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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEARN2.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2480669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1311 Mamaroneck Avenue
White Plains, New York 10605
(914) 682-4300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STEPHEN P. GOTT
President and Chief Executive Officer
Learn2.com, Inc.
1311 Mamaroneck Avenue
White Plains, New York 10605
(914) 682-4300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
GERALD ADLER, ESQ.
Swidler Berlin Shereff Friedman, LLP
405 Lexington Avenue
New York, New York 10174
(212) 973-0111
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of
this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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Title of Proposed Proposed Maximum
Shares to Amount to Maximum Offering Aggregate Amount of
BE REGISTERED BE REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE (2)
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<S> <C> <C> <C> <C>
Common Stock, par
value $0.01 per share 3,455,902 shares (1) $3.33 $11,508,153.66 $3,038.15
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(1) Shares of Common Stock which may be offered pursuant to this Registration
Statement consisting of 2,950,000 shares issuable upon conversion of
Debentures and 505,902 shares issuable upon exercise of Warrants. For
purposes of estimating the number of shares of Common Stock to be included
in this Registration Statement, the Company calculated 150% of the number
of shares of Common Stock issuable in connection with the conversion of the
Company's Debentures (based on a conversion price of $6.00) and exercise of
the Warrants (based upon an exercise price of $7.41). In addition to the
shares set forth in the table, the amount to be registered includes an
indeterminate number of shares issuable upon conversion of or in respect of
the Debentures and the Warrants, as such number may be adjusted as a result
of stock splits, stock dividends and similar transactions in accordance
with Rule 416.
(2) The Registration Fee has been calculated pursuant to Rule 457 as follows:
3,455,902 multiplied by .000264 multiplied by $3.33, the average of the bid
and asked sales prices of the Registrant's Common Stock as included on The
Nasdaq Stock Market on April 5, 2000.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file an amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
LEARN2.COM, INC.
3,455,902 SHARES OF
COMMON STOCK
We are furnishing this document to you to allow the selling stockholder to
sell up to 3,455,902 shares of our common stock. The selling stockholder 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 April 5, 2000, the closing price of our common stock as reported by
The Nasdaq Stock Market was $3.38 per share.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE
3 WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMPANY
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 April __, 2000.
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LEARN2.COM, INC.
Learn2.com, Inc. provides e-learning solutions for corporate, government
and individual clients. Our offerings include engaging online and physical
learning and training products and custom development services. This provides us
with a competitive advantage toward becoming the solutions providers of choice
to our customers.
Our products provide an engaging learning experience to corporate and
individual customers through interactive multimedia and animated tutorials and
courseware. Our corporate and government customers have access to these high
quality tutorials and additional features such as reporting and administration
through www.Learn2University.com. Additionally, through www.Learn2.com, visitors
can access our Internet e-learning community that offers tips and step-by-step
instructions on a broad spectrum of skills, activities and tasks, as well as our
multimedia tutorials. Our e-learning products are also available on CD-ROM and
video and can be purchased from major retailers nationwide.
Through our subsidiary, eTracks.com, Inc., we provide permission e-mail
marketing and tracking services to companies that engage in commerce and
advertising on the Internet as well as other companies that have a need for
these services. e-Tracks' services include e-mail creation, delivery, tracking
and response analysis for a high volume of client e-mail accounts in a short
period of time. We have also developed a proprietary member database of over
600,000 Internet users who have opted to receive promotional e-mails. Our
clients can supplement their internally developed customer lists with our member
database. In addition, through periodic e-mails we market various electronics
and other products to our members. The demand for permission e-mail marketing
and tracking services has increased substantially over the past few years and we
expect that the demand will continue to grow for the foreseeable future. We
believe that e- Tracks' technology enables more robust and useful tracking
capabilities than its competitors.
Our goal is to become the world's leading provider of engaging e-learning
products and services. To achieve this goal, we expect to focus on our four
primary objectives: creating a trusted brand, developing and owning creative and
engaging content, enhancing our patented state-of-the-art technologies and
offering custom services to meet the needs of our clients. In 1999, we changed
our company's name from 7th Level, Inc. to Learn2.com, Inc. We made the change
to create a single recognized brand that more closely aligned our corporate
identity with our product and service offerings.
Learn2.com, Inc. 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
OUR LIMITED HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
We have an evolving and unpredictable business model. In addition, we face
intense competition and we must manage effectively 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 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.
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT.
As of December 31, 1999, we had an accumulated deficit of approximately $126.0
million. We expect to incur net losses through at least the end of 2000 and may
continue to incur net losses thereafter.
WE ARE MAKING A SUBSTANTIAL INVESTMENT IN OUR BUSINESS AND MAY NEED TO RAISE
ADDITIONAL FUNDS.
We recently raised $10.0 million through the issuance of convertible debentures.
Additional funds may be raised in order to develop, acquire and/or market
products, businesses or technologies. These 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 our
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.
AS A RAPIDLY-GROWING COMPANY IN THE EMERGING E-LEARNING MARKET, WE MAY
EXPERIENCE SIGNIFICANT FLUCTUATIONS IN REVENUES AND OPERATING RESULTS, WHICH
COULD CAUSE OUR SHARE PRICE TO BE VOLATILE.
Due to the emerging nature of the e-learning market, we may be unable to
forecast our revenues and profitability accurately. We expect our revenues and
operating results to vary significantly from quarter to quarter depending on:
- - Our ability to attract and retain customers, and other marketing partners.
- - The number of tutorials our corporate customers license and the number of
users who license tutorials through our other marketing partners.
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- - The amount and timing of operating costs and capital expenditures relating
to the expansion of our business, including costs associated with our
introduction of new or enhanced services and with upgrading and developing
our systems and infrastructure.
- - The seasonality of our operating results.
- - The future development of the e-learning market.
Because many of our costs are fixed and are based on anticipated revenue levels,
variations in the timing of revenue recognition could cause significant
variations in operating results from quarter to quarter. As a result, we believe
that quarter-to-quarter comparisons of our sales and operating results are not
necessarily meaningful and may not be accurate indicators of future performance.
If our future operating results are below the expectations of securities
analysts or investors, the trading price of our common stock is likely to fall.
WE OPERATE IN A RAPIDLY CHANGING, HIGHLY COMPETITIVE MARKET AND WE MAY NOT HAVE
ADEQUATE RESOURCES TO COMPETE SUCCESSFULLY.
The e-learning market is evolving quickly and is subject to rapid technological
change, shifts in customer demands and evolving industry standards. To succeed,
we must continue to expand our tutorial offerings and upgrade our technologies.
We may not be able to do so successfully. If we fail to anticipate or respond
adequately to changes in technology and customer preferences, or we have any
significant delays in tutorial development or introduction, our competitors may
be able to attract and maintain a greater customer base.
The e-learning market is characterized by significant price competition. We
expect to face increasing price pressures from competitors as customers demand
more value for their budgets. This could result in reduced operating margins, as
well as loss of market share and brand recognition.
Although the e-learning market is highly fragmented with no single competitor
accounting for a dominant market share, competition is intense. Our competitors
vary in size and in the scope and breadth of the tutorials and services they
offer. Several of our competitors have longer operating histories and
significantly greater financial, technical and marketing resources. We
anticipate that the lack of significant entry barriers to the e-learning market
will allow other competitors to enter the market, increasing competition.
OUR BUSINESS WILL SUFFER IF E-LEARNING IS NOT WIDELY ACCEPTED.
The market for e-learning solutions is new and evolving. We expect that we will
engage in intensive marketing and sales efforts to enable prospective customers
to learn about the benefits of our e-learning solutions. There are a number of
factors that could impact the acceptance of our e-learning solutions, which are
new and largely untested compared to more established training and educational
methods, including:
- - Companies that have historically relied on, or invested in, traditional
training and educational methods may be reluctant or slow to adopt
Web-based e-learning solutions;
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- - Many of our potential customers have allocated only a limited portion of
their budgets to e-learning; and
- - End users may not use e-learning solutions effectively.
If the market for e-learning fails to develop or develops more slowly than we
expect, we will not achieve our growth and revenue targets and the value of our
common stock will likely decline.
THE SUCCESSFUL OPERATION OF OUR BUSINESS DEPENDS UPON A CONTINUAL 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 product 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 our
inability to provide content to our customers and prospects on a timely basis
could affect the performance of our business.
WE MUST DELIVER TUTORIALS THAT MEET THE NEEDS OF OUR CUSTOMERS OR OUR BUSINESS
WILL SUFFER.
To be competitive, we must develop and introduce on a timely basis new tutorial
offerings which meet the needs of companies seeking to use our e-learning
solutions. Furthermore, the viability of our e-learning solutions depends in
large part on our ability to frequently update our tutorials and develop new
content as the underlying subject matter changes.
THE VARIABILITY AND LENGTH OF OUR SALES CYCLE FOR OUR E-LEARNING SOLUTIONS MAY
MAKE OUR OPERATING RESULTS UNPREDICTABLE AND VOLATILE.
The period between our initial contact with a potential customer and the first
purchase of our product by that customer typically ranges from three to nine
months and in some cases may be as long as two years. Because we rely on large
sales for a substantial portion of our revenues, these long sales cycles can
have a particularly significant effect on our financial performance in any
quarter. Factors which may contribute to the variability and length of our sales
cycle include:
- - The time required for potential customers to learn about the benefits of
our e-learning solutions.
- - The time it takes our potential customers to assess the value of e-learning
solutions compared to more traditional solutions.
- - The time it takes our potential customers to evaluate competitive
e-learning solutions.
- - Our potential customers' internal budget and approval processes.
- - The extended periods most large corporations and government entities
require to make purchasing decisions.
As a result of our lengthy sales cycle, we have only a limited ability to
forecast the timing and size of specific sales and thus to predict quarterly
financial performance.
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WE ALSO DEPEND ON MAJOR RETAILERS TO MARKET OUR PRODUCTS.
Recently, as a result of our acquisition of ViaGrafix, we have begun to rely on
direct and indirect sales to major retailers. These sales accounted for
approximately 20% of our 1999 revenues and approximately 34% of our fourth
quarter 1999 revenues. 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. This failure of retailers to
effectively market our products could have a material adverse effect on our
business and financial condition.
Indirect sales of products are supplied to certain retailers through
distributors including Ingram and Tech Data. 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 impacted materially and adversely. In March 2000, a major
indirect retail customer has notified us that it intends to change the
distributor from which it purchases our products. This could result in a
decrease in product purchases by this retailer. Also, both Ingram and Tech Data
do and may continue to sell our competitors' products.
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 resources 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 two years
and other agreements permit the reseller 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 affected adversely.
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. Our streaming technology does not currently function
in a Linux environment.
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OUR FUTURE GROWTH DEPENDS ON THE ABILITY TO RETAIN KEY PERSONNEL AND SUCCESSFUL
HIRING AND RETENTION, PARTICULARLY WITH RESPECT TO SALES, MARKETING AND
DEVELOPMENT PERSONNEL, AND WE MAY BE UNABLE TO HIRE AND RETAIN THE SKILLED
PERSONNEL WE NEED TO SUCCEED.
We are dependent on the continued services of Stephen P. Gott, our President and
Chief Executive Officer and Donald Schupak, Chairman of the Board. If either one
of them were to leave our company, we could face substantial difficulty in
hiring a qualified successor and could experience a loss in productivity while
any successor obtains the necessary company and industry knowledge.
We may not be able to retain our key executives and engineers. We expect to
continue to hire additional product development, sales and marketing, production
and accounting staff. We may not be successful in attracting, retaining or
motivating key personnel. Our industry is experiencing a shortage in qualified
personnel. If we do not succeed in attracting new personnel, or retaining and
motivating existing personnel, our business may be affected adversely.
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 a 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.
UNAUTHORIZED BREAK-INS TO OUR SERVICE COULD HARM OUR BUSINESS.
Our servers are vulnerable to computer viruses, physical or electronic break-ins
and similar disruptions, which could lead to interruptions, delays, loss of data
or the inability to complete customer transactions. In addition, unauthorized
persons may improperly access our data. To date, we have not experienced any
unauthorized break-ins by "hackers" who may try to damage or change our system
or take confidential information. Any actions like these could harm us. Actions
like these may be very expensive to remedy and could damage our reputation and
discourage new and existing users from purchasing our products and services.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE THE COMPANIES THAT WE HAVE ACQUIRED.
As part of our business strategies, we have completed three acquisitions: Street
Technologies, Inc. (now known as Learn2, Inc.), Panmedia Corporation and
ViaGrafix Corporation. In combining these entities, we have faced risks and
continue to face risks of integrating our business. This process of integration
may take a significant period of time and will require the dedication of
management and other resources, which may distract management's attention from
our other operations.
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We intend to continue pursuing selective acquisitions of businesses,
technologies and product lines as a key component of our growth strategy. Any
future acquisition or investment may result in the use of significant amounts of
cash, potentially dilutive issuances of equity securities, incurrence of debt
and amortization expenses related to goodwill and other intangible assets. In
addition, acquisitions involve numerous risks, including:
- - Difficulties in the integration and assimilation of the operations,
technologies, products and personnel of an acquired business.
- - Diversion of management's attention from other business concerns.
- - Availability of favorable acquisition financing for future acquisitions.
- - Potential loss of key employees of any acquired business.
Our inability to successfully integrate any acquired company could adversely
affect our business.
AMORTIZATION OF INTANGIBLE ASSETS, WHICH REPRESENT APPROXIMATELY 53% OF OUR
ASSETS AS OF DECEMBER 31, 1999, WILL HAVE AN ADVERSE IMPACT ON OUR FINANCIAL
RESULTS.
Approximately $40.4 million or 53% of our assets as of December 31, 1999
consisted of intangible assets, including goodwill arising from our
acquisitions. This amount will be amortized over five to twenty years. This
non-cash expense, some of which is not tax deductible, will reduce net income or
increase net loss in each amortization period. This reduction in our net income
or increase in our net loss may have an adverse effect on the market price of
our common stock. In addition, we may never realize the value of our intangible
assets. We evaluate current events and circumstances to determine whether the
remaining balance of our intangible assets will be recoverable. If we deem all
or part of our intangible assets to be not recoverable, we would reduce the
carrying value of our intangible assets, which could have a material adverse
effect on our operating results for the period in which the reduction is
recognized.
Future acquisitions could also result in potentially dilutive issuances of
equity securities, the incurrence of debt, contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could harm our business.
In addition, the market price of our common stock may decline as a result of a
merger or acquisition if:
- - We do not achieve the perceived benefits as rapidly or to the extent we
anticipate.
- - The effect on our financial results is not consistent with the expectations
of securities analysts.
- - The dilution of our common stock negatively affects our stock price.
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.
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- - Continue to identify, attract, retain and motivate qualified personnel.
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 agreements.
- - 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. Furthermore, none of these protections prohibit our competitors from
independently developing technologies that are substantially equivalent or
superior to our technologies.
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 employees,
consultants and
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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 may not receive approval on all of our
trademark registrations or patent applications. 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 alleging infringement of the trademarks and other intellectual
property rights of third parties. These claims and any resulting litigation, if
it occurs, could subject us to significant liability for damages. In addition,
even if we prevail, litigation could be time-consuming and expensive 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.
CHANGES IN LAWS RELATING TO DATA COLLECTION AND USE PRACTICES AND THE PRIVACY OF
INTERNET USERS AND OTHER INDIVIDUALS COULD HARM OUR BUSINESS.
Websites usually place certain information ("cookies") on a user's hard drive
usually without the user's knowledge or consent. Websites use cookies for a
variety of reasons. We employ the use of cookies on our Website. Certain
currently available Internet browsers allow users to modify their browser
settings to remove cookies at any time or to prevent cookies from being stored
on their hard drive. In addition, some Internet commentators, privacy advocates
and governmental bodies have suggested limiting or eliminating the use of
cookies. The effectiveness of our technology could be limited by any reduction
or limitation in the use of cookies. The European Union has recently adopted a
directive addressing data privacy that may result in limitations on the
collection and use of certain information regarding Internet users. These
limitations may limit our ability to track or collect and use information in
certain European countries. Because regulations have not been adopted at this
time, we cannot yet determine the full impact of the directive on us if any.
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.
NET OPERATING LOSS CARRYFORWARDS MAY BE LIMITED SEVERELY.
Our net operating loss carryforwards were approximately $85.0 million as of
December 31, 1999. These net operating loss carryforwards expire at various
dates through 2019 and under Section 382 of the Internal Revenue Code are
limited due to ownership changes. Future stock issuances may result in future
ownership changes of our company under Section 382. Section
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382 contains rules that limit the ability of a company to offset pre-ownership
change net operating losses and credit carryovers against post-ownership change
taxable income. As a result, our ability to utilize our net operating loss
carryforwards could be limited severely.
DUE TO OUR USE OF THE INTERNET, INTRANETS, WEB SERVERS AND BROWSERS AS
PRESENTATION VEHICLES FOR OUR TUTORIALS, OUR SUCCESS DEPENDS ON CONTINUED
DEVELOPMENT AND MAINTENANCE OF THESE TECHNOLOGIES BY OTHER COMPANIES.
Our success is dependent on the continued growth and maintenance of the
Internet, intranets, Web servers and browsers over which we present our
tutorials. Several factors over which we have no control, including concerns
related to security, compatibility, cost, ease of use and access, could limit
future growth in the Internet, intranet, Web server and browser use, which would
limit or prevent implementation of our growth strategy.
WE FACE LEGAL UNCERTAINTIES RELATING TO THE INTERNET IN GENERAL AND TO OUR
INDUSTRY IN PARTICULAR AND MAY BECOME SUBJECT TO COSTLY GOVERNMENT REGULATION.
The applicability to the Internet of existing laws is uncertain and developing
with regard to many issues, including sales tax, intellectual property ownership
and infringement, copyright, trademark, trade secret, obscenity, libel, export
of encryption technology and personal privacy.
There are an increasing number of laws and regulations pertaining to liability
for information received from or transmitted over the Internet, online content
regulation, user privacy, taxation and quality of products and services. In
addition, it is possible that more laws and regulations may be adopted with
respect to the Internet, such as laws or regulations relating to user privacy,
taxation, e-mail, pricing, Internet access, content, copyrights, distribution
and characteristics and quality of products and services. Various state statutes
govern private post-secondary educational institutions. We are uncertain whether
states will attempt to apply these statutes to regulate the offering of
tutorials over the Internet.
Changes in existing laws and the adoption of additional laws or regulations may
decrease the popularity or limit expansion of the Internet. A decline in the
growth of the Internet could decrease demand for our tutorials and services and
increase our cost of doing business.
OUR BUSINESS COULD BE HARMED BY CONSUMERS' CONCERNS ABOUT THE SECURITY OF
TRANSACTIONS OVER THE INTERNET.
We believe that concerns regarding the security of confidential information
transmitted over the Internet, such as credit card numbers, prevent many
potential customers from engaging in online transactions. Our success may depend
on our ability to add sufficient security features to our e-commerce engine and
to instill confidence in those features to our customers. If we fail to do so,
we may not realize our business plan.
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<PAGE>
OUR STOCK PRICE HAS HISTORICALLY BEEN VOLATILE, WHICH MAY MAKE IT MORE DIFFICULT
FOR YOU TO RESELL SHARES WHEN YOU WANT TO DO SO AND AT PRICES YOU FIND
ATTRACTIVE.
The trading price of our common stock can fluctuate significantly. For example,
during the 52 week period ended February 29, 2000, the market price of our
common stock ranged from $2.72 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 affect adversely the price of
our common stock, regardless of operating performance. A drop in the market
price of our common stock may affect adversely our business and financial
opportunities.
CERTAIN EVENTS COULD RESULT IN A DILUTION OF YOUR OWNERSHIP OF OUR COMMON STOCK.
As of April 4, 2000, we had approximately 52.7 million shares of our common
stock outstanding and approximately 12.2 million shares of our 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 $0.01 to $7.97 per share. These common stock equivalents
also provide for antidilution protection upon the occurrence of stock splits,
redemptions, mergers and other certain transactions. If one or more of these
events occurs the number of shares of our common stock that may be issued 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. In addition, if we continue to acquire new companies through the issuance
of common or preferred stock your percentage of ownership may be diluted.
SHARES ELIGIBLE FOR FUTURE SALE
As of April 4, 2000, $10,000,000 aggregate principal amount of Debentures
were issued and outstanding. If converted on April 4, 2000, the Debentures would
have been convertible into approximately 1,666,667 shares of common stock, but
this number of shares could prove to be significantly greater in the event of a
decrease in the trading price of the common stock. Purchasers of common stock
could therefore experience substantial dilution of their investment upon
conversion of the Debentures. The Debentures are not registered and may be sold
only if registered under the Securities Act or sold in accordance with an
applicable exemption from registration, such as Rule 144. The shares of common
stock into which the Debenture may be converted are being registered pursuant to
this registration statement.
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<PAGE>
As of April 4, 2000, warrants to purchase 337,268 shares of common stock
issued to the purchasers of the Debentures were outstanding. These warrants are
exercisable over the next five years at a price of $7.41, which price may be
adjusted from time to time under certain antidilution provisions. The shares of
common stock issuable upon exercise of these warrants are being registered
pursuant to this registration statement.
As of April 4, 2000, there were no shares of common stock reserved for
issuance upon exercise of our outstanding warrants and options other than those
issued in connection with the Debentures and an additional 4,007,869 shares of
common stock were reserved for issuance upon conversion of the Debentures and
exercise of the warrants issued in connection with the Debentures. At April 4,
2000, there were 52,669,124 shares of common stock outstanding. Of these
outstanding shares, 42,188,831 were freely tradeable without restriction under
the Securities Act unless held by affiliates.
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, Canada and Brazil. 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, we face 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 these 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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<PAGE>
RECENT DEVELOPMENTS
RGC INTERNATIONAL INVESTORS FINANCING
On March 10, 2000, we entered into a Securities Purchase Agreement with RGC
International Investors, LDC which provides for the issuance of a $10.0 million
6% convertible debenture to RGC due March 10, 2003 that may be converted into
1,666,667 shares of common stock. The debenture is convertible at any time, in
whole or in part, at the option of the holder at a conversion price of $6.00 per
share (approximated market value of our common stock on March 10, 2000) and
is subject to anti-dilution provisions. The conversion price of the debenture
may also be reset to the market value of our common stock on the first and
second anniversary of the convertible debenture if the price of our common stock
declines below the initial or adjusted conversion price on such anniversaries.
Under certain conditions, we have the right to redeem the debenture. In
addition, we granted RGC a five year warrant to purchase 337,268 shares of our
common stock exercisable at $7.41 per share. The value of this warrant will be
recorded as debt discount and amortized over the life of the related debt.
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.
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.
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<PAGE>
SELLING STOCKHOLDER
CERTAIN INFORMATION ABOUT RGC INTERNATIONAL INVESTORS
The number of shares set forth in the table for RGC International Investors
represents an estimate of the number of shares of common stock to be offered by
RGC International Investors. The actual number of shares of common stock
issuable upon conversion of the Debentures and exercise of the related warrants
is indeterminate, is subject to adjustment and could be materially less or more
than such estimated number depending on factors which cannot be predicted by us
at this time, including, among other factors, the future market price of the
common stock. The actual number of shares of common stock offered in this
prospectus, and included in the registration statement of which this prospectus
is a part, includes such additional number of shares of common stock as may be
issued or issuable upon conversion of the Debentures and exercise of the related
warrants by reason of any stock split, stock dividend or similar transaction
involving the common stock, in accordance with Rule 416 under the Securities
Act. Under the terms of the Debentures, if the Debentures had been actually
converted on April 4, 2000, the conversion price would have been $6.00. The
warrants issued in connection with the Debentures are exercisable into 337,268
shares of common stock at an exercise price of $7.41.
Under the terms of the Debentures and the related warrants, the Debentures
are convertible and the warrants are exercisable by any holder only to the
extent that the number of shares of common stock issuable pursuant to such
securities, together with the number of shares of common stock owned by such
holder and its affiliates (but not including shares of common stock underlying
unconverted Debentures or unexercised portions of the warrants) would not exceed
4.9% of the then outstanding common stock as determined in accordance with
Section 13(d) of the Exchange Act. Accordingly, the number of shares of common
stock set forth in the table for RGC International Investors exceeds the number
of shares of common stock that RGC International Investors could own
beneficially at any given time through their ownership of Debentures and the
warrants. In that regard, the beneficial ownership of the common stock by RGC
International Investors set forth in the table is not determined in accordance
with Rule 13d-3 under the Exchange Act.
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL OWNERSHIP SHARES TO BENEFICIAL OWNERSHIP
OF COMMON STOCK BE SOLD IN OF COMMON STOCK
PRIOR TO OFFERING OFFERING AFTER OFFERING
STOCKHOLDER NUMBER PERCENT NUMBER PERCENT
- ----------- ------ ------- ---------- ------ -------
<S> <C> <C> <C> <C>
RGC International Investors, 3,455,902 -- 3,455,902 -- 0%
LDC
</TABLE>
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholders or their respective
pledgees, donees, transferees or other successors in interest, will be sold from
time to time in one or more transactions, which may involve block transactions:
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<PAGE>
- on the Nasdaq National Market or on such other market on which the common
stock may from time to time be trading;
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling stockholders determine from time to time.
The shares may also be sold pursuant to Rule 144. The selling stockholders have
the sole and absolute discretion not to accept any purchase offer or make any
sale of shares if they deem the purchase price to be unsatisfactory at any
particular time.
The selling stockholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the securities act or the exchange act, or the rules and
regulations under such acts.
The selling stockholders, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If a selling stockholder
enters into such an agreement or agreements, the relevant details will be set
forth in a supplement or revisions to this prospectus.
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<PAGE>
The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
exchange act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities
of, and limit the timing of purchases and sales of any of the shares by, the
selling stockholders or any other such person. Furthermore, under Regulation
M, persons engaged in a distribution of securities are prohibited from
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the
shares.
We have agreed to indemnify the selling stockholders, or their transferees
or assignees, against certain liabilities, including liabilities under the
securities act, or to contribute to payments the selling stockholders or their
respective pledgees, donees, transferees or other successors in interest, may be
required to make in respect of such liabilities.
EXPERTS
The consolidated financial statements and financial statement schedule of
Learn2.com, Inc. incorporated by reference herein and in the registration
statement, have been audited by Arthur Andersen LLP, as of December 31, 1999 and
for each of the years in the three-year period ended December 31, 1999,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein and therein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
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:
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
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 Stock Market.
Reports, proxy and information statements and
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other information concerning Learn2.com, Inc. 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 for the year ended December 31, 1999.
2. 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 Avenue, White Plains, New York 10605, Attention: Chief
Executive Officer, or by Telephone (914) 682-4300.
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.
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<PAGE>
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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<TABLE>
<CAPTION>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<S> <C>
Securities and Exchange Commission Registration Fee...... $ 3,038.15
Printing and Engraving................................... $ 6,000.00
Legal Fees and Expenses.................................. $10,000.00
Accounting Fees and Expenses............................. $10,000.00
Miscellaneous............................................ $ 1,500.00
Total........................................... $30,538.15
</TABLE>
All of the above items, except the registration fee, are estimated. All
expenses incurred in connection with this offering will be borne by Learn2.com.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification of officers and directors of the registrant is governed
by Section 145 of the general corporation law of the state of Delaware (the
"DGCL") and the restated certificate of incorporation and by-laws of the
registrant. Subsection (a) of DGCL Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.
Subsection (b) of DGCL Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless and
only to the extent that the delaware court of chancery or the court in which
such action or suit was brought shall
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determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
DGCL Section 145 further provides that to the extent that a present or
former director or officer is successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in Subsections (a) and
(b) of Section 145, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith. In
all cases in which indemnification is permitted under Subsections (a) and (b)
of Section 145 (unless ordered by a court), it shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or agent
is proper in the circumstances because the applicable standard of conduct has
been met by the party to be indemnified. Such determination must be made,
with respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors,
even though less than a quorum, or (3) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion,
or (4) by the stockholders. The statute authorizes the corporation to pay
expenses incurred by an officer or director in advance of the final
disposition of a proceeding upon receipt of an undertaking by or on behalf of
the person to whom the advance will be made, to repay the advances if it
shall ultimately be determined that he was not entitled to indemnification.
DGCL Section 145 also provides that indemnification and advancement of
expenses permitted thereunder are not to be exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. DGCL Section 145 also authorizes the corporation to
purchase and maintain liability insurance on behalf of its directors,
officers, employees and agents regardless of whether the corporation would
have the statutory power to indemnify such persons against the liabilities
insured.
Article Eighth of the Restated Certificate of Incorporation of the
registrant, as amended (the "Certificate"), provides that no director of the
registrant shall be personally liable to the registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (involving certain unlawful dividends or stock purchases or
redemptions), or (iv) for any transaction from which the director derived an
improper personal benefit.
Article Tenth of the Registrant's Certificate entitles directors and
officers of the registrant to indemnification to the fullest extent permitted by
Section 145 of the DGCL, as the same may be supplemented from time to time. The
certificate further provides that the registrant may, to the fullest extent
authorized by the Board of Directors, indemnify any employee or agent of the
registrant.
Pursuant to Section 145(g) of the DGCL, the registrant's by-laws, as
amended, authorize the registrant to obtain insurance to protect officers and
directors from certain liabilities, including liabilities against which the
registration cannot indemnify its officers and
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directors. The registrant maintains a primary directors and officers liability
and company reimbursement policy which, among other things, provides for payment
up to $3 million on behalf of any of the registrant's past, present or future
directors or officers against loss (as defined in such policy). The registrant
also maintains a supplemental insurance and company reimbursement policy
providing for, among other things, payment up to $2 million on behalf of any of
the registrant past, present or future directors or officers against loss (as
defined in such policy).
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
5.1 Opinion of Swidler Berlin Shereff Friedman, LLP
10.1 Warrant issued to RGC International Investors, LDC
(incorporated by reference into the Company's Current Report
on Form 8-K (Commission File No. 000-24936) filed with the
Commission on March 15, 2000).
10.2 Securities Purchase Agreement, dated as of March 10, 2000,
by and among Learn2.com, Inc. and RGC International
Investors, LDC (incorporated by reference into the Company's
Current Report on Form 8-K (Commission File No. 000-24936)
filed with the Commission on March 15, 2000).
10.3 Registration Rights Agreement, dated as of March 10, 2000,
by and among Learn2.com, Inc. and RGC International
Investors, LDC (incorporated by reference into the Company's
Current Report on Form 8-K (Commission File No. 000-24936)
filed with the Commission on March 15, 2000).
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
10.4 6% Convertible Debenture issued to RGC International
Investors, LDC (incorporated by reference into the Company's
Current Report on Form 8-K (Commission File No. 000-24936)
filed with the Commission on March 15, 2000).
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Swidler Berlin Shereff Friedman, LLP (included in
Exhibit 5.1)
24.1 Power of Attorney (appears on signature page)
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective
date of this Registration Statement (or
the most recent post-effective amendment
thereof) which, individually or in the
aggregate, represent a fundamental
change in the information set forth in
this Registration Statement.
Notwithstanding the foregoing, any
increase or decrease in volume of
securities offered (if the total dollar
value of securities offered would not
exceed that which was registered) and
any deviation from the low or high end
of the estimated maximum offering range
may be reflected in the form of
prospectus filed with the SEC pursuant
to Rule 424(b) promulgated under the
Securities Act of 1933 if, in the
aggregate, the changes in volume and
price represent no more than a 20%
change in the maximum aggregate offering
price set forth in the "Calculation of
Registration Fee" table in this
Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this
Registration Statement or any material
change to such information in this
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (ii) shall not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by Learn2.com pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
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<PAGE>
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of White Plains, State of New York, on this 7th day of
April, 2000.
LEARN2.COM, INC.
By: /S/ MARC E. LANDY
---------------------------------------
Name: Marc E. Landy
Title: Chief Financial Officer, Executive Vice
President and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned whose
signature appears below constitutes and appoints Stephen P. Gott and Marc E.
Landy, and each of them (with full power of each of them to act alone), his true
and lawful attorneys-in-fact, with full power of substitution and resubstitution
for him and on his behalf, and in his name, place and stead, in any and all
capacities to execute and sign any and all amendments or post-effective
amendments to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or any of them or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof and the Registrant hereby
confers like authority on its behalf.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES A. CANNAVINO
- ----------------------- Director April 7, 2000
James A. Cannavino
/s/ ROBERT ALAN EZRIN Vice Chairman of the Board of Directors
- ---------------------- and Director April 7, 2000
Robert Alan Ezrin
/s/ STEPHEN P. GOTT President, Chief Executive Officer and
- -------------------- Director (Principal Executive Officer) April 7, 2000
Stephen P. Gott
/s/ MARC E. LANDY Chief Financial Officer, Executive Vice President and
- ------------------ Secretary (Principal Financial and Accounting Officer)
Marc E. Landy Chairman of the Board of Directors April 7, 2000
/s/ DONALD SCHUPAK
- ------------------- Chairman of the Board of Directors April 7, 2000
Donald Schupak
</TABLE>
<PAGE>
LEARN2.COM, INC.
FORM S-3
REGISTRATION STATEMENT
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
5.1 Opinion of Swidler Berlin Shereff Friedman, LLP
10.1 Warrant issued to RGC International Investors, LDC
(incorporated by reference into the Company's Current Report
on Form 8-K (Commission File No. 000-24936) filed with the
Commission on March 15, 2000).
10.2 Securities Purchase Agreement, dated as of March 10, 2000,
by and among Learn2.com, Inc. and RGC International
Investors, LDC (incorporated by reference into the Company's
Current Report on Form 8-K (Commission File No. 000-24936)
filed with the Commission on March 15, 2000).
10.3 Registration Rights Agreement, dated as of March 10, 2000,
by and among Learn2.com, Inc. and RGC International
Investors, LDC (incorporated by reference into the Company's
Current Report on Form 8-K (Commission File No. 000-24936)
filed with the Commission on March 15, 2000).
10.4 6% Convertible Debenture issued to RGC International
Investors, LDC (incorporated by reference into the Company's
Current Report on Form 8-K (Commission File No. 000-24936)
filed with the Commission on March 15, 2000).
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Swidler Berlin Shereff Friedman, LLP
(included in Exhibit 5.1)
24.1 Power of Attorney (appears on signature page)
</TABLE>
<PAGE>
EXHIBIT 5.1
April 7, 2000
Learn2.com, Inc.
1311 Mamaroneck Avenue
White Plains, New York 10605
Ladies and Gentlemen:
On the date hereof, Learn2.com, Inc., a Delaware corporation (the
"Company"), intends to transmit to the Securities and Exchange Commission a
Registration Statement on Form S-3 (the "Registration Statement") relating to
3,455,902 shares (the "Shares") of common stock, par value $.01 per share (the
"Common Stock"), of the Company. This opinion is an exhibit to the Registration
Statement.
We have at times acted as special counsel to the Company with respect
to certain corporate and securities matters, and in such capacity we are
familiar with the various corporate and other proceedings taken by or on behalf
of the Company in connection with the proposed offer and sale of the Shares as
contemplated by the Registration Statement. However, we are not general counsel
to the Company and would not ordinarily be familiar with or aware of matters
relating to the Company unless they are brought to our attention by
representatives of the Company.
In connection with this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of (i) the Company's Restated Certificate of Incorporation as presently in
effect, (ii) the Company's By-Laws as presently in effect, (iii) minutes and
other instruments evidencing actions taken by the Company's directors and
stockholders, (iv) the Securities Purchase Agreement, dated as of March 10, 2000
(the "Securities Purchase Agreement"), by and among the Company and RGC
International Investors, LDC ("RGC"), (v) the 6% Convertible Debenture (the
"Convertible Debenture") issued to RGC, (vi) the Warrant (the "Warrant") issued
to RGC, (vii) the Registration Rights Agreement, dated as of March 10, 2000, by
and among the Company and RGC (the "Registration Rights Agreement", and together
with the Securities Purchase Agreement, the Convertible Debenture and the
Warrant collectively referred to herein as the "Transaction Agreements"), and
(viii) such other documents and instruments relating to the Company and the
proposed offering as we have deemed necessary under the circumstances. In our
examination of all such agreements, documents and instruments, we have assumed
the genuineness of all signatures and the authenticity of all agreements,
documents and instruments submitted to us as originals and the conformity with
the originals of all agreements, documents and instruments submitted to us as
certified, conformed or photostatic copies. Insofar as this opinion relates to
securities to be issued in the future, we have assumed that all applicable laws,
rules and regulations in effect at the time of such issuance are the same as
such laws, rules and regulations in effect as of the date hereof.
<PAGE>
Except as provided in the next sentence, we express no opinion as to
the laws of any jurisdiction other than the laws of the State of New York and
the federal laws of the United States of America. To the extent that matters
concerning the Delaware General Corporation Law are involved in the opinions
expressed below our opinions are based solely upon our reasonable familiarity
with the Delaware General Corporation Law based on our reading of standard
published compilations of such laws. We express no opinion as to the application
of the securities or "Blue Sky" laws of any state, including the State of
Delaware and the State of New York, to the offer and/or sale of the Shares.
Based upon and subject to the foregoing, it is our opinion that the
Shares have been duly authorized and are, or when issued and paid for in
accordance with the terms set forth in the Transaction Agreements will be,
legally and validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as an exhibit to any filing made by the Company under
the securities or "Blue Sky" laws of any state of the United States which is
related to the offer and/or sale of the Shares.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose, except as expressly provided in the preceding
paragraph, without our express written consent, and no party other than you is
entitled to rely on it. This opinion is rendered to you as of the date hereof
and we undertake no obligation to advise you of any change, whether legal or
factual, after the date hereof.
Very truly yours,
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
SBSF: GA: RMF: SMZ: CJS
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 14, 2000 included in Learn2.com, Inc.'s Form 10-K for the year ended
December 31, 1999 and to all references to our Firm included in this
registration statement filed on Form S-3 registering 3,455,902 shares of
Learn2.com, Inc.'s common stock.
/S/ ARTHUR ANDERSEN LLP
----------------------
ARTHUR ANDERSEN LLP
New York, New York
April 6, 2000
