<PAGE> 1
As Filed with the Securities and Exchange Commission on December 17, 1996
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CKS GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7389 77-0385435
- ------------------------------- ---------------------------- ----------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation organization) Classification Code Number) Identification Number)
</TABLE>
10441 Bandley Drive
Cupertino, California 95014
(408) 366-5100
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
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MARK D. KVAMME
Chief Executive Officer
CKS GROUP, INC.
10441 Bandley Drive
Cupertino, California 95014
(408) 366-5100
(Name, address, including zip code and telephone number,
including area code, of agent for service)
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Copy to:
ROBERT T. CLARKSON, ESQ
DANIEL R. MITZ, ESQ.
RAMSEY HANNA, ESQ.
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Offering Aggregate
Securities to Amount to be Price Per Offering Amount of
be Registered Registered Share (1) Price (1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 318,667 $40.00 $2,746,680 $3,863
=================================================================================================================
</TABLE>
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(1) Estimated solely for purposes of calculation of the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
318,667 SHARES
CKS GROUP, INC.
COMMON STOCK
($0.01 PAR VALUE)
This Prospectus relates to the public offering, which is not being
underwritten, of shares of the common stock ("Common Stock") of CKS Group, Inc.,
a Delaware corporation (together with its consolidated subsidiaries, "CKS" or
the "Company") offered from time to time by the Selling Stockholder named herein
(the "Selling Stockholder") for its own benefit. It is anticipated that the
Selling Stockholder will generally offer shares of Common Stock for sale at
prevailing prices in the over-the-counter market on the date of sale. The
Company will receive no part of the proceeds of sales made hereunder. The Common
Stock to which this Prospectus relates was received by the Selling Stockholder
pursuant to the acquisition of all of the assets of the Selling Stockholder by
DG Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of the
Company (the "Acquisition"). The Common Stock issued to the Selling Stockholder
in the Acquisition was issued pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 4(2) thereof. All expenses of registration incurred in
connection with this offering are being borne by the Company, but all selling
and other expenses incurred by Selling Stockholder will be borne by such Selling
Stockholder. None of the shares offered pursuant to this Prospectus have been
registered prior to the filing of the Registration Statement of which this
Prospectus is a part.
The Common Stock of the Company is traded on the Nasdaq National Market
(Nasdaq Symbol: CKSG). On December __, 1996, the closing price of the Company's
Common Stock was $____.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
The Selling Stockholder and any broker executing selling orders on
behalf of the Selling Stockholder may be deemed to be an "underwriter" within
the meaning of the Securities Act. Commissions received by any such broker may
be deemed to be underwriting commissions under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December __, 1996.
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<PAGE> 3
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus is delivered, upon written or oral request of
any such person, a copy of any and all of the information that has been or may
be incorporated by reference in this Prospectus, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to CKS Group, Inc.,
10441 Bandley Drive, Cupertino, CA 95014, Attn: Investor Relations (telephone
(408) 366-5100).
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at Seven World Trade Center,
13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Common Stock of the Company is quoted on
the Nasdaq National Market. Reports, proxy and information statements and other
information concerning the Company may be inspected at The Nasdaq Stock Market
at 1735 K Street, N.W., Washington, D.C. 20006. Information, as of particular
dates, concerning directors and officers of the Company, their remuneration,
options granted to them, and the principal holders of securities of the Company
has been disclosed in the proxy statements distributed to shareholders of the
Company and filed with the Commission.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the shares of Common Stock offered hereby, reference
is hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any document are not necessarily complete, and each
such statement is qualified in its entirety by reference to the copy of such
document filed with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated by reference in this Prospectus: (i) the Company's Annual
Report on Form 10-K for the year ended November 30, 1995, filed pursuant to
Section 13 of the Exchange Act; (ii) the Company's Quarterly Report on Form 10-Q
for the quarter ended February 29, 1996, filed pursuant to Section 13 of the
Exchange Act; (iii) the Company's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1996, filed pursuant to Section 13 of the Exchange Act; (iv) the
Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1996,
filed pursuant to Section 13 of the Exchange Act; (v) the Company's Proxy
Statement dated May 8, 1996 for the 1996 Annual Meeting of Stockholders, filed
pursuant to Section 14 of the Exchange Act; (vi) the Company's Proxy Statement
dated November 27, 1996 for the 1996 Special Meeting of Stockholders, filed
pursuant to Section 14 of the Exchange Act; and (vii) the description of the
Company's Common Stock contained in its Registration Statement on Form 8-A as
filed with the Commission on November 30, 1995.
All reports and other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY
CKS Group, Inc. ("CKS" or the "Company") specializes in offering a wide
range of integrated marketing communication services that help companies market
their products, services and messages. The integrated marketing communication
services provided by the Company include strategic corporate and product
positioning, corporate identity and product branding, new media, packaging,
collateral systems, advertising, direct mail, consumer promotions, trade
promotions and media placement services. Depending on the scope of the
assignment, the Company's services to its clients range from execution of a
discrete marketing project, such as designing product packaging, to taking
responsibility for the overall marketing message through various methods. When
the Company assumes responsibility for the overall marketing message, the
Company works with the client to analyze the client's products or services, and
the market for those services, and to evaluate the appropriate media to reach
the desired market efficiently.
The Company is a provider of integrated marketing programs that utilize
advanced technology solutions and new media -- which the Company defines as
media that deliver content to end users in digital form, including the World
Wide Web, the Internet, proprietary online services, CD-ROMs, laptop PC
presentations and interactive kiosks.
CKS was incorporated in California in 1994 and is the successor to
three predecessor corporations, CKS Partners, Inc., CKS Pictures, Inc. and CKS
Interactive, Inc., which are now wholly owned subsidiaries of the Company. CKS
Partners, Inc. originally began business in 1987 with two employees as Cleary
Communications. CKS Pictures, Inc. and CKS Interactive, Inc. were incorporated
in 1994. The Company was reincorporated in Delaware in December 1995. CKS's
executive offices are located at 10441 Bandley Drive, Cupertino, California
95014. Its telephone number at that address is (408) 366-5100. The Company's
Internet address is: http://www.cks.com. Information contained in the Company's
World Wide Web site shall not be deemed part of this Prospectus.
References made in this Prospectus to "CKS," the "Company" or the
"Registrant" refer to CKS Group, Inc. and its wholly owned subsidiaries.
CKS|Group(TM), CKS|Interactive(TM), CKS|Onsite(TM), CKS|Partners(TM) and
CKS|Pictures(TM) are the trademarks of CKS Group, Inc., which may be registered
in some jurisdictions. All other trademarks used are owned by their respective
owners.
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RISK FACTORS
In addition to reviewing the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1995, the other documents incorporated herein
by reference and the other information in this Prospectus, the following factors
should be considered carefully in evaluating an investment in the securities
offered hereby.
DEPENDENCE ON KEY ACCOUNTS
The Company's five largest clients accounted for 42% and 33% of the
Company's revenues for the fiscal year ended November 30, 1995 and the nine
months ended August 31, 1996, respectively, with fluctuations in the amount of
revenue contribution from each such client from quarter to quarter. MCI
Telecommunications, Inc. ("MCI") and Apple Computer, Inc. ("Apple"), the
Company's two largest clients during the fiscal year ended November 30, 1995,
accounted for approximately 19% and 7% of the Company's revenues, respectively,
during that year and accounted for approximately 17% and 4% of the Company's
revenues, respectively, during the nine months ended August 31, 1996. Since the
Company's clients generally retain the Company on a project by project basis, a
client from whom the Company generates substantial revenue in one period may not
be a substantial source of revenue in a subsequent period. For example, of the
five largest clients (in terms of revenues recognized by the Company) during the
fiscal year ended November 30, 1995, only two were in the top five for the
fiscal year ended November 30, 1994 and only two were in the top five for the
nine months ended August 31, 1996. To the extent that the Company's major
clients do not remain a significant source of revenues, and the Company is
unable to replace these clients, there could be a direct and immediate material
adverse effect on the Company's business, financial condition and operating
results. The Company's typical project lasts four to six weeks. Once a project
is completed there can be no assurance that a client will engage the Company for
further services. In addition, the Company's clients may unilaterally reduce
their use of the Company's services or terminate existing projects without
penalty. The termination of the Company's business relationship with any of its
significant clients or a material reduction in the use of the Company's services
by a significant client would have a material adverse effect on the Company's
business, financial condition and operating results.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS AND MARGINS; SEASONALITY OF BUSINESS
The Company's operating results have fluctuated in the past and may
fluctuate in the future as a result of a variety of factors, including timing of
the completion, material reduction or cancellation of major projects or the loss
of a major client, timing of the receipt of new business, timing of the hiring
or loss of personnel, timing of the opening or closing of an office, the
relative mix of high margin creative projects as compared to lower margin
production projects, changes in the pricing strategies and business model of the
Company or its competitors, capital expenditures and other costs relating to the
expansion of operations, and other factors that are outside of the Company's
control. Operating results could also be materially adversely affected by
increased competition in the Company's markets. The Company's operating margins
may fluctuate from quarter to quarter depending on the relative mix of lower
cost full time employees versus higher cost independent contractors. The Company
experiences some seasonality in its business which results from timing of
product introductions and business cycles of the Company's clients. The
Company's revenues tend to be somewhat higher during the third and fourth
quarters of the Company's fiscal year as the Company's clients prepare marketing
campaigns for products launched in anticipation of fall trade shows and the
holiday season. The Company's revenues for the first fiscal quarter tend to be
somewhat lower because many clients have expended most of their marketing
budgets prior to the end of the calendar year and do not release funds from the
next calendar year's marketing budget until mid to late January. The Company
expects this seasonality to continue in the future. As a result of the foregoing
and other factors, the Company anticipates that it may experience material and
adverse fluctuations in future operating results on a quarterly or annual basis.
Therefore, the Company believes that period to period comparisons of its
revenues and operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance.
MANAGEMENT OF GROWTH; RISKS ASSOCIATED WITH EXPANSION
The Company's business has grown rapidly in recent periods. The growth
of the Company's business and expansion of its customer base have placed a
significant strain on the Company's management and operations. In the last
several years, the Company has opened offices in Portland (Oregon), New York,
Washington, D.C. and London. The Company subsequently decided to downsize the
London office. The Company's expansion has resulted, and is expected in the
future to result, in substantial growth in the number of its employees and in
increased responsibility for both existing and new management personnel and
strain on the Company's existing operational, financial and management
information systems. The Company's
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success depends to a significant extent on the ability of its executive officers
and other members of senior management to operate effectively, both
independently and as a group.
In addition, the Company plans to expand its offerings of integrated
marketing communication services and products. There can be no assurance that
the Company will be successful in identifying new services or products that will
be attractive to clients or that such services or products will ultimately
generate revenues in excess of costs to implement them. Difficulties in
recruiting and assimilating new personnel, enhancing the Company's financial and
operational controls and expanding the Company's marketing and customer support
capabilities may impede the Company's ability to pursue its growth strategy. In
general, there can be no assurance that the Company will be able to manage its
recent or any future expansions effectively, and any inability to do so would
have a material adverse effect on the Company's business, financial condition
and operating results. There also can be no assurance that the Company will be
able to sustain the rates of growth that it has experienced in the past.
DEVELOPING MARKET FOR NEW MEDIA; NEW ENTRANTS; UNPROVEN ACCEPTANCE OF THE
COMPANY'S NEW MEDIA SOLUTIONS
The Company's future growth is dependent to a significant extent upon
its ability to increase the amount of revenue it derives from providing
marketing and advertising solutions to its customers through new media, which
the Company defines as media that delivers content to end users in digital form,
including the World Wide Web, the Internet, proprietary online services,
CD-ROMs, laptop PC presentations and interactive kiosks. The market for
marketing and advertising through new media has only recently begun to develop,
is rapidly evolving and is characterized by an increasing number of market
entrants who have introduced or developed products and services for
communication and commerce through new media. Demand and market acceptance for
recently introduced products and services are subject to a high level of
uncertainty. There can be no assurance that commerce and communication through
new media will continue to grow. The use of new media in marketing and
advertising, particularly by those individuals and enterprises that have
historically relied upon traditional means of marketing and advertising,
generally requires the acceptance of a new way of conducting business and
exchanging information. In particular, enterprises that have already invested
substantial resources in other means of conducting commerce and exchanging
information may be particularly reluctant or slow to adopt a new strategy that
may make their existing resources and infrastructure less useful. If commerce
and communication through new media fail to grow for any reason, the Company's
business, financial condition and results of operation could be adversely
affected.
In connection with the Company's new media services, the Company is
exploring new methods to derive revenue, so that a larger percentage of its
revenues is recurring. These methods include long-term service contracts,
product license fees and content development contracts for new media. The
Company has not generated significant revenues from these new methods, and no
assurance can be given that the Company will be able to negotiate such
arrangements with clients or that any such arrangements will generate revenues
sufficient to offset the costs incurred by the Company in performing such
services.
DEPENDENCE ON PERSONNEL
The Company's success depends to a significant extent upon certain
members of senior management, including Mark D. Kvamme, Thomas K. Suiter,
Carlton H. Baab and other key employees. Although the Company maintains key man
life insurance policies on Messrs. Kvamme, Suiter, Baab and certain other key
personnel, there can be no assurance that such insurance policies will
adequately compensate for the loss of such individuals. The Company has no
employment agreements with any of these individuals. The loss of any senior
manager or other key employee could have a material adverse effect upon the
Company's business, financial condition and operating results. In addition, the
Company's ability to generate revenues relates directly to the Company's
personnel, both in terms of the number and expertise of the personnel the
Company has available to work on its projects as they are received and the mix
of such personnel (i.e., full time or temporary employees or contract service
providers). As a result, any failure by the Company to retain existing employees
or hire new employees when necessary could have a material adverse effect upon
the Company's business, financial condition and operating results. In addition,
if one or more of the Company's key employees resigns from the Company to join a
competitor or to form a competing company, the loss of such personnel and any
resulting loss of existing or potential clients to any such competitor could
have a material adverse effect on the Company's business, financial condition
and operating results. In the event of the loss of any such personnel there can
be no assurance that the Company would be able to prevent the unauthorized
disclosure or use of its technical knowledge, practices, procedures or client
lists. The Company believes that its future success will depend in large part
upon its ability to attract and retain additional highly skilled creative,
technical, financial and strategic marketing personnel. Competition for such
personnel, especially creative talent, is intense. There can be no assurance the
Company will be successful in attracting and retaining such
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personnel, and the failure to do so could have a direct and immediate material
adverse effect on the Company's business, financial condition and operating
results.
COMPETITION; LOW BARRIERS TO ENTRY
The markets for the Company's services are highly competitive, with
service providers constantly striving to reduce prices, incorporate new
capabilities and accelerate job completion schedules.
The Company faces competition from a number of sources. These sources
include national and regional advertising agencies as well as specialized and
integrated marketing communication firms. In addition, with respect to new
media, many advertising agencies have started to either internally develop or
acquire new media capabilities. New competitors that either provide integrated
or specialized services (e.g., corporate identity and packaging, advertising
services or World Wide Web site design) and are technologically proficient,
especially in the new media arena, have emerged and are competing with the
Company. Many of the Company's competitors or potential competitors have longer
operating histories, longer client relationships and significantly greater
financial, management, technology, development, sales, marketing and other
resources than the Company. In addition, the Company's ability to maintain its
existing clients and generate new clients depends to a significant degree on the
quality of its services and its reputation among its clients and potential
clients, as compared with the quality of services provided by and the
reputations of the Company's competitors. The Company also competes on the basis
of price. To the extent the Company loses clients to the Company's competitors
because of dissatisfaction with the Company's services or the Company's
reputation is adversely impacted for any other reason, the Company's business,
financial condition and operating results could be materially adversely
affected.
There are relatively low barriers to entry into the Company's business.
For example, the Company has no significant proprietary technology that would
preclude or inhibit competitors from entering the integrated marketing
communication solutions market. The Company expects that it will face additional
competition from new entrants into the market in the future. There can be no
assurance that existing or future competitors will not develop or offer
marketing communication services and products that provide significant
performance, price, creative or other advantages over those offered by the
Company, which could have a material adverse effect on the Company's business,
financial condition and operating results.
RISKS ASSOCIATED WITH ACQUISITIONS
As part of its business strategy, the Company expects to make
acquisitions of, or significant investments in, businesses that offer
complementary marketing communication services, products and technologies. Any
such future acquisitions or investments would be accompanied by the risks
commonly encountered in acquisitions of businesses. Such risks include, among
other things, the difficulty of assimilating the operations and personnel of the
acquired businesses, the potential disruption of the Company's ongoing business,
the inability of management to maximize the financial and strategic position of
the Company through the successful incorporation of acquired personnel and
clients, the maintenance of uniform standards, controls, procedures and policies
and the impairment of relationships with employees and clients as a result of
any integration of new management personnel. In addition to the Acquisition, in
August 1996, the Company acquired Schell/ Mullaney, Inc., a New York advertising
and marketing firm specializing in servicing technology companies, for
consideration consisting of an initial payment, in Common Stock of the Company,
of $5 million and additional future consideration of up to $9 million in Common
Stock of the Company if certain operating results are achieved in 1997 and 1998.
The Company is also negotiating with other potential acquisition targets. The
Company expects that future acquisitions, if any, could provide for
consideration to be paid in cash, stock or a combination of cash and stock.
There can be no assurance that the Acquisition, the Schell/Mullaney acquisition
or any other potential acquisition will not have a material adverse effect on
the Company's business, financial condition and operating results.
UNCERTAIN ADOPTION OF THE INTERNET AS A MEDIUM OF COMMERCE AND COMMUNICATIONS;
DEPENDENCE ON THE INTERNET
The Company's ability to derive revenues from new media solutions will
depend in part upon a robust industry and the infrastructure for providing
Internet access and carrying Internet traffic. The Internet may not prove to be
a viable commercial marketplace because of inadequate development of the
necessary infrastructure, such as a reliable network backbone or timely
development of complementary products, such as high speed modems. Because global
commerce and online exchange of information on the Internet and other similar
open wide area networks are new and evolving, it is difficult to predict with
any assurance whether the Internet will prove to be and remain a viable
commercial marketplace. Moreover, critical issues concerning the commercial use
of the Internet (including security, reliability, cost, ease of use and access,
and quality of service)
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remain unresolved and may impact the growth of Internet use. There can be no
assurance that the Internet will become a viable commercial marketplace. If the
necessary infrastructure or complementary products are not developed, or if the
Internet does not become a viable commercial marketplace, the Company's
business, financial condition and operating results could be materially
adversely affected.
PROJECT PROFIT EXPOSURES
The Company generates the substantial majority of its revenues through
project fees on a fixed fee for service basis. The Company assumes greater
financial risk on fixed-price type contracts than on either time-and-material or
cost-reimbursable contracts. Failure to anticipate technical problems, estimate
costs accurately or control costs during performance of a fixed-price contract
may reduce the Company's profit or cause a loss. Although the majority of the
Company's projects typically last four to six weeks and therefore each
individual short-term project creates less exposure than a long-term fixed-price
contract, in the event the Company does not accurately anticipate the progress
of a number of significant revenue-generating projects it could have a material
adverse effect on the Company's business, financial condition and operating
results.
CONFLICTS OF INTEREST
Conflicts of interest are inherent in certain segments of the marketing
communications industry. The Company has in the past and will in the future be
unable to pursue potential advertising and other opportunities because such
opportunities will require the Company to provide services to direct competitors
of existing Company clients. In addition, the Company risks alienating or
straining relationships with existing clients each time the Company agrees to
provide services to even indirect competitors of existing Company clients.
Conflicts of interest may jeopardize the stability of revenues generated from
existing clients and preclude access to business prospects, either of which
developments could have a material adverse effect on the Company's business,
financial condition and operating results.
SUSCEPTIBILITY TO GENERAL ECONOMIC CONDITIONS
The Company's revenues and results of operations will be subject to
fluctuations based upon the general economic conditions of the United States. If
there were to be a general economic downturn or a recession in the United
States, then the Company expects that business enterprises, including its
clients and potential clients, would substantially and immediately reduce their
advertising and marketing budgets. In the event of such an economic downturn,
there can be no assurance that the Company's business, financial condition and
operating results would not be materially and adversely affected.
MARKET ACCEPTANCE OF THE COMPANY'S APPROACH; SERVICE DEVELOPMENT; RAPID
TECHNOLOGICAL CHANGE
The Company provides an integrated approach to meet the marketing
communications needs of its clients. This approach is markedly different from
the more typical approach whereby clients employ the services of several
specialized service providers to meet their marketing communications needs.
There can be no assurance that potential clients of the Company will be willing
to embrace the Company's integrated approach. Moreover, to compete successfully
against specialized service providers, the Company believes that its products
and services in each discipline will need to be competitive with the services
offered by the firms that specialize in each discipline. There can be no
assurance that the Company will be successful in providing competitive solutions
to clients in each of its integrated marketing communication services and
products. Failure to do so could result in the loss of existing customers or the
inability to attract and retain new customers, either of which developments
could have a material adverse effect on the Company's business, financial
condition and operating results.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF
INCORPORATION AND DELAWARE LAW
Executive officers, directors, holders of five percent or more of the
Company's Common Stock and companies associated with such persons will
collectively own approximately 27.8% of the Company's outstanding Common Stock,
including approximately 18.8% held by The Interpublic Group of Companies, Inc.
("IPG"). Accordingly, such persons will have the effective power to influence
significantly the outcome of matters submitted for the vote of stockholders,
including the election of members of the Board of Directors and the approval of
significant change in control transactions. Their combined equity interest in
the Company accordingly may have the effect of making certain transactions more
difficult in the absence of the support of management of the Company and may
have the effect of delaying, deferring or preventing a change in control of the
Company.
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<PAGE> 9
In addition, the Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of such stock
without further stockholder approval. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any Preferred Stock that may be issued in the future. Issuance of Preferred
Stock could have the effect of delaying, deferring or preventing a change in
control of the Company. Furthermore, certain provisions of the Company's
Certificate of Incorporation and of Delaware law could have the effect of
delaying, deferring or preventing a change in control of the Company.
VOLATILITY OF SHARE PRICE
The trading price of the Company's Common Stock has been and in the
future could be subject to wide fluctuations in response to quarterly variations
in operating results, announcements of new services or business acquisitions by
the Company or its competitors, the gain or loss of client accounts, changes in
estimates of revenues or earnings by securities analysts, changes in the mix of
revenues derived by the Company from new media projects as compared to other
projects and other events or factors. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations that have
particularly affected the market price of many technology-oriented companies and
that often have been unrelated or disproportionate to the operating performance
of these companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. The trading prices of many high
technology and Internet-related companies' stocks, including the Common Stock of
the Company, are at or near their historical highs and reflect price/earning
ratios substantially above historical norms. There can be no assurance that the
trading price of the Company's Common Stock will remain at or near its current
level. See "Price Range of CKS Common Stock."
-8-
<PAGE> 10
SELLING STOCKHOLDER
The Selling Stockholder is Donovan & Green, Inc., a New York
corporation ("D&G"). D&G received the shares offered by this prospectus pursuant
to the Acquisition in partial consideration for the purchase of all of its
assets by DG Acquisition, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company. All of the shares of Common Stock held by D&G may be
sold pursuant to this Prospectus. D&G holds less than 1% of the outstanding
shares of Common Stock of the Company.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholder that it or its
pledgees, donees, transferees or other successors in interest intend to sell all
or a portion of the shares offered hereby from time to time in the
over-the-counter market and that sales will be made at prices prevailing at the
times of such sales. Such persons may also make private sales directly or
through a broker or brokers, who may act as agent or as principal. In connection
with any sales, the Selling Stockholder and any brokers or dealers participating
in such sales may be deemed to be underwriters within the meaning of the
Securities Act. The Company will receive no part of the proceeds of sales made
hereunder.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Stockholder and/or purchasers of the shares
offered hereby (and, if it acts as agent for the purchaser of such shares, from
such purchaser). Usual and customary brokerage fees will be paid by the Selling
Stockholder. Broker-dealers may agree with the Selling Stockholder to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker-dealer is unable to do so acting as agent for the Selling
Stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the Selling Stockholder. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions (which may involve cross and block transactions and which
may involve sales to and through other broker-dealers, including transactions of
the nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
The Company has advised the Selling Stockholder that the
anti-manipulative Rules 10b-6 and 10b-7 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), may apply to its sales in the market, has
furnished the Selling Stockholder with a copy of these Rules and has informed it
of the need for delivery of copies of this Prospectus. The Selling Stockholder
may indemnify any broker-dealer that participates in transactions involving the
sale of the shares against certain liabilities, including liabilities arising
under the Securities Act. Any commissions paid or any discounts or concessions
allowed to any such broker-dealers, and any profits received on the resale of
such shares, may be deemed to be underwriting discounts and commissions under
the Securities Act if any such broker-dealers purchase shares as principal. The
Company has agreed to indemnify the Selling Stockholder against certain
liabilities, including liabilities under the Securities Act.
Upon notification by the Selling Stockholder to the Company that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a cross or block trade, a supplemental prospectus will be filed
under Rule 424(c) under the Securities Act setting forth the name of the
participating broker-dealer(s), the number of shares involved, the price at
which such shares were sold by the Selling Stockholder, the commissions paid or
discounts or concessions allowed by the Selling Stockholder to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this Prospectus.
Any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the Selling Stockholder will sell any or
all of the shares of Common Stock offered by it hereunder.
-9-
<PAGE> 11
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits, to the maximum
extent permitted by Delaware law, the personal liability of directors for
monetary damages for breach of their fiduciary duties as a director. The
Company's Bylaws provide that the Company shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
permitted by Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements require the
Company, among other things to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
LEGAL MATTERS
The validity of the CKS Common Stock issuable pursuant to the
Acquisition and certain other legal matters related to the Acquisition will be
passed upon for CKS by Wilson Sonsini Goodrich & Rosati, Professional
Corporation ("WSGR"), Palo Alto, California. An investment partnership of WSGR,
and Robert T. Clarkson, a member of WSGR, own 6,000 shares of Common Stock of
the Company.
EXPERTS
The consolidated financial statements and schedule of the Company as of
November 30, 1994 and 1995, and for each of the years in the three-year period
ended November 30, 1995, have been incorporated by reference herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent auditors, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing. The financial statements of
Schell/Mullaney, Inc. as of December 31, 1994 and 1995, and for each of years in
the three-year period ended December 31, 1995, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent auditors, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
-10-
<PAGE> 12
TABLE OF CONTENTS
Page
Available Information................................................... 2
Incorporation of Certain Documents
by Reference......................................................... 3
The Company............................................................. 3
Risk Factors............................................................ 4
Selling Stockholder..................................................... 9
Plan of Distribution.................................................... 9
Legal Matters.......................................................... 10
Experts................................................................ 10
318,667 SHARES
CKS GROUP, INC.
COMMON STOCK
PROSPECTUS
DECEMBER 17, 1996
-11-
<PAGE> 13
CKS GROUP, INC.
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
Item 14 Other Expenses of Issuance and Distribution.*
The following table sets forth costs and expenses of the sale and
distribution of the securities being registered. All amounts except Securities
and Exchange Commission and Nasdaq Stock Market Listing fees are estimates.
<TABLE>
<S> <C>
Registration Statement--Securities and Exchange Commission ......... $ 3,940
Nasdaq Stock Market Listing Fee .................................... $ 6,373
Accounting fees .................................................... $ 5,000
Legal fees ......................................................... $ 5,000
Miscellaneous ...................................................... $ 1,000
Total .............................................................. $21,313
</TABLE>
---------------
* Represents expenses relating to the distribution by the
Selling Stockholder pursuant to the Prospectus prepared in
accordance with the requirements of Form S-3. These expenses
will be borne by the Company on behalf of the Selling
Stockholder.
Item 15 Indemnification of Directors and Officers.
See "Indemnification of Directors and Officers."
Item 16 Exhibits.
Exhibit
Number
4.1* Asset Purchase Agreement dated October 4, 1996 by and
among Registrant, Donoven & Green, Inc,, DG Acquistion,
Inc., Nancy L. Green and Michael Donoven.
4.2* Amendment No. to Asset Purchase Agreement dated December
__, 1996 by and among Registrant, Donoven & Green, Inc.,
Nancy L. Green and Michael Donoven.
4.3* Declaration of Registration Rights by the Company dated
December 16, 1996.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation
23.1 Consent of Independent Auditors
23.2 Consent of Wilson, Sonsini, Goodrich & Rosati (Included
in Exhibit 5.1)
24.1 Power of Attorney (contained on Page II-3)
II-1
<PAGE> 14
Item 17 Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate represent a fundamental change
in the information set forth in the registration statement, and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
as that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, CKS Group, Inc., a corporation organized and existing under the laws
of the State of Delaware, certifies that it has reasonable cause to believe that
it meets all of the requirements for filing on Form S- 3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cupertino, State of California, on the
17th day of December, 1996.
CKS GROUP, INC.
By: /s/ CARLTON H. BAAB
(Carlton H. Baab, Executive Vice President
and Chief Financial Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Mark D. Kvamme and Carlton H. Baab,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendment to
this Registration Statement on Form S-3, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARK D. KVAMME President, Chief Executive Officer (Principal Executive December 17, 1996
- --------------------------- Officer) and Chairman of the Board of Directors
(Mark D. Kvamme)
/s/ CARLTON H. BAAB Executive Vice President and Chief Financial Officer December 17,1996
- --------------------------- (Principal Financial and Accounting Officer)
(Carlton H. Baab)
/s/ ALEXANDRE BALKANSKI Director December 17, 1996
- ---------------------------
(Alexandre Balkanski)
/s/ PIERRE R. LAMOND Director December 17, 1996
- ---------------------------
(Pierre R. Lamond)
/s/ BARRY R. LINSKY Director December 17, 1996
- ---------------------------
(Barry R. Linsky)
Director December __, 1996
- ---------------------------
(Michael B. Slade)
Director December __, 1996
- ---------------------------
(Thomas K. Suiter)
</TABLE>
II-3
<PAGE> 16
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
CKS Group, Inc.
We consent to the incorporation by reference herein of our report dated December
15, 1995 (except as to Note 5 which is as of December 20, 1995), on our audit of
the consolidated financial statements and schedule of CKS Group, Inc. as of
November 30, 1994 and 1995 and for each of the years in the three-year period
ended November 30,1995, which report appears in the November 30, 1995, annual
report on Form 10-K of CKS Group, Inc., and our report dated June 6, 1996, on
our audit of the financial statements of Schell/Mullaney, Inc. as of December
31, 1994 and 1995, and for each of the years in the three-year period ended
December 31, 1995, which report appears in the Form 8-K/A of CKS Group, Inc.
dated August 1, 1996. We also consent to the reference to our firm under the
heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
San Jose, California
December 16, 1996
II-4
<PAGE> 17
INDEX TO EXHIBITS
Exhibit
Number
4.1* Asset Purchase Agreement dated October 4, 1996 by and
among Registrant, Donoven & Green, Inc,, DG Acquistion,
Inc., Nancy L. Green and Michael Donoven.
4.2* Amendment No. to Asset Purchase Agreement dated December
__, 1996 by and among Registrant, Donoven & Green, Inc.,
Nancy L. Green and Michael Donoven.
4.3* Declaration of Registration Rights by the Company dated
December 16, 1996.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation
23.1 Consent of Independent Auditors
23.2 Consent of Wilson, Sonsini, Goodrich & Rosati (Included
in Exhibit 5.1)
24.1 Power of Attorney (contained on Page II-3)
<PAGE> 1
December 17, 1996
CKS Group, Inc.
10441 Bandley Drive
Cupertino, California 95014
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about December 16, 1996
(the "Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 318,667 shares of your Common
Stock (the "Shares"), to be issued to and offered for sale by a selling
stockholder and/or its pledges, degrees, transferees or other successors in
interest. The Shares are to be sold from time to time in the over-the
counter-market at prevailing prices or as otherwise described in the
Registration Statement. As legal counsel for CKS Group, we have examined the
proceedings taken by you in connection with the sale of the Shares.
It is our opinion that the Shares when issued and sold in the manner
set forth in this Acquisition Agreement, referred to in the Registration
Statement, will be legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, including the prospectus constituting a part thereof, and further
consent to the use of our name wherever it appears in the Registration Statement
and any amendments thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/S/ WILSON, SONSINI, GOODRICH & ROSATI
