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These excerpts taken from the SKIL 10-K filed Mar 31, 2008. RISKS
RELATED TO LEGAL PROCEEDINGS
WE ARE THE
SUBJECT OF AN INVESTIGATION BY THE SEC.
We had been the subject of a formal investigation by the United
States Securities and Exchange Commission (“SEC”) into
the events and circumstances giving rise to the 2003 restatement
of SmartForce PLC’s accounts (the “Restatement
Investigation”). On July 19, 2007, the SEC announced
that three former officers and one former employee of SmartForce
had settled SEC claims in connection with the Restatement
Investigation. (The former officers/employee have made payments
in connection with their settlements. It is possible that they
may seek to require us to indemnify them for such payments.) We
understand that the Restatement Investigation has now been
concluded without any claim being brought against us.
The Boston District Office of the SEC informed us in January
2007 that we are the subject of an informal investigation
concerning option granting practices at SmartForce for the
period beginning April 12, 1996 through July 12, 2002.
These grants were made prior to the September 6, 2002
merger of SkillSoft Corporation and SmartForce PLC. We have
produced documents in response to requests from the SEC.
We continue to cooperate with the SEC in this matter. At the
present time, we are unable to predict the outcome of this
matter or its potential impact on our operating results or
financial position. However, we may incur
Table of Contents
substantial costs in connection with the SEC option granting
practices investigation, and this investigation could cause a
diversion of management time and attention. In addition, we
could be subject to penalties, fines or regulatory sanctions or
claims by our former officers, directors or employees for
indemnification of costs they may incur in connection with the
SEC investigation. Any or all of those issues could adversely
affect our business, operating results and financial position.
CLAIMS THAT
WE INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS
COULD RESULT IN COSTLY LITIGATION OR ROYALTY PAYMENTS TO THIRD
PARTIES, OR REQUIRE US TO REENGINEER OR CEASE SALES OF OUR
PRODUCTS OR SERVICES.
Third parties have in the past and 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 barring the sale 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 the combined company or at all.
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 COULD
INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS’ USE OF OUR PRODUCTS AND SERVICES.
Many of the business interactions supported by our products and
services are critical to our customers’ businesses. Any
failure in a customer’s business interaction or other
collaborative activity caused or allegedly caused in the future
by our products and services could result in a claim for
substantial damages against us, regardless of our responsibility
for the failure. Although we maintain general liability
insurance, including coverage for errors and omissions, there
can be no assurance that existing coverage will continue to be
available on reasonable terms or will be available in amounts
sufficient to cover one or more large claims, or that the
insurer will not disclaim coverage as to any future claim.
WE COULD BE
SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM
THIRD PARTIES OVER WHOM WE EXERT LIMITED CONTROL.
It is possible that we could become subject to legal actions
based upon claims that our course content infringes the rights
of others or is erroneous. Any such claims, with or without
merit, could subject us to costly litigation and the diversion
of our financial resources and management personnel. The risk of
such claims is exacerbated by the fact that our course content
is provided by third parties over whom we exert limited control.
Further, if those claims are successful, we may be required to
alter the content, pay financial damages or obtain content from
others.
SOME OF OUR
INTERNATIONAL SUBSIDIARIES HAVE NOT COMPLIED WITH REGULATORY
REQUIREMENTS RELATING TO THEIR FINANCIAL STATEMENTS AND TAX
RETURNS.
We operate our business in various foreign countries through
subsidiaries organized in those countries. Due to our
restatement of the historical SmartForce financial statements,
some of our subsidiaries have not filed their audited statutory
financial statements and have been delayed in filing their tax
returns in their respective jurisdictions. As a result, some of
these foreign subsidiaries may be subject to regulatory
restrictions, penalties and fines and additional taxes.
RISKS RELATED TO LEGAL PROCEEDINGS WE ARE THE SUBJECT OF AN INVESTIGATION BY THE SEC. We had been the subject of a formal investigation by the United States Securities and Exchange Commission (“SEC”) into the events and circumstances giving rise to the 2003 restatement of SmartForce PLC’s accounts (the “Restatement Investigation”). On July 19, 2007, the SEC announced that three former officers and one former employee of SmartForce had settled SEC claims in connection with the Restatement Investigation. (The former officers/employee have made payments in connection with their settlements. It is possible that they may seek to require us to indemnify them for such payments.) We understand that the Restatement Investigation has now been concluded without any claim being brought against us. The Boston District Office of the SEC informed us in January 2007 that we are the subject of an informal investigation concerning option granting practices at SmartForce for the period beginning April 12, 1996 through July 12, 2002. These grants were made prior to the September 6, 2002 merger of SkillSoft Corporation and SmartForce PLC. We have produced documents in response to requests from the SEC. We continue to cooperate with the SEC in this matter. At the present time, we are unable to predict the outcome of this matter or its potential impact on our operating results or financial position. However, we may incur
Table of Contentssubstantial costs in connection with the SEC option granting practices investigation, and this investigation could cause a diversion of management time and attention. In addition, we could be subject to penalties, fines or regulatory sanctions or claims by our former officers, directors or employees for indemnification of costs they may incur in connection with the SEC investigation. Any or all of those issues could adversely affect our business, operating results and financial position. CLAIMS THAT WE INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS COULD RESULT IN COSTLY LITIGATION OR ROYALTY PAYMENTS TO THIRD PARTIES, OR REQUIRE US TO REENGINEER OR CEASE SALES OF OUR PRODUCTS OR SERVICES. Third parties have in the past and 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 barring the sale 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 the combined company or at all. 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 COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS RELATING TO OUR CUSTOMERS’ USE OF OUR PRODUCTS AND SERVICES. Many of the business interactions supported by our products and services are critical to our customers’ businesses. Any failure in a customer’s business interaction or other collaborative activity caused or allegedly caused in the future by our products and services could result in a claim for substantial damages against us, regardless of our responsibility for the failure. Although we maintain general liability insurance, including coverage for errors and omissions, there can be no assurance that existing coverage will continue to be available on reasonable terms or will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. WE COULD BE SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM THIRD PARTIES OVER WHOM WE EXERT LIMITED CONTROL. It is possible that we could become subject to legal actions based upon claims that our course content infringes the rights of others or is erroneous. Any such claims, with or without merit, could subject us to costly litigation and the diversion of our financial resources and management personnel. The risk of such claims is exacerbated by the fact that our course content is provided by third parties over whom we exert limited control. Further, if those claims are successful, we may be required to alter the content, pay financial damages or obtain content from others. SOME OF OUR INTERNATIONAL SUBSIDIARIES HAVE NOT COMPLIED WITH REGULATORY REQUIREMENTS RELATING TO THEIR FINANCIAL STATEMENTS AND TAX RETURNS. We operate our business in various foreign countries through subsidiaries organized in those countries. Due to our restatement of the historical SmartForce financial statements, some of our subsidiaries have not filed their audited statutory financial statements and have been delayed in filing their tax returns in their respective jurisdictions. As a result, some of these foreign subsidiaries may be subject to regulatory restrictions, penalties and fines and additional taxes. This excerpt taken from the SKIL 10-K filed Apr 13, 2007. RISKS
RELATED TO LEGAL PROCEEDINGS
WE ARE THE
SUBJECT OF AN ONGOING INVESTIGATION BY THE SEC.
While preparing the closing balance sheet of SmartForce as at
September 6, 2002, the date on which we closed our merger
with SkillSoft Corporation (the Merger), certain accounting
matters were identified relating to the historical financial
statements of SmartForce (which, following the Merger, are no
longer our historical financial statements). On
November 19, 2002, we announced our intent to restate the
SmartForce financial statements for 1999, 2000, 2001 and the
first two quarters of 2002. We have settled several class action
lawsuits that were filed following the announcement of the
restatement.
We are the subject of a formal order of private investigation
entered by the SEC relating to the restatement. On June 2,
2005, the Boston District Office of the SEC informed us that it
had made a preliminary determination to recommend that the SEC
bring a civil injunctive action against us. Under the SEC’s
rules, we are permitted to make a so-called Wells Submission in
which we seek to persuade the SEC that no such action should be
commenced. In the event we are unable to resolve the SEC’s
potential claims by agreement, we intend to make such a
submission.
The Boston District Office of the SEC informed us in January
2007 that we are the subject of an informal investigation
concerning options granting practices at SmartForce for the
period beginning April 12, 1996 through July 12, 2002,
which was prior to the Merger. We have received a document
request from the SEC and are in the process of responding to the
request. The SEC has also informed us that the investigation
relating to the restatement of historical SmartForce financial
statements cannot be concluded until the investigation relating
to the option granting practices of SmartForce has been
completed.
We continue to cooperate with the SEC in these matters. At the
present time, we are unable to predict the outcome of these
maters or their potential impact on our operating results or
financial position. However, we may incur substantial costs in
connection with the SEC investigations, and these investigations
could cause a diversion of management time and attention. In
addition, we could be subject to penalties, fines or regulatory
sanctions or claims by our former officers, directors or
employees for indemnification of costs they may incur in
connection with the SEC investigations. Any or all of those
issues could adversely affect our business, operating results
and financial position.
CLAIMS THAT
WE INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS
COULD RESULT IN COSTLY LITIGATION OR ROYALTY PAYMENTS TO THIRD
PARTIES, OR REQUIRE US TO REENGINEER OR CEASE SALES OF OUR
PRODUCTS OR SERVICES.
Third parties have in the past and 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 the combined company or at all.
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.
Table of Contents
WE COULD
INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS’ USE OF OUR PRODUCTS AND SERVICES.
Many of the business interactions supported by our products and
services are critical to our customers’ businesses. Any
failure in a customer’s business interaction or other
collaborative activity caused or allegedly caused in the future
by our products and services could result in a claim for
substantial damages against us, regardless of our responsibility
for the failure. Although we maintain general liability
insurance, including coverage for errors and omissions, there
can be no assurance that existing coverage will continue to be
available on reasonable terms or will be available in amounts
sufficient to cover one or more large claims, or that the
insurer will not disclaim coverage as to any future claim.
WE COULD BE
SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM
THIRD PARTIES OVER WHOM WE EXERT LIMITED CONTROL.
It is possible that we could become subject to legal actions
based upon claims that our course content infringes the rights
of others or is erroneous. Any such claims, with or without
merit, could subject us to costly litigation and the diversion
of our financial resources and management personnel. The risk of
such claims is exacerbated by the fact that our course content
is provided by third parties over whom we exert limited control.
Further, if those claims are successful, we may be required to
alter the content, pay financial damages or obtain content from
others.
SOME OF OUR
INTERNATIONAL SUBSIDIARIES HAVE NOT COMPLIED WITH REGULATORY
REQUIREMENTS RELATING TO THEIR FINANCIAL STATEMENTS AND TAX
RETURNS.
We operate our business in various foreign countries through
subsidiaries organized in those countries. Due to our
restatement of the historical SmartForce financial statements,
some of our subsidiaries have not filed their audited statutory
financial statements and have been delayed in filing their tax
returns in their respective jurisdictions. As a result, some of
these foreign subsidiaries may be subject to regulatory
restrictions, penalties and fines and additional taxes.
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