTION
We are registering the shares of our common stock covered by this
prospectus.
As used in this prospectus, the selling stockholders include donees,
pledgees, transferees or other successors in interest who will hold the selling
stockholders' shares after the date of this prospectus. We are paying the costs,
expenses and fees of registering the common stock, but the selling stockholders
will pay any underwriting or brokerage commissions and similar selling expenses
relating to the sale of the shares of common stock.
The selling stockholders may sell our common stock at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
selling stockholders may sell some or all of their common stock through:
- ordinary brokers' transactions which may include long or short sales;
- transactions involving cross or block trades or otherwise on the Nasdaq
National Market;
- purchases by brokers, dealers or underwriters as principal and resale by
those purchasers for their own accounts under this prospectus;
- market makers or into an existing market for the common stock;
- other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
- transactions in options, swaps or other derivatives; or
- any combination of the selling options described in this prospectus, or by
any other legally available means.
The selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales of our common stock in the course
of hedging the positions they assume. The selling stockholders also may enter
into option or other transactions with broker-dealers that require the delivery
by those broker-dealers of the common stock. Thereafter, the shares may be
resold under this prospectus.
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In their selling activities, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the Exchange Act's rules and
regulations, including Regulation M, which may limit the selling stockholders'
timing of purchases and sales of our common stock.
The selling stockholders and any broker-dealers involved in the sale or
resale of our common stock may qualify as "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933, as amended. In addition, the
broker-dealers' commissions, discounts or concessions may qualify as
underwriters' compensation under the Securities Act. If the selling stockholders
or any broker-dealer qualifies as an "underwriter," then they will be subject to
the prospectus delivery requirements of Rule 153 of the Securities Act, which
may include delivery through the facilities of the NASD.
In conjunction with sales to or through brokers, dealers or agents, the
selling stockholders may agree to indemnify them against liabilities arising
under the Securities Act. We know of no existing arrangements between the
selling stockholders, any other stockholder, broker, dealer, underwriter or
agent relating to the sale or distribution of our common stock. We have also
agreed to indemnify the selling stockholders and certain related persons against
certain liabilities, including liabilities under the Securities Act.
In addition to selling its common stock under this prospectus, the selling
stockholders may:
- Transfer their common stock in other ways not involving market makers or
established trading markets, including by gift, distribution, or other
transfer; or
- Sell their common stock under Rule 144 of the Securities Act, if the
transaction meets the requirements of Rule 144.
We will amend or supplement this prospectus if required under the Securities
Act. We have agreed to keep the Registration Statement effective until certain
events occur which are described in the relevant Registration Rights Agreement.
If the selling stockholders sell their shares of common stock in accordance
with this prospectus, then the legends that restrict the transferability of
their common stock will no longer be necessary. Accordingly, the new
certificates will be issued to the transferee without restrictive legends.
Under the securities law of certain states, the common stock offered by the
selling stockholders may only be sold in those states using registered or
licensed brokers or dealers.
EXPERTS
The consolidated financial statements of Learn2.com, Inc. (formerly known as
7th Level, Inc.) incorporated by reference in this registration statement, have
been audited by Arthur Andersen LLP, independent public accountants, as of
December 31, 1998 and for the year ended December 31, 1998, as indicated in
their report (dated June 28, 1999) with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Our report dated March 17, 1999
included in the Learn2.com, Inc. Form 10-K/A for the year ended December 31,
1998 is no longer appropriate since restated financial statements have been
presented giving effect to the business combination with Panmedia Corporation
accounted for as a pooling-of-interests.
The supplementary consolidated financial statements of Learn2.com, Inc.
incorporated by reference in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as of December 31, 1998 and
1997 and for the two years then ended, and the adjustments that were applied to
restate the 1996 consolidated financial statements, as indicated in their report
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
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The consolidated financial statements and financial statement schedule of
7th Level, Inc. (currently Learn2.com, Inc.), as of December 31, 1997 and for
each of the years in the two-year period then ended have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The financial statements of Learn2, Inc. (formerly known as 7th Street.com,
Inc. and Street Technologies, Inc.) as of and for the year ended December 31,
1997, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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ADDITIONAL INFORMATION MADE AVAILABLE TO YOU
This prospectus is part of a Registration Statement on Form S-3 that we are
filing with the SEC. Certain information in the Registration Statement has been
omitted from this prospectus in accordance with the rules of the SEC.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our file number is 0-24936.
You may read and copy materials that we have filed with the SEC, including
the registration statement, at the following SEC public reference rooms:
<TABLE>
<S> <C> <C>
450 Fifth Street, N.W. Northwest Atrium Center 7 World Trade Center
Room 1024 500 West Madison Street Suite 1300
Washington, D.C. 20549 Suite 1400 New York, New York 10048
Chicago, Illinois 60661
</TABLE>
You may call the SEC at 1-800-732-0330 for further information about the
public reference room.
We are also required to file electronic versions of these documents with the
SEC, which may be accessed through the SEC's World Wide Web site at
HTTP://WWW.SEC.GOV. Our common stock is quoted on the Nasdaq National Market.
Reports, proxy and information statements and other information concerning
Learn2.com may be inspected at The Nasdaq Stock Market at 1735 K Street, NW,
Washington, D.C. 20006.
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not offer to sell
or buy any shares in any jurisdiction in which it is unlawful. The information
in this prospectus is current as of the date on the cover.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in these documents is considered part of this prospectus. Information
that we file with the SEC subsequent to the date of this prospectus 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 Securities Exchange Act of 1934, as
amended, until the selling stockholders have sold all the shares of common stock
described in this prospectus.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-K/A for the year ended December 31, 1998.
2. Our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1999
and Form 10-Q for the quarter ended June 30, 1999.
3. Our Current Reports on Form 8-K dated January 15, 1999, February 16,
1999 and May 13, 1999, June 1, 1999, July 19, 1999, July 23, 1999 and
November 11, 1999 and Form 8-K/A filed with the SEC on April 16, 1999 and
June 30, 1999.
4. The description of our common stock contained in our Registration
Statement on Form 8-A filed with the SEC under the Exchange Act.
We will furnish without charge to you, on written or oral request, a copy of
any or all of the documents incorporated by reference, other than exhibits to
those documents. You should direct any requests for documents to: Learn2.com,
Inc., 1311 Mamaroneck, White Plains, New York 10605, Attention: Chief Executive
Officer, or by telephone (914) 682-4300.
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FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS
MAY NOT PROVE TO BE ACCURATE
This prospectus contains or incorporates forward-looking statements
including statements regarding, among other items, our business strategy, growth
strategy, and anticipated trends in our business. We may make additional written
or oral forward-looking statements from time to time in filings with the SEC or
otherwise. When we use the words "believe," "expect," "anticipate," "project"
and similar expressions, this should alert you that this is a forward-looking
statement. Forward-looking statements speak only as of the date the statement is
made.
These forward-looking statements are based largely on our expectations. They
are subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond our control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this prospectus or made
in documents incorporated into this prospectus, describe factors that could
contribute to or cause differences between our expectations and actual results.
We have described many of these factors in "Risk Factors" and "Learn2.com,
Inc." Because of these risks and uncertainties, the forward-looking information
contained in this prospectus may not in fact occur or prove to be accurate. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by this
section.
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