Filed Pursuant to Rule 424(b)(3)
Registration No. 333-70130
PROSPECTUS
SMARTFORCE PUBLIC LIMITED COMPANY
92,394 AMERICAN DEPOSITORY SHARES
REPRESENTING 92,394 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 September 24, 2001, the closing price of our ADSs on the Nasdaq
National Market was $18.55 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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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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THE DATE OF THIS PROSPECTUS IS OCTOBER 22, 2001
TABLE OF CONTENTS
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 ............................................................... 3
Risk Factors ............................................................................. 3
Use of Proceeds .......................................................................... 11
Selling Shareholders ..................................................................... 12
Plan of Distribution ..................................................................... 13
Legal Matters ............................................................................ 14
Experts .................................................................................. 14
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 after the date of this prospectus and prior to
the time all of the securities offered hereby are sold:
- Our annual report, as amended on Form 10-K/A, for the fiscal year
ended December 31, 2000;
- Our quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 2001;
- Our quarterly report on Form 10-Q for the fiscal quarter ended
June 30, 2001; 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 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.
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, references to "EUR" or "Euros" are to the common
currency of the eleven participating member states of the European Union 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 support their critical strategic business initiatives and deploy
knowledge globally across their extended enterprise of employees, customers,
suppliers, distributors and other business partners. Our hosted, scalable
e-Learning platform, e3, is an integrated, object based e-Learning architecture
that enables us to build e-Learning solutions precisely targeted to an
enterprise's specific business requirements. The e3 platform combines a learning
management system with access to a comprehensive offering of learning events and
resources comprising over 4,000 hours of e-Learning content, as well as 2,500
hours of localized content, online SmartSeminars(TM), 24x7 SmartMentoring(TM),
SmartSimulations, e-Testing, articles, peer-to-peer collaboration and online
workshops. The object-based architecture of our platform, together with a set of
content authoring and publication tools, allows us to deliver customized
e-Learning solutions to help organizations meet their corporate objectives and
train their employees and business partners quickly, effectively and
efficiently. 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 e-Business, business skills, interpersonal skills, information
technology, or IT, customer relationship management and project management. We
develop our content in collaboration with leading e-Business, business and
technology providers, including Ariba, BroadVision, Provant, Microsoft, Cisco,
Informix, Intel, Lotus, Netscape, Novell, Oracle, Rational Software, SAP and
jCert, a collaboration between BEA Systems, Hewlett Packard, IBM, Oracle, Sun
Microsystems, Sybase and iPlanet E-Commerce solutions. As of December 31, 2000,
we had over 2,500 corporate customers, including AT&T, British Airways, Compaq,
CSC, Dell, Deloitte & Touche, E-Trade, United States Air Force, Lucent
Technologies, MCI WorldCom, Bank of America, PricewaterhouseCoopers, Reuters,
Sprint and Unisys.
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.
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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.
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 MAY 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 continue to 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 revenue between content, e-Learning platform, services
and partners' products
- 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
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- the impact of any unanticipated decline in net revenues in any
particular quarter as compared to the relatively fixed nature of
our expense levels in the short term
- general conditions in our market or the markets served by our
customers in the U.S. and or the International economy
- 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
OUR EXPERIENCE IN SELLING FULL INTEGRATED, INTERNET-BASED LEARNING SOLUTIONS IS
RELATIVELY LIMITED.
In the fourth quarter of 1999 we introduced SmartForce e-Learning, a hosted
Internet-based learning solution. While the results of our efforts to migrate
our business to the e-Learning model and market solutions to our customers has
exceeded our expectations, we have relatively limited experience with these
solutions, which makes our historical results of limited value in predicting the
potential success of this initiative. The ultimate success of this initiative
will depend on our ability to continue to expand and enhance our e-Learning
infrastructure, to market and sell the new e-Learning solutions to existing and
prospective customers, to host, operate and manage our destination site, and to
attract and retain key management and technical personnel.
We may not be successful in these efforts 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, the arrangements with our
customers in the e-learning model have and will continue to have accounting and
operating model consequences that would also be materially different from the
consequences of our traditional software licensing model.
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 could
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
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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.
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 revenue
mix (between content, e-Learning platform, services and partner's products) 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 strategic alliance partners may from time to time renegotiate the
terms of our agreement with them and could result in changes to the royalty
arrangements, which could adversely affect our results of operations.
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
requirements and preferences and frequent introductions of new products and
services embodying new technologies. 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 cost effective and timely basis. Product
development is risky because it is difficult to foresee developments in
technology, coordinate technical personnel and identify and eliminate design
flaws. Any significant delay in releasing new products could have a material
adverse effect on the ultimate success of our products and could reduce sales of
predecessor products. We may not be able to introduce new products on a timely
basis. In addition, new products introduced by us may fail to achieve a
significant degree of market acceptance or, once accepted, may fail to sustain
viability in the market for any significant period. If we are unsuccessful in
addressing the changing needs of the marketplace due to resource, technological
or other constraints, or in anticipating and responding adequately to changes in
customers' software technology and preferences, our business and results of
operations would be materially adversely affected.
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 could
be materially harmed. We have in the past experienced performance problems and
unscheduled downtime, and these problems could re-occur. 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,
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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 any upgrades or enhancements required
to facilitate any significant traffic increase to the Web site are uncertain. We
have in the past experienced difficulties in upgrading our site infrastructure
to handle increased traffic, and these difficulties could recur. 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.
Our facilities in the State of California, including our corporate
headquarters and other critical business operations, are currently subject to
electrical blackouts as a consequence of a shortage of available power. In the
event these blackouts continue to increase in severity, they could disrupt the
operations of our affected facilities and our business could be seriously
harmed. In addition, in connection with the shortage of available power, prices
for electricity have risen dramatically, and will likely continue to increase in
the foreseeable future. Such price changes will increase our operating costs,
which could adversely impact our profitability.
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.
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
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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 April 2001 we acquired icGlobal, providers of industry acclaimed
Learning Management System software. In August 2001 we acquired substantially
all of the assets of Impaxselling.com, a sales performance company providing
global enterprises with web-based learning solutions designed to improve sales
and account management performance. Difficulties in combining these companies'
products and technologies could have an adverse impact on our ability to fully
benefit from our existing and future investment in this business and on the
future prospects for our business, management and professional education
software products.
We regularly evaluate acquisition opportunities and are likely to make
acquisitions in the future that would provide additional product or service
offerings, additional industry expertise or an expanded geographic presence. We
may be unable to locate attractive opportunities or acquire any that we locate
on attractive terms. 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. 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,
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.
WE DEPEND ON A FEW KEY PERSONNEL TO MANAGE AND OPERATE US.
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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, content
development and operational personnel and on our ability to attract, motivate
and retain highly qualified employees. In addition, we depend on writers,
programmers, Web designers and graphic artists. We expect to continue to hire
additional content development, programmers, 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
education and 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 recognition, 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 e-Learning solutions that
compare favorably with new instructor-led techniques, other interactive training
software or new e-Learning solutions 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
-8-
fluctuations, and changes to the value of the Euro, pound sterling and other
currencies relative to the U.S. dollar could adversely affect our business and
results of operations.
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 RESULT IN DEVELOPMENT OF PRODUCTS OR SERVICES THAT 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, services or
technology or 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
against 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. Though no such legal actions are pending at this
time, from time to time we learn of parties that claim broad intellectual
property rights in the e-Learning area that might implicate our offerings. These
parties or others could initiate actions against us in the future.
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.
Since the end of the third quarter of 1998, a class action lawsuit has
been pending in the United States District Court for the Northern District of
California against us, one of our subsidiaries, SmartForce USA, and
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certain of our former and current officers and directors, alleging violation of
the federal securities laws. It has been alleged in this lawsuit that we
misrepresented or omitted to state material facts regarding our business and
financial condition and prospects in order to artificially inflate and maintain
the price of our ADSs, and misrepresented or omitted to state material facts in
our registration statement and prospectus issued in connection with our merger
with Forefront, which also is alleged to have artificially inflated the price of
our ADSs.
We believe that this action is without merit and intend to vigorously
defend ourselves against it. Although we cannot presently determine the outcome
of this action, an adverse resolution of this matter could significantly
negatively impact our financial position and results of operations.
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 account 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.
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 affect 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.
In addition, the general condition of the economy is affected by social,
political and military conditions. It is not possible to predict the outcome of
the recent escalation of hostilities between the United States and certain
countries and persons related to terrorist events including the events that took
place on September 11, 2001. Any military response by the United States could
result in further weakness in the economy which would have an adverse impact on
our operating results and financial condition.
THE MARKET PRICE FOR OUR ADSs MAY FLUCTUATE AND MAY NOT BE SUSTAINABLE.
The market price of our ADSs has fluctuated
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significantly since our initial public offering and is likely to continue to be
volatile. We believe that factors, such as the following, could cause the price
of our ADSs to fluctuate, perhaps substantially:
- announcements of developments related to ourselves or our
competitors' business
- announcements of new products or enhancements by ourselves or our
competitors
- sales of our 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 which differ from public market
expectations
- changes in the public market expectation of our performance or
industry performance
- changes in market valuations of competitors
- regulatory developments
- additions or departures of key personnel
- fluctuations in results of operations and
- general conditions in our market or the markets served by our
customers or in the U.S. and or the International economy.
In addition, in recent years the stock market in general, and the market
for shares of technology stocks in particular, has experienced extreme price and
volume fluctuations, which have often been unrelated to the operating
performance of affected companies. The market price of our ADSs may continue to
experience significant fluctuations in the future, including fluctuations that
are unrelated to our performance.
To succeed we must continue to expand our content offerings, upgrade our
technology and distinguish our solution. We may not be able to do this
successfully. Any failure by us to anticipate or respond adequately to changes
in technology and customer preferences or any significant delays in content
development or implementation could impact our ability to capture market share.
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.
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SELLING SHAREHOLDERS
The following table lists, as of September 25, 2001, (i) the name of each
of the selling shareholders, (ii) the number of ADSs and ordinary shares that
each such selling shareholder beneficially owned, and (iii) the number of ADSs
owned by each selling shareholder that may be offered for sale from time to time
by 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.
SHARES SHARES WHICH MAY
BENEFICIALLY BE SOLD PURSUANT TO
SELLING SHAREHOLDER OWNED THIS PROSPECTUS
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Impaxselling.com .................... 92,394 92,394
Total ................... 92,394 92,394
(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 September 25, 2001
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. Each shareholder owns less than one
percent of the ordinary shares outstanding.
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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
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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 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 have agreed that from the
date of the closing of our acquisition of Impaxselling.com to February 8, 2002
they will not dispose of greater than forty-four percent (44%) of the ADSs held
by such selling shareholders.
We have agreed with the selling shareholders to keep the registration
statement, of which this prospectus constitutes a part, effective until the
earlier of (i) two (2) years following the date of the closing, (ii) such time
as all registered ADSs held by such selling shareholders have been sold or (iii)
such time as all of the ADSs may be sold in any consecutive three month period
in accordance with Rule 144 of the Securities Act.
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, 2000 and 1999 and
for each of the three years in the period ended December 31, 2000 incorporated
in this prospectus by reference to our annual report, as amended on Form 10-K/A,
for the year ended December 31, 2000 have been so incorporated in reliance on
the reports of Ernst & Young, independent auditors, given on the authority of
said firm as experts in auditing and accounting.
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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.
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TABLE OF CONTENTS
Page
----
Enforcement of Civil Liabilities under United States Federal
Securities Law............................................ 1
Where You Can Find More Information........................... 1
Currency of Presentation...................................... 3
The Company................................................... 3
Forward-Looking Statements.................................... 4
Risk Factors.................................................. 4
Use of Proceeds............................................... 12
Selling Shareholders.......................................... 13
Plan of Distribution.......................................... 14
Legal Matters................................................. 15
Experts....................................................... 15
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92,394 AMERICAN DEPOSITARY SHARES
REPRESENTING 92,394 ORDINARY SHARES
SMARTFORCE PUBLIC
LIMITED COMPANY
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PROSPECTUS
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October 22, 2001
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