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PROSPECTUS
Filed Pursuant to Rule 424(B)(3)
Registration No. 333-38240
SMARTFORCE PUBLIC LIMITED COMPANY
328,044 American Depository Shares
Representing 328,044 Ordinary Shares
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This prospectus relates to the offering of our American Depository Shares,
or ADSs, held by certain selling shareholders. See "Selling Shareholders".
These selling shareholders may sell the shares from time to time. Each ADS
represents one of our ordinary shares. We will pay certain of the expenses of
this offering; however, the selling shareholders will bear the cost of all
brokerage commissions and discounts. We will not receive any proceeds from the
sale of shares by the selling shareholders.
The selling shareholders may offer and sell all the shares in the over-the-
counter market or on one or more exchanges. The selling shareholders may sell
the shares at the then prevailing market price for the shares or in negotiated
transactions.
Our ADSs are quoted on the Nasdaq National Market under the symbol "SMTF."
On May 26, 2000, the closing price of our ADSs on the Nasdaq National Market
was $38.25 per share.
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See "Risk Factors" beginning on page 3 to read about factors you should
consider before buying our ADSs.
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The Securities and Exchange Commission may take the view that, under certain
circumstances, the selling shareholders and any broker-dealers or agents that
participate with the selling shareholders in the distribution of the ADSs may
be deemed to be "underwriters" within the meaning of the Securities Act of
1933. Commissions, discounts or concessions received by any such broker-dealer
or agent may be deemed to be underwriting commissions under the Securities Act.
See "Plan of Distribution."
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The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is June 12, 2000
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TABLE OF CONTENTS
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Page
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Enforcement of Civil Liabilities Under United States Federal
Securities Law...................................................... 1
Where You Can Find More Information.................................. 1
Currency of Presentation............................................. 2
The Company.......................................................... 2
Forward-Looking Statements........................................... 2
Risk Factors......................................................... 3
Use of Proceeds...................................................... 10
Selling Shareholders................................................. 10
Plan of Distribution................................................. 12
Legal Matters........................................................ 13
Experts.............................................................. 13
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ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAW
We are a public limited company incorporated under the laws of the Republic
of Ireland. Some of our directors and officers and experts named in this
prospectus are non-residents of the United States and are located outside the
United States. A significant portion of our assets are also located outside the
United States. If investors want to bring lawsuits against these persons, the
investors may not successfully effect service of process within the United
States upon these persons. In addition, the investors may not successfully
enforce judgements against them for liabilities based on United States law,
including federal securities law. Even if the investors bring lawsuits against
these persons in courts in the Republic of Ireland, the investors may not
succeed in enforcing judgements based solely upon United States law, including
the federal securities laws.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or the SEC. You may
read and copy any document we file at the SEC's public reference room at 450
Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference room. Our SEC filings are also
available to the public from the SEC's Website at http://www.sec.gov.
Information concerning us is also available for inspection at the offices of
the Nasdaq National Market, Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
. Our annual report, as amended on Form 10-K/A, for the fiscal year ended
December 31, 1999;
. Our quarterly report on Form 10-Q for the fiscal quarter ended March 31,
2000; and
. The description of the our ordinary shares contained in our registration
statement on Form 8-A filed on March 9, 1995 and amended on April 10,
1995.
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
Investor Relations
SmartForce Public Limited Company
900 Chesapeake Drive
Redwood City, California 94063
(650) 817-5900
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different
information. We are not making an offer of these securities in any state which
does not permit the offer. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
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CURRENCY OF PRESENTATION
We present our financial statements in U.S. dollars and have them prepared
in accordance with generally accepted accounting principles in the United
States. In this prospectus, references to "dollars" or "$" are to U.S. dollars,
references to "IR(Pounds)" are to Irish pounds, references to "pence" or "p"
are to Irish pence, and references to "Stg(Pounds)" are to U.K. pounds
sterling. Except as otherwise stated, all monetary amounts in this prospectus
are in dollars.
THE COMPANY
We provide comprehensive, integrated e-Learning solutions that help
businesses deploy knowledge across their extended enterprise of employees,
customers, suppliers, distributors and other business partners. Our hosted e-
Learning platform provides access to a comprehensive offering of learning
events and resources comprising over 1,300 SmartCourses, online
SmartSeminars(TM), 24x7 SmartMentoring(TM), articles, peer-to-peer
collaboration, customer-created content and other e-Learning services. Our
platform allows organizations to customize their e-Learning environment to meet
their corporate objectives and to train their employees and business partners
quickly, efficiently and effectively. Our e-Learning solutions also provide
individuals access to dynamic, continuously-updated learning events so they can
personalize their e-Learning environment to meet their specific educational and
career objectives. In addition, we provide tracking, assessment and feedback
tools which help users better understand their educational progress and
managers track and assess the effectiveness of their training initiatives.
Our learning environment covers a wide variety of business topics, including
information technology, or IT, business skills, interpersonal skills and
project management. We develop our content in collaboration with leading
technology providers, including Cisco, Informix, Intel, Lotus, Microsoft,
Netscape, Novell, Oracle, Rational Software, SAP, Sybase and TIBCO Software. As
of December 31, 1999, we had over 2,500 corporate customers, including AT&T,
Bell Atlantic, British Airways, Compaq, CSC, Dell, Deloitte & Touche, GTE, MCI
WorldCom, PricewaterhouseCoopers, Reuters, Sprint, Unisys and Whittman-Hart.
We launched our hosted e-Learning environment, which we license under an
Internet rental model, in the fourth quarter of 1999. We generated
substantially all of our revenues in 1999 and earlier periods from licenses of
our SmartCourses under software license agreements. Historically, our customers
have deployed our SmartCourses using a variety of technologies, primarily
including local and wide area networks and corporate intranets.
We were incorporated in the Republic of Ireland on August 8, 1989. Our
registered office is located at Belfield Office Park, Clonskeagh, Dublin 4,
Ireland, and our telephone number at that address from the United States is
(011) 353-1-2181000. The address of SmartForce USA is 900 Chesapeake Drive,
Redwood City, California 94063, USA, and our telephone number at that address
is (650) 817-5900.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in documents
that we have incorporated by reference into this prospectus. These forward-
looking statements are subject to risks and uncertainties. Actual results may
differ materially from those expressed in these forward-looking statements.
Forward-looking statements include information concerning our possible or
assumed future results of operations as well as statements that include the
words "believe," "expect," "anticipate," "intend" or similar expressions. You
should understand that certain important factors, including those set forth in
"Risk Factors" below and elsewhere in this prospectus and the documents that we
have incorporated by reference into this prospectus, could affect our future
results of operations and could cause those results to differ materially from
those expressed in our forward-looking statements. In connection with these
forward-looking statements, you should carefully review the risks set forth in
this prospectus and the documents incorporated into this prospectus.
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RISK FACTORS
Purchasing our ADSs involves a high degree of risk and is speculative in
nature. You should carefully consider the following risk factors, in addition
to the other information contained in the documents incorporated by reference
herein before purchasing our ADSs.
Our quarterly operating results are difficult to predict because they can
fluctuate significantly. This limits your ability to evaluate our historical
financial results and increases the likelihood that our results will fall below
market analysts' expectations, which could cause the price of our ADSs to drop
rapidly and severely.
We have in the past experienced fluctuations in our quarterly operating
results and anticipate that these fluctuations will continue and could
intensify in the future. As a result, we believe that our quarterly revenue,
expenses and operating results are likely to vary significantly in the future.
Thus, it is likely that in some future quarters our results of operations will
be below the expectations of public market analysts and investors, which could
have a severe adverse effect on the price of our ADSs. For example, our revenue
for the quarter ended September 30, 1998 did not increase at a rate comparable
to prior quarters. As a direct result, the trading price of our ADSs decreased
rapidly and significantly, having an extreme adverse effect on the value of an
investment in our securities.
Our operating results have historically fluctuated, and may in the future
continue to fluctuate, as a result of factors which include:
. the size and timing of new and renewal agreements
. the rate at which we migrate our customers to our e-Learning solutions
. the number and size of outsourced virtual university agreements or other
agreements providing for professional services or the resale of
instructor-led training
. the mix of sales between courseware we develop and courseware developed
through development and marketing alliances
. royalty rates
. the announcement, introduction and acceptance of new products, product
enhancements and technologies by us and our competitors
. the mix of sales between our field sales force, our other direct sales
channels and our telesales sales channels
. competitive conditions in the industry
. the loss of significant customers
. delays in availability of existing or new products
. the spending patterns of our customers
. litigation costs and expenses
. currency fluctuations
. the length of sales cycles
We have recently introduced fully integrated, Internet-based learning
solutions, an area in which we have limited experience.
We recently introduced SmartForce e-Learning, a hosted Internet-based
learning solution. As a result, we have a very limited experience with these
solutions, which makes our historical results of limited value in predicting
the potential success of this initiative. The success of this initiative will
depend on our ability to
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build-out and maintain our e-Learning infrastructure, to market and sell the
new e-Learning solutions to existing and prospective customers, to create a
significant subscriber base for our e-Learning destination Web site, to host,
operate and manage our destination site, and to attract and retain key
management and technical personnel.
We may not be successful in our efforts to migrate our customers to our e-
Learning solutions and the economic terms of any arrangements that might be
expected may not be as favorable as the traditional licensing agreements. We
believe that a lack of success in this regard could have a material negative
effect on us. Moreover, to the extent that we are successful in our efforts to
enter into e-Learning agreements with our customers, those arrangements are
expected to have accounting and operating model consequences that would also be
materially different from the consequences of our traditional software
licensing model.
Our introduction of e-Learning solutions will have a significant impact on our
operating model.
In connection with our SmartForce e-Learning initiative, we are moving from
a software license model, where we sell a license to a specified list of
software titles, to an Internet rental model where we provide our customers
with access to a constantly evolving Internet environment. As a consequence,
revenue under e-Learning rental agreements will generally be deferred and
recognized ratably over the term of the agreement rather than annually in
advance under the historical licensing structure. The migration of new and
existing customers to our e-Learning solutions will result in the deferral of a
significant portion of revenues
from year 2000 into future periods, and, accordingly, a decrease in reported
revenues in year 2000 compared to year 1999 as well as a decrease in reported
revenues for each quarter during year 2000 as compared to that which would be
expected under the software license model.
Additionally, we intend to make significant investments in our e-Learning
infrastructure and in building the SmartForce brand. In particular, we
anticipate that we will significantly increase our research and development
expenses and capital expenditures to build out our e-Learning infrastructure,
and expect to increase marketing expenses significantly to build the SmartForce
brand. As a result of the deferral of revenue under e-Learning agreements and
these incremental expenses, we expect to record a net loss for each quarter
during the year 2000. These losses could continue beyond that time.
Our operating results are subject to seasonal fluctuations which may adversely
impact our business.
Our operating results are subject to seasonal fluctuations, based in part on
customers' annual budgetary cycles and in part on the annual nature of sales
quotas. These seasonal trends have in the past caused revenues in the first
quarter of a year to be less, perhaps substantially so, than revenues for the
immediately preceding fourth quarter. We expect that these seasonal trends will
continue to adversely affect our revenues. In addition, we have in past years
added significant headcount in the sales and marketing and research and
development functions in the first quarter, and to a lesser extent, the second
quarter. Because these headcount additions do not immediately contribute
significant revenues, our operating margins in the earlier part of the year
tend to be significantly lower than in the later parts of the year. In
addition, many technology companies also experience a seasonal downturn in
demand during the summer months. These seasonal trends may have a material
adverse effect on our results of operations.
We rely on strategic alliances that may not continue in the future.
We have developed strategic alliances to develop and market many of our
products, and we believe that an increasing proportion of our future revenues
may be attributable to products developed and marketed through these and other
future alliances. However, these relationships are not exclusive and we may be
unable to continue to develop future products through these alliances in a
timely fashion or may be unable to negotiate additional alliances in the future
on acceptable terms or at all.
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The marketing efforts of our partners may also disrupt our direct sales
efforts. Our development and marketing partners could pursue their existing or
alternative training programs in preference to and in competition with those
being developed by us. In the event that we are unable to maintain or expand
our current development and marketing alliances or enter into new development
and marketing alliances, our operating results and financial condition could be
materially adversely affected. Furthermore, we are required to pay royalties to
our development and marketing partners on products developed with them, which
reduces our gross margins. We expect that cost of revenues may fluctuate from
period to period in the future based upon many factors, including the mix of e-
Learning events licensed (between e-Learning events developed exclusively by
us, and royalty-bearing courseware developed pursuant to development and
marketing alliances) and the timing of expenses associated with development and
marketing alliances. In addition, the collaborative nature of the development
process under these alliances may result in longer development times and less
control over the timing of product introductions than for e-Learning offerings
developed solely by us.
Our success depends on our ability to meet the needs of the rapidly changing
market.
The market for interactive education and training is influenced by rapidly
changing technology, evolving industry standards, changes in customer needs and
frequent introductions of new products by software vendors. New methods of
providing interactive education in a technology-based format are being
developed and offered in the marketplace, including intranet and Internet
offerings. Many of these new offerings involve new and different business
models and contracting mechanisms. In addition, multimedia and other product
functionality features are being added to the educational software.
Accordingly, our future success will depend upon the extent to which we are
able to develop and implement products which address these emerging market
requirements on a timely basis. If we are unsuccessful in addressing the
changing needs of the marketplace due to resource, technological or other
constraints, or if we are unable to anticipate and respond adequately to
changes in customers' software technology and preferences, our business and
results of operations would be materially adversely affected.
If we are unable to build the SmartForce brand, we may be unable to grow our
business.
We believe that establishing and maintaining the SmartForce brand will be
critical to the success of our e-Learning strategy and that the importance of
brand recognition will increase due to the growing number of education-oriented
Internet sites. Successful promotion and marketing of the SmartForce brand will
depend on providing compelling educational content, community and commerce, and
we intend to significantly increase our marketing and branding expenditures in
our effort to increase our brand awareness. If our brand building strategy is
unsuccessful, these expenses may never be recovered, and our business could be
materially harmed.
The success of our e-Learning strategy depends on the reliability and
consistent performance of our information systems and Internet infrastructure.
The success of our e-Learning strategy is highly dependent on the consistent
performance of our information systems and Internet infrastructure. If our Web
site fails for any reason or if we exercise any unscheduled down times, even
for only a short period of time, our business and reputation would be
materially harmed. We rely on third parties for proper functioning of our
computer infrastructure, delivery of our e-Learning application and the
performance of our destination site. Our systems and operations could be
damaged or interrupted by fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. Any system failures could adversely
affect customer usage of our solutions and user traffic results in any future
quarters, which could adversely affect our revenues and operating results and
harm our reputation with corporate customers, subscribers and commerce
partners. A key element of our strategy is to generate a high volume of traffic
to the Web site and create a significant subscriber base. Accordingly, the
satisfactory performance, reliability and availability of our Web site and
computer infrastructure is critical to our reputation and ability to attract
and retain corporate customers, subscribers and commerce partners. We cannot
accurately project the rate or timing of any increases in traffic to our Web
site and, therefore, the integration and timing of
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any upgrades or enhancements required to facilitate any significant traffic
increase to the Web site are uncertain. The failure to expand and upgrade the
Web site or any system error, failure or extended down time could materially
harm our business, reputation, financial condition or results of operations.
We may fail to integrate adequately acquired products, technologies and
businesses.
As a result of the consummation of a number of acquisitions our operating
expenses have increased. The integration of these businesses may not be
successfully completed in a timely fashion, or at all. Further, the revenues
from the acquired businesses may not be sufficient to support the costs
associated with those businesses, without adversely affecting our operating
margins. Any failure to successfully complete the integration in a timely
fashion or to generate sufficient revenues from the acquired businesses could
have a material adverse effect on our business and results of operations.
In addition in June 1999, we acquired Knowledge Well. Knowledge Well
provides interactive software that delivers business, management and
professional education skills and/or courses. Although, the software delivery
systems are similar, we and Knowledge Well developed distinct architectures for
our respective products. Successful integration of these architectures will
require substantial effort. Difficulties in combining the companies, products
and technologies could have an adverse impact on our ability to fully benefit
from its existing and future investment in this business and on the future
prospects for the business, management and professional education software
products.
We regularly evaluate acquisition opportunities and are likely to make
acquisitions in the future. Future acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, which could materially adversely affect our results of operations.
Product and technology acquisitions entail numerous risks, including
difficulties in the assimilation of acquired operations, technologies and
products, diversion of management's attention to other business concerns, risks
of entering markets in which we have no or limited prior experience and the
potential loss of key employees of acquired companies. Our management has had
limited experience in assimilating acquired organizations and products into our
operations. We may be unable to integrate successfully any operations,
personnel or products that have been acquired or that might be acquired in the
future, and our failure to do so could have a material adverse effect on our
results of operations.
Rapid expansion of our operations could strain our personnel and systems.
We have recently experienced rapid expansion of our operations, which has
placed, and is expected to continue to place, significant demands on our
executive, administrative, operational and financial personnel and systems. Our
future operating results will substantially depend on the ability of our
officers and key employees to manage changing business conditions and to
implement and improve our operational, financial control and reporting systems.
In particular, we require significant improvement in our order entry and
fulfillment and management information systems in order to support our expanded
operations. If we are unable to respond to and manage changing business
conditions, our business and results of operations could be materially
adversely affected.
Our expense levels are fixed in the short term and we may be unable to adjust
spending to compensate for unexpected revenue shortfalls.
Our expense levels are based in significant part on our expectations
regarding future revenues and are fixed to a large extent in the short term.
Accordingly, we may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Any significant revenue
shortfall would therefore have a material adverse effect on our results of
operations. This risk materialized in the third quarter of 1998, where profit
was dramatically negatively affected by a shortfall in revenues as against
management's expectations.
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We depend on a few key personnel to manage and operate us.
Our success is largely dependent on the personal efforts and abilities of
our senior management. Failure to retain these executives, or the loss of
certain additional senior management personnel or other key employees, could
have a material adverse effect on our business and future prospects.
We are also dependent on the continued service of our key sales, product
development and additional operational personnel and on our ability to attract,
motivate and retain highly qualified employees. In addition, we depend on
writers, programmers and graphic artists. We expect to continue to hire
additional product development, sales and marketing, information systems and
accounting staff. However, we may be unsuccessful in attracting, retaining or
motivating key personnel. The inability to hire and retain qualified personnel
or the loss of the services of key personnel could have a material adverse
effect upon our current business, new product development efforts and future
business prospects.
Increased competition may result in decreased demand for our products and
services, which may result in reduced revenues and gross margins and loss of
market share.
The market for business education training solutions is highly fragmented
and competitive, and we expect this competition to increase. We expect that
because of the lack of significant barriers to entry into this market, new
competitors may enter the market in the future. In addition to increased
competition from new companies entering into the market, established companies
are entering into the market through acquisitions of smaller companies which
directly compete with us, and we expect this trend to continue. We expect the
market to become increasingly competitive due to the lack of significant
barriers to entry. We may also face competition from publishing companies and
vendors of application software, including those vendors with whom we have
formed development and marketing alliances.
Our primary source of direct competition comes from third-party suppliers of
instructor-led information technology, business, management and professional
skills education and training as well as suppliers of computer-based training
and e-Learning solutions. We also face indirect competition from internal
training departments of our potential customers. We also compete to a lesser
extent with consultants, value-added resellers and network integrators. Certain
of these value-added resellers also market products competitive with ours. We
expect that as organizations increase their dependence on outside suppliers of
training, we will face increasing competition from these other suppliers as
education and training managers more frequently compare training products
provided by outside suppliers.
Growing competition may result in reduced revenue and gross margins and loss
of market share, any one of which have a material adverse effect on our
business. Many of our current and potential competitors have substantially
greater financial, technical, sales, marketing and other resources, as well as
greater name price competition, and we expect that we will face increasing
price pressures from competitors as managers demand more value for their
training budgets. Accordingly, we may be unable to provide products that
compare favorably with new instructor-led techniques or other interactive
training software or competitive pressures may require us to reduce our prices
significantly.
Our business is subject to currency fluctuations that can adversely affect our
operating results.
Due to our multinational operations, our business is subject to fluctuations
based upon changes in the exchange rates between the currencies in which we
collect revenues or pay expenses. In particular, the value of the U.S. dollar
against the Euro and related currencies impacts our operating results. Our
expenses are not necessarily incurred in the currency in which revenue is
generated, and, as a result, we are required from time to time to convert
currencies to meet our obligations. These currency conversions are subject to
exchange rate fluctuations, and changes to the value of the Euro and related
currencies relative to other currencies could adversely affect our business and
results of operations.
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Our corporate tax rate may increase, which could adversely impact our cash
flow, financial condition and results of operations.
We have significant operations and generate a majority of our taxable income
in the Republic of Ireland, and some of our Irish operating subsidiaries are
taxed at rates substantially lower than tax rates in effect in the United
States and other countries in which we have operations. If our Irish
subsidiaries were no longer to qualify for these lower tax rates or if the
applicable tax laws were rescinded or changed, our operating results could be
materially adversely affected. Moreover, because we incur income tax in several
countries, an increase in our profitability in one or more of these countries
could result in a higher overall tax rate. In addition, if U.S. or other
foreign tax authorities were to change applicable tax laws or successfully
challenge the manner in which our subsidiaries' profits are currently
recognized, our taxes could increase, and our business, cash flow, financial
condition and results of operations could be materially adversely affected.
We may be unable to protect our proprietary rights. Unauthorized use of our
technology may results in development of products or services which compete
with ours.
Our success depends on our ability to protect our rights in our intellectual
property and trade secrets. We rely upon a combination of copyright, trademark
and trade secret laws and customer license agreements, and other methods to
protect our proprietary rights. We also enter into confidentiality agreements
with our employees, consultants and third parties to seek to limit and protect
the distribution of our proprietary information regarding this technology.
However, we have not signed protective agreements in every case. Unauthorized
parties may copy aspects of our products and services and obtain and use
information that we regard as proprietary. Other parties may breach
confidentiality agreements and other protective contracts we have executed. We
may not become aware of, or have adequate remedies in the event of, a breach.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect trade secrets or to determine the validity and scope of the
proprietary rights of others. This litigation could result in substantial costs
and diversion of management and technical resources.
Some may claim that we infringe their intellectual property rights, which could
result in costly litigation or require us to reengineer or cease sales of our
products or services.
Third parties could in the future claim that our current or future products
infringe their intellectual property rights. Any claim, with or without merit,
could result in costly litigation or require us to reengineer or cease sales of
our products or services, any of which could have a material adverse effect on
our business. Infringement claims could also result in an injunction in the use
of our products or require us to enter into royalty or licensing agreements.
Licensing agreements, if required, may not be available on terms acceptable to
us or at all.
We are subject to a pending legal proceeding and may become subject to
additional proceedings, and adverse determinations in these proceedings could
harm our business.
We may be from time to time involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. An adverse
resolution of these matters could significantly negatively impact our financial
position and results of operations.
Our non-U.S. operations are subject to risks which could negatively impact our
future operating results.
We expect that international operations will continue to account for a
significant portion of our revenues, and intend to continue to expand our
operations outside of the United States. Operations outside of the United
States are subject to inherent risks, including difficulties or delays in
developing and supporting non-English language versions of our products and
services, political and economic conditions in various jurisdictions, in
staffing and managing foreign subsidiary operations, longer accounts receivable
payment cycles and potential adverse tax consequences. Any of these factors
could have a material adverse effect on our future operations outside of the
United States, which could negatively impact our future operating results.
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The Internet-based learning market is a developing market, and our business
will suffer if e-Learning is not widely accepted.
The market for Internet-based enterprise learning is a new and emerging
market. Corporate training and education has historically been conducted
primarily through classroom instruction and has traditionally been performed by
a company's internal personnel. Many companies have invested heavily in their
current training solutions. Although technology-based training applications
have been available for several years, they currently account for only a small
portion of the overall training market.
Accordingly, our future success will depend upon the extent to which
companies adopt technology based solutions and use the Internet in connection
with their training activities, and the extent to which companies utilize the
services or purchase products of third-party providers. Many companies that
have already invested substantial resources in traditional methods of corporate
training may be reluctant to adopt a new strategy that may compete with their
existing investments. Even if companies implement technology-based training or
Internet learning solutions, they may still choose to design, develop, deliver
or manage all or part of their education and training internally. If technology
based learning and the use of the Internet for learning does not become
widespread, or if companies do not use the products and services of third
parties to develop, deliver or manage their training needs, then our products
and services, may not achieve commercial success.
Because many users of our e-Learning solutions access them over the Internet,
factors adversely affecting the use of the Internet could harm our business.
Many of our users access our e-Learning solutions over the Internet. Any
factors that adversely affect Internet usage could disrupt the ability of those
users to access our e-Learning solutions, which would adversely effect customer
satisfaction and therefore our business. Factors which could disrupt Internet
usage include slow access to download times, security concerns, network
problems or service disruptions that prevent users from accessing an Internet
server and delays in, or disputes concerning, the development of industry wide
Internet standards and protocols.
Demand for our products and services may be especially susceptible to adverse
economic conditions.
Our business and financial performance may be damaged by adverse financial
conditions affecting our target customers or by a general weakening of the
economy. Some companies may not view training products and services as critical
to the success of their businesses. If these companies experience disappointing
operating results, whether as a result of adverse economic conditions,
competitive issues or other factors, they may decrease or forego education and
training expenditures before limiting their other expenditures.
The market price for our ADSs may fluctuate and may not be sustainable.
Our initial public offering of the ADSs was completed in April 1995, and
there can be no assurance that a viable public market for the ADSs will be
sustained. The market price of the ADSs has fluctuated significantly since our
initial public offering. We believe that factors such as announcements of
developments related to ourselves or our competitors' business, announcements
of new products or enhancements by ourselves or our competitors, sales of the
ADSs into the public market, developments in our relationships with our
customers, partners and distributors, shortfalls or changes in revenues, gross
margins, earnings or losses or other financial results from public market
expectations, regulatory developments, fluctuations in results of operations
and general conditions in our market or the markets served by our customers or
the economy could cause the price of the ADSs to fluctuate, perhaps
substantially.
In addition, in recent years the stock market in general, and the market for
shares of technology stocks in particular, has experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. The market price of the ADSs may continue to experience
significant fluctuations in the future, including fluctuations that are
unrelated to our performance.
9
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale from time to time of
the ADSs. All proceeds from the sale of the ADSs will go to the account of the
selling shareholders. See "Selling Shareholders" and "Plan of Distribution"
below.
SELLING SHAREHOLDERS
The following table lists, as of May 25, 2000, (i) the name of each of the
selling shareholders, (ii) the number of ADSs and ordinary shares that each
such selling shareholder beneficially owned, (iii) the number of ADSs owned by
each selling shareholder that may be offered for sale from time to time by this
prospectus, and (iv) the number of ADSs and ordinary shares to be held by each
such selling shareholder assuming the sale of all the ADSs offered under this
prospectus. Except as indicated, none of the selling shareholders has held any
position or office or had a material relationship with us or any of our
affiliates within the past three years other than as a result of the ownership
of our ADSs. We may amend or supplement this prospectus from time to time to
update the disclosure set forth herein.
<TABLE>
<CAPTION>
Shares
Shares Which Beneficially Owned
Shares May be Sold After Offering(2)
Beneficially Pursuant to ------------------
Selling Shareholder Owned this Prospectus Number Percent (%)
------------------- ------------ --------------- ------ -----------
<S> <C> <C> <C> <C>
Steven Goodman............. 55,226 55,226 -- *
Bernard Goodman............ 12,287 12,287 -- *
Scott Mitchell............. 55,226 55,226 -- *
Jean-Paul O'Brien.......... 18,343 18,343 -- *
Malcolm Youngren........... 24,617 24,617 -- *
Daniel Fisher.............. 898 898 -- *
Marc Fisher................ 898 898 -- *
Jed Hart................... 449 449 -- *
Ken Mayhorne............... 1,797 1,797 -- *
Ira Rainess................ 449 449 -- *
Reeveston Partners......... 898 898 -- *
C. Allan Rosar............. 1,797 1,797 -- *
David M. Silverman......... 449 449 -- *
Stanley Vigran Living
Trust..................... 3,414 3,414 -- *
Ross Vigran................ 4,247 4,247 -- *
Rick Vigran................ 1,797 1,797 -- *
Gary Vigran................ 1,078 1,078 -- *
Mitch Weiman............... 449 449 -- *
Avnet, Inc................. 21,785 21,785 -- *
Janet Larson............... 98 98 -- *
David Adams................ 1,665 1,665 -- *
Rathnam Aravamudhan........ 384 384 -- *
Osanna Avanesova........... 358 358 -- *
Paul Benner................ 291 291 -- *
Sharon Casino.............. 324 324 -- *
Elizabeth Fournier......... 629 629 -- *
Brian Gabbard.............. 224 224 -- *
Eduardo Gamez.............. 333 333 -- *
Karla Jensen............... 274 274 -- *
LeiAnne Jones.............. 2,747 2,747 -- *
Jared Kitch................ 205 205 -- *
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares
Shares Which Beneficially Owned
Shares May be Sold After Offering(2)
Beneficially Pursuant to ------------------
Selling Shareholder Owned this Prospectus Number Percent (%)
------------------- ------------ --------------- ------ -----------
<S> <C> <C> <C> <C>
Willis Lee................. 103 103 -- *
David Lilly................ 280 280 -- *
Ginny Lund................. 567 567 -- *
Dariush Navabi............. 316 316 -- *
Morris Nuspl............... 245 245 -- *
Holly Orchard.............. 317 317 -- *
Dieter Runge............... 338 338 -- *
Angela Saldivar............ 85 85 -- *
Margarett Scott............ 294 294 -- *
Sal Sferlazza.............. 4,371 4,371 -- *
Ted Zrmhal................. 4,364 4,364 -- *
Advanced Educational
Systems Limited(3)........ 103,128 103,128 -- *
------- -------
Total...................... 328,044 328,044
</TABLE>
--------
* Indicates less than one percent.
(1) Each ADS represents one ordinary share. The number and percentage of
shares beneficially owned is determined in accordance with Rule 13d-3 of
the Exchange Act, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days of May 25, 2000 through
the exercise of any stock option or other right. Unless otherwise
indicated in the footnotes, each person has sole voting and investment
power (or shares such powers with his or her spouse) with respect to the
shares shown as beneficially owned.
(2) Assumes the sale of all ADSs offered under this prospectus. Calculated
based on 51,049,669 ordinary shares outstanding as of May 25, 2000.
(3) Patrick J. McDonagh, one of our directors, is also a director and is
deemed the beneficial holder of approximately 29% of the outstanding
shares of Advanced Educational Systems Limited.
11
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders may offer and sell the ADSs covered by this
prospectus from time to time. The selling shareholder's pledgees, donees,
transferees or other successors in interest that receive such ADSs as a gift,
partnership distribution, corporate dividend or other non-sale related transfer
may likewise offer and sell the ADSs from time to time. The selling
shareholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. The selling shareholders may sell the
ADSs on one or more exchanges, including the Nasdaq National Market, or in the
over-the-counter market or otherwise, at prices and at terms then prevailing or
at prices related to the then current market prices or in negotiated
transactions. The selling shareholders may sell the ADSs by one or more of the
following means of distribution: (a) a block trade in which the broker-dealer
will attempt to sell the shares as agent, but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker-dealer as principal and resale by such broker-dealer for its own account
pursuant to this prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. We may amend this
prospectus from time to time to describe a specific plan of distribution. In
connection with distributions of the ADSs or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with such transactions, broker-dealers or
other financial institutions may engage in short sales of our ADSs in the
course of hedging the positions they assume with the selling shareholders. The
selling shareholders may also sell our ADSs short and redeliver the shares
covered by this prospectus to close out such short positions. The selling
shareholders may also enter into option or other transactions with broker-
dealers or other financial institutions which require the delivery to such
broker-dealer or other financial institution of the ADSs offered under this
prospectus, which ADSs such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction). The selling shareholders may also pledge the ADSs registered
hereunder to a broker-dealer or other financial institution and, upon a
default, such broker-dealer or other financial institution may effect sales of
the pledged ADSs pursuant to this prospectus (as supplemented or amended to
reflect such transaction). In addition, the selling shareholder may also sell
the ADSs under Rule 144 of the Securities Act rather than pursuant to this
prospectus if the shares so qualify for resale under Rule 144.
In effecting sales, brokers, dealers or agents engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling shareholders in amounts to be negotiated prior to the sale. These
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales, and any such commission, discount or concession may be deemed
to be underwriting discounts or commissions under the Securities Act. We will
pay all expenses incident to the offering and sale of the ADSs covered by this
prospectus to the public other than any commissions and discounts of
underwriters, dealers or agents and any transfer taxes.
In order to comply with the securities laws of certain states, if
applicable, the ADSs will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the ADSs may not
be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling shareholders that the anti-manipulation rules
set forth in Regulation M under the Exchange Act may apply to sales of the ADSs
in the market and to the activities of the selling shareholders and their
affiliates. In addition, we will make copies of this prospectus available to
the selling shareholders and have informed them of the need for delivery of
copies of this prospectus to purchasers at or prior to the time of any sale of
the ADSs covered by this prospectus. The selling shareholders may indemnify any
broker-dealer that participates in transactions involving the sale of the ADSs
against certain liabilities, including liabilities arising under the Securities
Act.
At the time a particular offer of the ADSs covered by this prospectus is
made, if required, a prospectus supplement will be distributed that will set
forth the number of shares being offered and the terms of the
12
<PAGE>
offering, including the name of any underwriter, dealer or agent, the purchase
price paid by any underwriter, any discount, commission and other item
constituting compensation, any discount, commission or concession allowed or
reallowed or paid to any dealer, and the proposed selling price to the public.
The selling shareholders may or may not sell all or any of the ADSs covered
by this prospectus. The selling shareholders other than Advanced Educational
Systems Limited, or AES, have agreed that from the date of the closing of our
acquisition of Learning Productions, LLC to October 28, 2000, they will not
dispose of any of the ADSs held by such selling shareholders; provided,
however, that the foregoing restriction shall not apply to 20,222 ADSs held by
certain of such selling shareholders. AES has agreed not to dispose of any of
the 103,128 ADSs held by it from the date it acquired such ADSs to September 2,
2000.
We have agreed with the selling shareholders, other than AES, to keep the
registration statement, of which this prospectus constitutes a part, effective
until all registered ADSs held by such selling shareholders have been sold
under such registration statement or in compliance with Rule 144 of the
Securities Act. We have agreed with AES to keep the registration statement of
which this prospectus constitutes a part effective until the earlier of (i)
such time as all registered ADSs held by AES may be sold by AES in a three
month period in accordance with Rule 144 of the Securities Act, and (ii) two
years following the date AES acquired such registered ADSs.
LEGAL MATTERS
The validity of the ordinary shares represented by the ADSs offered by this
prospectus will be passed upon by Binchys, Solicitors, our Irish legal counsel.
EXPERTS
Our consolidated financial statements at December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 incorporated in
this prospectus by reference to our annual report, as amended on Form 10-K/A,
for the year ended December 31, 1999 have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon appearing therein
and have been so incorporated in reliance on such reports given on the
authority of said firm as experts in auditing and accounting. The financial
statements of The ForeFront Group Inc. and subsidiaries for the year ended
December 31, 1997 incorporated by reference in this prospectus and elsewhere in
the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
13
<PAGE>
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Enforcement of Civil Liabilities under United States Federal Securities
Law..................................................................... 1
Where You Can Find More Information...................................... 1
Currency of Presentation................................................. 2
The Company.............................................................. 2
Forward-Looking Statements............................................... 2
Risk Factors............................................................. 3
Use of Proceeds.......................................................... 10
Selling Shareholders..................................................... 10
Plan of Distribution..................................................... 12
Legal Matters............................................................ 13
Experts.................................................................. 13
</TABLE>
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328,044 American Depositary Shares
Representing 328,044 Ordinary Shares
SMARTFORCE PUBLIC
LIMITED COMPANY
----------------
PROSPECTUS
----------------
June 12, 2000
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