WIRED VENTURES INC, S-1/A, 1996-10-21

WIRED VENTURES INC
S-1/A, 1996-10-21
PERIODICALS: PUBLISHING OR PUBLISHING & PRINTING

Previous: CASINO MAGIC OF LOUISIANA CORP, S-4, 1996-10-21

Next: ALYN CORP, 15-12G, 1996-10-21

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1996

REGISTRATION NO. 333-4739
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

WIRED VENTURES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 2721 94-3241954
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

520 THIRD STREET, FOURTH FLOOR
SAN FRANCISCO, CA 94107
(415) 276-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------------

JEFFREY SIMON
CHIEF FINANCIAL OFFICER
WIRED VENTURES, INC.
520 THIRD STREET, FOURTH FLOOR
SAN FRANCISCO, CA 94107
(415) 276-5000
[email protected]
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

---------------------

COPIES TO:

<TABLE>
<S> <C>
KENNETH L. GUERNSEY ROBERT T. CLARKSON
JODIE M. BOURDET KENNETH M. SIEGEL
ISOBEL A. JONES TAMARA G. MATTISON
BRADLEY P. MACMILLIN WILSON, SONSINI, GOODRICH & ROSATI, P.C.
COOLEY GODWARD LLP 650 PAGE MILL ROAD
ONE MARITIME PLAZA, 20TH FLOOR PALO ALTO, CA 94304
SAN FRANCISCO, CA 94111 (415) 493-9300
(415) 693-2000
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.

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, please check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement number for the same offering.

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

---------------------

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
4,750,000 SHARES

[WIRED LOGO]

WIRED VENTURES, INC.

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
- --------------------------------------------------------------------------------

Of the 4,750,000 shares of Common Stock offered, 3,800,000 shares are being
offered hereby in the United States and 950,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".

All of the shares of Common Stock offered hereby are being sold by Wired
Ventures, Inc. (the "Company"). Prior to the offerings, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $12.00 and $14.00 per share. For
factors to be considered in determining the initial public offering price, see
"Underwriting".

SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.

The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "WWWW", subject to official notice of issuance.

- --------------------------------------------------------------------------------
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.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting".

(2) Before deducting estimated expenses of $1,300,000 payable by the
Company.

(3) The Company has granted the Underwriters an option for 30 days to
purchase up to an additional 712,500 shares at the initial public
offering price per share, less the underwriting discount, solely to
cover over-allotments. If such option is exercised in full, the total
initial public offering price, underwriting discount, and proceeds to
Company will be $ , $ , and $ , respectively. See
"Underwriting".
- --------------------------------------------------------------------------------

The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
October , 1996, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO. ROBERTSON, STEPHENS & COMPANY
- --------------------------------------------------------------------------------

The date of this Prospectus is , 1996.
<PAGE> 3

Wired(R) is a registered trademark and HotWired(TM), HardWired(TM),
HotBot(SM), Wired TV(TM), and Wired Online(TM) and certain other terms
used in this Prospectus are trademarks or service marks of the
Company. Trade names, trademarks, and service marks of other companies
appearing in this Prospectus are the property of their respective
holders.

The contents of the Company's Web sites and other media products are
not part of this Prospectus.

----------------------------------------------------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

----------------------------------------------------------------------
<PAGE> 4
[ARTWORK - DESCRIPTION OF COMPANY PRODUCT]

<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Except where otherwise indicated, all
share and per-share information in this Prospectus has been adjusted to reflect
(i) the completion in May 1996 of the Reorganization described in "The Company,"
(ii) the repricing by the Company of certain outstanding stock options in
September 1996, (iii) a one-for-two reverse split of the Preferred and Common
Stock of the Company to be effected in October 1996, and (iv) the conversion of
all outstanding shares of Preferred Stock of the Company into shares of Common
Stock (based on an assumed initial public offering price of $13.00 per share),
which will occur automatically upon the completion of the offerings. In
addition, unless otherwise indicated, all information in this Prospectus assumes
that the Underwriters' over-allotment option will not be exercised. See
"Description of Capital Stock" and "Underwriting."

THE COMPANY

Wired Ventures, Inc. (the "Company") is a new kind of global, diversified media
company engaged in creating compelling, branded content. Its current businesses
include publishing Wired magazine and programming original content on the World
Wide Web (the "Web") primarily through its HotWired network of online content
sites (the "HotWired Network"). The Company also launched a series of book
titles in September 1996 and is developing a television program based on its The
Netizen online program. The Company believes that it has developed Wired and
HotWired into strong brands that symbolize new media and the digital age.

Wired magazine and the Company's online content sites have award-winning content
and design that have attracted large and rapidly growing audiences with young,
well educated, and affluent demographics that the Company believes are highly
sought after by advertisers. The Company also believes that with its creative,
research, technological, sales, and management expertise, and its established
brands, it has created a platform from which to launch additional brands across
multiple media. In addition, the Company believes that its brands and media
properties are well positioned to capitalize on the expected growth in the use
of the Internet and the Internet advertising market. Industry sources estimate
that total spending for online advertising will reach $4.8 billion by 2000, up
from $80 million in 1996.

Wired magazine was launched in January 1993 to cover the Digital Revolution, a
term popularized by the Company that describes the profound changes caused by
the convergence of the computer, media, and communications industries. With
Wired magazine's blend of compelling editorial content and highly innovative
design, the Company has created a unique magazine genre. Wired magazine is not a
computer magazine; it is about the people, companies, and ideas of the Digital
Revolution. Wired magazine's paid circulation has grown from 90,000 at the end
of 1993 to an estimated 325,000 at the end of September 1996, while average
advertising revenues have grown from $265,000 per issue for 1993 to over $1.5
million per issue for the first nine issues of 1996. The magazine's advertisers
range from consumer goods companies such as The Saturn Corporation to technology
and telecommunications companies such as Motorola, Inc. Wired magazine has won a
number of prestigious awards, including a 1994 National Magazine Award for
General Excellence and the 1996 National Magazine Award for Design, both given
by the American Society of Magazine Editors.

The Company's online programming is primarily distributed through the Web. Its
flagship offering, the HotWired Network, was launched in October 1994 and
features original content on topics such as politics, travel, technology, arts,
entertainment, health, careers, and lifestyle, as well as content based on Wired
magazine. The HotWired Network also includes HotBot, a Web-wide search engine
designed to search the complete text of all documents on the Web, launched in
June 1996. Users can access the HotWired Network's programs through the main
HotWired Network site (http://www.hotwired.com) or in most cases through each
program's own distinct Web address. The Company also produces the popular
Suck.com online content

3
<PAGE> 6

site (http://www.suck.com), a source of sharp commentary on the Web and popular
culture. During September 1996, the Company's Web sites received between 137,000
and 206,000 visitors per weekday, up from 12,000 to 19,000 visitors per weekday
in September 1995. The Company's online advertisers range from consumer products
companies such as VISA International to technology and telecommunications
companies such as Intel Corporation. The HotWired Network has won a number of
prestigious awards, including the Digital Hollywood Best of Digital Hollywood
award (1995) and Best Site of the Year award (1996) and the National Information
Infrastructure Arts & Entertainment Award (1995).

The Company has devoted and will continue to devote substantial resources to
extending its brands into new print, online, and television media properties,
all of which are aimed at the core demographic groups reached by Wired magazine
and the HotWired Network. The Company, through its HardWired book brand, is in
the process of publishing several book titles. The first two of these have been
chosen as a Book of the Month Club selection and a featured alternate,
respectively. The Company is also developing a television program based on the
HotWired Network's The Netizen political commentary program
(http://www.netizen.com) with funding partially provided under an agreement
between the Company and MSNBC Cable Channel, L.L.C., a joint venture of National
Broadcasting Company, Inc. and Microsoft Corporation. In addition, the Company
is developing an online news service that will provide news from the perspective
of the digital generation. This service is expected to attract additional
traffic to the HotWired Network and, along with other HotWired content, will
also be distributed through alternative channels such as the PointCast Network.
The Company is also exploring several new magazine, online, and television
concepts that are editorially and creatively distinct from the Company's current
products. Although over 90% of the Company's revenues to date have been from
Wired magazine, as of September 30, 1996, approximately half of the Company's
employees were devoted to operating and developing the Company's online
operations.

The Company aims to create "smart media for smart people around the world" -
high-quality information and entertainment products aimed at a well educated,
affluent, technologically savvy, and influential consumer group. Its mission is
to build a new kind of global, diversified media company for the 21st century
utilizing its ability to create compelling, branded content across multiple
media, its research and technological capabilities, its strong connection to
consumers and advertisers, and its commitment to journalistic and artistic
excellence.

RISK FACTORS

For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors."

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering........................... 3,800,000 shares
International Offering.................. 950,000 shares
Total................................ 4,750,000 shares
Common Stock to be outstanding after the
offerings............................... 20,961,518 shares(1)
Use of proceeds........................... Repayment of approximately $5.0
million of indebtedness, product
development, international
expansion, and working capital and
other general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol.... WWWW
</TABLE>

(1) Based on shares outstanding as of September 30, 1996. Excludes: (i)
2,435,364 shares issuable upon the exercise of stock options outstanding as
of such date with a weighted average exercise price of $8.72 per share; (ii)
2,481,432 shares reserved for future issuance under the Company's 1996
Equity Incentive Plan; and (iii) 50,000 shares reserved for future issuance
under the Company's 1996 Non-Employee Director Stock Option Plan.

4
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------------
1993 1994 1995 1995 1996
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Total revenues........................... $ 2,928 $ 9,181 $25,255 $16,736 $ 25,109
Total costs and expenses................. 3,952 12,718 33,188 21,098 67,896(1)
Operating loss........................... (1,024) (3,537) (7,933) (4,362) (42,787)(1)
Net loss................................. (1,036) (3,457) (6,505) (3,334) (42,038)(1)
Pro forma net loss per share(2).......... $ (0.37) $ (2.47)
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(3)
------- -------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 3,997 $ 55,124
Working capital (deficit).......................................... (6,791) 49,336
Total assets....................................................... 18,271 69,398
Long-term note payable............................................. 1,272 1,272
Accumulated deficit................................................ (36,830) (36,830)
Total stockholders' equity (deficit)............................... (448) 55,679
</TABLE>

- --------------------------------------------------------------------------------

(1) Includes non-cash operating charges of $20.5 million resulting from the
write-off of in-process research and development recorded in connection with
the Business Combination described in "The Company" and $6.4 million
compensation expense relating to stock options granted and stock issued
during the first six months of 1996.

(2) See Note 2 of Notes to Consolidated Financial Statements.
(3) As adjusted to reflect the sale by the Company of 4,750,000 shares of Common
Stock in the offerings at an assumed initial public offering price of $13.00
per share and deduction of the estimated underwriting discount and offering
expenses and application of the net proceeds therefrom as described herein.
See "Use of Proceeds" and "Capitalization."

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" and elsewhere in this Prospectus.

5
<PAGE> 8

RISK FACTORS

In addition to the other information presented in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" and elsewhere in this
Prospectus.

LIMITED OPERATING HISTORY AND ANTICIPATION OF LOSSES

The Company commenced the publishing of Wired magazine in January 1993 and
launched the HotWired Network in October 1994. Accordingly, the Company has a
limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company has incurred operating losses since
inception, including operating losses of $1.0 million for 1993, $3.5 million for
1994, $7.9 million for 1995, and $42.8 million for the nine months ended
September 30, 1996, partially as a result of a one-time, non-cash charge of
approximately $20.5 million resulting from the write-off of in-process research
and development recorded in connection with the Business Combination described
in "The Company." Moreover, deferred compensation expense of $9.9 million
relating to stock options granted and stock issued prior to May 31, 1996 will be
recognized over the vesting periods of the options. Of such amount, $6.4 million
was recognized in the nine months ended September 30, 1996, and the balance will
be amortized over the remaining vesting periods of the options, including
$380,000 to be recognized in the three months ending December 31, 1996. Although
over 90% of the Company's revenues to date have been from Wired magazine, the
Company has devoted and will continue to devote substantial resources to
extending its brands into new print, online, and television media properties.
The Company and its prospects must be considered in light of the risks,
expenses, and difficulties frequently encountered by new media companies and
companies in the new and rapidly evolving market for online products and
services. To address these risks, the Company must, among other things, continue
to respond to competitive developments, attract, retain, and motivate qualified
personnel, continue to successfully execute its advertising and print sales
strategies, and develop and successfully commercialize new media properties.
There can be no assurance that the Company will be successful in addressing
these risks. The Company's ability to maintain or increase its revenues or
become profitable depends on many factors, including its ability to increase
advertising rate bases and the resulting revenues for its print publications and
online content sites and increase the paid circulation of its print
publications. There can be no assurance that the Company will be successful in
any of these efforts. Since its inception, the Company has experienced
substantial growth, which has required it to significantly increase the scale of
its operations and, correspondingly, its operating expenses. The increase in
operating expenses reflects the hiring of additional personnel in all functional
areas, an increase in sales and marketing activities, and the funding of
development of new products and technologies. The Company expects that operating
expenses will increase faster than revenues for at least the next 18 months and,
as a result, the Company expects to incur operating and net losses through at
least 1997. There can be no assurance that the Company can maintain or increase
its revenues in the future to offset its increased operating expenses. See "The
Company," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," and "Business --
Development Projects."

FLUCTUATIONS IN OPERATING RESULTS

6
<PAGE> 9

(i) the seasonal nature of the advertising business, where the second and fourth
calendar quarters for magazine publishers are generally characterized by higher
advertising revenues; (ii) the ability of the Company to maintain or increase
the paid circulation for Wired magazine and future publications; (iii) the cost
of paper, postage, and other costs associated with magazine production and
distribution; (iv) the ability to maintain or increase print and online
advertising rate bases; (v) the ability to reasonably predict newsstand and
store sales of its magazines and books and thereby limit the returns of unsold
products; (vi) the anticipated increases in operating expenses to support the
expansion of its existing print and online businesses, the development of new
magazine and online content sites, and the Company's book publishing and
television efforts; (vii) the size and rate of growth of the market for Internet
products and online content; (viii) the introduction by others of products that
are competitive with those of the Company; and (ix) the general economic
conditions in the United States and worldwide. As a result of the foregoing,
period-to-period comparisons of the Company's results of operations are not
necessarily meaningful and should not be relied upon as an indication of future
performance.

The Company believes that advertising sales in traditional media, such as
magazines and television, are generally lower in the first and third calendar
quarters than in the respective preceding quarters and that advertising
expenditures fluctuate significantly with economic cycles. Depending on the
extent to which the Web is accepted as an advertising medium, seasonality and
cyclicality in the level of advertising expenditures generally could become more
pronounced for Web advertising. Seasonality and cyclicality in advertising
expenditures generally, or with respect to Web-based advertising specifically,
could have a material adverse effect on the Company's business, financial
condition, and operating results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

FUTURE CAPITAL NEEDS

The Company will require substantial additional funding to meet its future
operating and capital expenditure requirements. The Company believes that the
net proceeds from the sale of the Common Stock to be sold in the offerings will
be sufficient to meet its product development, international expansion, working
capital and capital expenditure requirements through at least the end of 1997.
However, the Company may need to raise additional funds in order to support more
rapid expansion, develop new or enhance existing products, respond to
competitive pressures, acquire complementary businesses, assets or technologies,
or respond to unanticipated requirements. The Company may seek to raise
additional funds through private or public sales of securities, strategic
relationships, bank or lease financing, or otherwise. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
the stockholders of the Company will be reduced, stockholders may experience
additional dilution, and such securities may have rights, preferences, and
privileges senior to those of the holders of the Company's Common Stock. There
can be no assurance that additional financing will be available when needed on
terms favorable to the Company, if at all. If adequate funds are not available
or are not available on acceptable terms, the Company may be unable to develop
new or enhance existing products, take advantage of future opportunities, or
respond to competitive pressures or unanticipated requirements, which would have
a material adverse effect on the Company's business, financial condition, and
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

DEVELOPING MARKET FOR ONLINE MEDIA; UNCERTAIN ACCEPTANCE OF THE INTERNET AS AN
ADVERTISING MEDIUM

The Company's future growth is dependent to a significant extent upon its
ability to increase the amount of revenue it derives from advertising through
online media, principally the Web and proprietary online services. The market
for advertising through online 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 information,
entertain-

7
<PAGE> 10

ment, and commerce through the Web and online services. Demand and market
acceptance for recently introduced online products and services are subject to a
high level of uncertainty. There can be no assurance that the market for
commerce, entertainment, and information through online media will continue to
grow. The use of the Web and online services as a medium for 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 advertising may be particularly reluctant or slow to adopt
advertising through online media. If the Web and online services do not develop
as a significant means for companies to advertise their products and services,
there will be a material adverse effect on the Company's business, financial
condition, and operating results. See "Business -- Products."

In connection with the development and expansion of the Company's online
products and distribution channels, the Company is exploring new methods of
deriving and increasing revenues, including long-term advertising contracts and
frequency discounts, cross-publication advertising packages, co-branding of
program content, user-customized online advertising, use of detailed demographic
data of online and print consumers, and relationships with online services for
the delivery of online content in exchange for royalties based on user fees.
There can be no assurance that the Company will be able to negotiate such
arrangements with advertisers or strategic partners or that any such
arrangements will generate revenues sufficient to offset the costs incurred by
the Company in developing and maintaining such business arrangements.

The Company's ability to derive revenues from online advertising will also
depend on a robust online industry and the infrastructure for providing Internet
access and carrying Internet traffic, particularly with respect to the Web. The
Internet in general and the Web in particular may not prove to be viable
commercial marketplaces because of inadequate development of the necessary
infrastructure, such as a reliable network backbone, or timely development of
affordable complementary products, such as high-speed modems and accurate
methods for auditing online usage and advertising. Because global commerce and
the exchange of information on the Internet are new and evolving, it is
difficult to predict with any assurance whether the Internet or the Web will
prove to be and remain a viable commercial marketplace. Moreover, critical
issues concerning the commercial use of the Internet and the Web, including
security, technical reliability, cost, ease of use and access, and quality of
service, remain unresolved and may impact the growth of Internet and Web use. If
the necessary infrastructure or complementary products are not developed, or if
the Internet or the Web does not continue to develop as a viable commercial
marketplace, there will be a material adverse effect on the Company's business,
financial condition, and operating results. See "Business -- Advertising Sales."

NO ASSURANCE OF SUCCESSFUL EXPANSION OR DIVERSIFICATION OF OPERATIONS

To date, more than 90% of the Company's revenues have been attributable to its
magazine operations. The Company believes its future success is in part
dependent on its ability to expand its editorial and creative vision to new
magazines and online media products and to other media, including books and
television. The development of such new products generally involves significant
expense and diversion of management, creative, technical, and personnel
resources from the Company's current businesses. The Company's past performance
in print and online media is not an indicator of the performance of future
products, if developed. There can be no assurance that the Company will be
successful in developing, marketing, or selling new magazines or online media
products, or that the cost of establishing such products, whether successful or
not in the market, will not have a material adverse effect on the Company's
business, financial condition, and operating results. For example, during the
beta test period following the Company's introduction of the HotBot Web-wide
search engine in May 1996, some users experienced difficulties with HotBot, such
as improperly displayed graphics,

8
<PAGE> 11

long query times, and incomplete searches. While the Company and its HotBot
strategic partner, Inktomi Corporation, substantially resolved these technical
issues with the HotBot service prior to the time the service began accepting
paid advertising in June 1996, there can be no assurance that the Company will
not experience similar or other difficulties in connection with future online
product introductions or that technical problems will not arise once a site or
other product is in operation. In addition, the Company and its management have
only limited prior experience in book publishing, television, and other media.
The Company began distribution of its first book title in September 1996, and
the planned airing of the Company's first television program did not occur as
originally scheduled in the Summer of 1996. There can be no assurance that the
Company will be able to successfully develop, market, sell, or deliver its book
products or television programming or that the cost of establishing a business
in either medium, whether successful or not in the market, will not have a
material adverse effect on the Company's business, financial condition, and
operating results. See "Business -- Development Projects."

DEPENDENCE ON TECHNOLOGICAL ENHANCEMENTS

A key element of the Company's strategy is to continue to develop technological
innovations for its online media properties that allow it to enhance the user's
experience and strengthen relationships with advertisers. The Company believes
such technological leadership is required for the Company to remain competitive.
There can be no assurance that the Company will be able to conceive, develop, or
acquire such technological innovations successfully or that the Company's
competitors will not successfully implement features on their online media
properties that are superior to those of the Company's online media properties.
Moreover, the cost associated with developing new technology can be significant.
There can be no assurance that these costs will not have a material adverse
effect on the Company's business, financial condition, and operating results.
See "Business -- Products."

MANAGEMENT OF A CHANGING BUSINESS

Since its inception, the Company has experienced significant change and
expansion in its business and operations, which have placed significant demands
on the Company's administrative, operational, financial, and other resources.
Future growth, if any, could place a significant strain on the Company's
management, operational, financial, and other resources. The Company's ability
to manage future growth will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures, and controls.
Moreover, the Company will need to continue to train, motivate, and manage its
employees and attract and retain qualified senior managers and technical
professionals. If the Company's management is unable to manage growth
effectively, there could be a material adverse effect on the Company's business,
financial condition, and operating results. See "Business -- Employees" and
"Management."

DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL

The Company's performance is substantially dependent on the performance of its
executive officers and other key personnel. The Company is dependent on its
ability to retain and motivate high quality personnel, especially its editorial,
creative, and management personnel. The loss of the services of any of the
Company's key personnel, particularly its co-founders Louis Rossetto and Jane
Metcalfe, who are domestic partners, could have a material adverse effect on the
Company's business, financial condition, and operating results. Ms. Metcalfe
currently anticipates taking a leave of absence of approximately three months
beginning in the first quarter of 1997. The Company does not have "key person"
life insurance policies on any of its employees.

The Company's future success also depends on its continuing ability to identify,
hire, train, and retain other highly qualified creative, technical, and
managerial personnel with compatible creative visions. The Company has had
difficulties in the past identifying qualified personnel to

9
<PAGE> 12

lead certain of its proposed new products. Additionally, the Company has
experienced turnover of key personnel in connection with its proposed The
Netizen television program. The Company anticipates hiring a large number of new
employees in all functional areas within the next two years. Competition for
highly qualified personnel is intense. There can be no assurance that the
Company will be successful in attracting, assimilating, and retaining such
personnel, and the failure to do so could delay the launch of new products or
otherwise have a material adverse effect on the Company's business, financial
condition, and operating results. Moreover, 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 proprietary technology, practices,
procedures, or customer lists. See "Business -- Employees" and "Management."

COMPETITION

The Company faces significant competition from a large number of companies, many
of which have significantly greater financial, creative, technical, and
marketing resources than the Company. These companies may be better positioned
to compete in the evolving media and technology industries. In addition, the
Company faces broad competition for advertising revenue from other media
companies that produce magazines, newspapers, online content, radio, and
television, as well as other promotional vehicles such as direct mail, coupons,
and billboard advertising. Each of the Company's products competes with other
media and many other types of leisure activities for audiences and advertising
revenue. Overall competitive factors in these segments include editorial and
design quality, price, and customer service. Competition for advertising dollars
is primarily based on advertising rates, reader response to advertisers'
products and services, and effectiveness of sales teams. There can be no
assurance that one or more of the Company's competitors will not significantly
undermine the sales efforts of the Company or reduce the Company's audiences,
either of which would have a material adverse effect on the Company's business,
financial condition, and operating results. Moreover, to the extent the Company
develops new magazines and other media products, there can be no assurance that
one or more of such new products will not compete with the Company's current
products for audiences and advertising revenues, which could have a material
adverse effect on the Company's business, financial condition, and operating
results.

Competition in the magazine publishing business is also intense with respect to
subscription sales and single copy distribution and display. Wired magazine is
editorially unique, covering a broad range of topics relating to the Digital
Revolution, including technology, business, and lifestyle. As such, the Company
competes with many general interest magazines, including computer magazines such
as BYTE and PC Magazine, business magazines such as Fortune and BusinessWeek,
and lifestyle magazines such as GQ. There can be no assurance that one or more
other magazines or online content sites, including new magazines or online
content sites developed by the Company, will not significantly undermine the
marketing efforts of Wired magazine or significantly impact the sources of its
circulation or advertising revenues. If this were to occur, there would be a
material adverse effect on the Company's business, financial condition, and
operating results.

To the extent that the Internet infrastructure is expanded and access to the Web
is made easier and less expensive, the Company expects the number of Web users
to continue to grow at a rapid rate. In response to this anticipated growth,
there is an increasing number of companies, some with significantly greater
resources than the Company, developing online content and services for delivery
on the Web, and competing for audiences and the advertising dollars that are
currently being devoted to the Web. The Company's online content sites compete
with other online content sites such as America Online's Global Network
Navigator, cnet, Starwave's ESPNet, and Time-Warner's Pathfinder. The Company's
HotBot search engine service competes with services such as AltaVista, Excite,
Infoseek, Lycos, and Yahoo!. All of the Company's online media properties
compete for advertising dollars with Web browser companies such as Netscape
Communications Corporation and Microsoft Corporation. There can be no assurance
that one or more of the Company's competitors or the Company's own media

10
<PAGE> 13

properties will not significantly undermine the Company's marketing efforts for
its online media properties or attract a significant amount of advertising
revenues away from the Company.

The Company's book publishing operations compete for sales with numerous other
publishers and retailers, as well as with other media, including the Company's
own print and online media products. In addition, the acquisition of publishing
rights to books by leading authors is highly competitive, and the Company
competes with numerous other book publishers. There can be no assurance that the
Company's book publishing efforts will be successful, or that the costs of such
efforts will not have a material adverse effect on the Company's business,
financial condition, and operating results.

The creation, production, and distribution of television programming is a highly
competitive business, as each television program competes with other television
programming and with other forms of entertainment. Furthermore, competition in
the television industry is expected to increase as the number and variety of
basic cable and pay television services available continue to grow. There is
active competition among all production companies in these industries for the
services of producers, directors, actors, and others and for the acquisition of
literary properties. With respect to the distribution of television product,
there is significant competition from independent producers and distributors as
well as major studios. Revenues for filmed entertainment product depend in part
on general economic conditions, but the competitive position of a producer or
distributor is still greatly affected by the quality of, and public response to,
the entertainment product it makes available to the marketplace. There can be no
assurance that the Company's efforts in television programming will result in
programming that is marketable to advertisers and distributors or will be
commercially successful, or that the cost of creating and producing television
programming, whether successful or not in the market, will not have a material
adverse effect on the Company's business, financial condition, and operating
results.

UNCERTAINTY OF CONTENT AVAILABILITY

The success of the Company's products is largely dependent on the availability
of high quality editorial and artistic content that will appeal to consumers
and, in the case of the Company's print publications, generate circulation
revenue. Without strong consumer interest in the Company's publications,
advertisers will not begin or continue to advertise with the Company, and the
Company's ability to generate revenues from advertising will be materially and
adversely affected. The Company believes the most important factor influencing
consumer acceptance and support of its products is the quality of the content.
There can be no assurance that the Company's direct content development efforts
will produce media products that attract consumer interest and generate
advertising and subscription revenues in the future. The failure of the Company
to create compelling content and generate and maintain consumer and advertiser
interest would risk diluting its brands and would have a material adverse effect
on the Company's business, financial condition, and operating results.

In addition to its own direct content development efforts, the Company depends
substantially on third parties, including both occasional and regular outside
contributors, to create content for the Company's media products. The dependence
on third party content providers is expected to continue in the future. In many
cases, the Company is required to compete with other business opportunities for
the attention of these content providers, including other print and online
publications that are or will be directly competitive with the Company's media
products. There can be no assurance that the Company will succeed in attracting
and retaining third party contributors in sufficient numbers or quality to
supply the requisite content for its products to succeed. The inability of the
Company to retain third parties that develop high quality content that appeals
to consumers would have a material adverse effect on the success of the
Company's publications and its business, financial condition, and operating
results. See "Business -- Products."

11
<PAGE> 14

DEPENDENCE ON INFORMATION TECHNOLOGY INDUSTRIES

The Company's products are generally targeted toward users and developers of
information technology and are susceptible to shifts in this rapidly changing
market. The information technology industries are characterized by intense
competition among various technologies and their respective proponents. The
markets for the technologies to which the Company's editorial content and
product distribution are devoted, including the Internet, are in the early
stages of development. The Company's growth is dependent upon a developing
market for these technologies. If information technologies, including the
Internet, develop more slowly than anticipated, or become obsolete, there will
be a material adverse effect on the revenues from the Company's products devoted
to or reliant on such technologies, and on the Company's business, financial
condition, and operating results as a whole. Furthermore, even if these segments
of the information technology market do develop as the Company anticipates,
there can be no assurance that the demand for the Company's products and
services will also increase. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Competition."

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

A component of the Company's strategy is further expansion into international
markets. The Company has only limited experience in developing localized
versions of its print and digital publications and marketing and distributing
them internationally. Moreover, the Company believes that in order for it to
expand internationally, it must continue to enter into strategic alliances with
companies outside of the United States. There can be no assurance that the
Company will be able to obtain such alliances on terms favorable to the Company,
if at all, or that any strategic alliance will be successful. In addition, there
are certain risks inherent in doing business in international markets, such as
unexpected changes in regulatory requirements, currency fluctuations,
state-imposed restrictions on the repatriation of funds, potentially adverse tax
consequences, import and export duties and restrictions, difficulties in
staffing and managing multinational operations, the uncertainty of product
acceptance by different cultures, and seasonal reductions in business activity
during the summer months in Europe and certain other parts of the world. There
can be no assurance that one or more of such factors will not have a material
adverse effect on the Company's future international operations and,
consequently, on the Company's business, financial condition, and operating
results. As a result of the foregoing, there can be no assurance that the
Company will be able to successfully market, sell, and deliver its products and
services in international markets. See "Business -- Products."

DEPENDENCE ON ADVERTISERS

The majority of the Company's revenues has been and is expected to continue to
be attributable to advertising. In 1995 and the first nine months of 1996, 66%
and 64%, respectively, of the Company's total revenues were from advertising.
The majority of the Company's print magazine advertising space is sold on a
monthly basis. Longer-term advertising contracts with magazine and online
advertisers are subject to cancellation upon advance notice of 30 days or less.
In addition, the nature of certain of the Company's editorial materials has from
time to time resulted in the loss of advertising accounts. To the extent that
the Company's major advertisers do not continue to advertise in the Company's
products and the Company is unable to replace these advertisers, there would be
a material adverse effect on the Company's business, financial condition, and
operating results. See "Business -- Advertising Sales."

12
<PAGE> 15

UNCERTAINTY OF GOVERNMENT REGULATION

Laws and regulations may be enacted with respect to the Internet, covering
issues such as access to content, pricing, user privacy, and characteristics and
quality of products and services. The adoption of any such laws or regulations
may decrease the growth of the Internet, which could in turn decrease the demand
for advertising and increase the Company's cost of doing business, or could
otherwise have a material adverse effect on the Company's business, financial
condition, and operating results.

In February 1996, the Communications Decency Act ("CDA") was signed into law as
part of the Telecommunications Act of 1996. Under its provisions, the CDA
creates criminal liability for the expression of "indecent" and similar
communications via online systems accessible to minors, and carries penalties
generally consisting of minimum monetary fines of approximately $250,000 or up
to two years of incarceration for each occurrence. Through a federal court
challenge of certain aspects of the statute by a variety of traditional and new
media publishers, access service providers, and other organizations, including
the Company, the United States District Court for the Eastern District of
Pennsylvania enjoined the government from enforcing certain portions of the CDA
on the basis that such portions are unconstitutional. The government is
currently appealing this ruling. There can be no assurance that the injunction
against enforcement of the provisions of the new law that might apply to the
Company's online products will not be overturned or that material created by or
on behalf of the Company or that is otherwise distributed through the Company's
online sites, including those provided via online services such as America
Online, will not be deemed in violation of the CDA. In addition, there can be no
assurance that similar state, federal, or international laws have not or will
not be enacted and enforced that would criminalize or otherwise penalize or
restrict such communications. The inability of the Company to continue
publishing any of its current or planned online content or displaying the online
submissions of its users as a result of the CDA or similar laws, or any
penalties incurred by the Company under such laws, could have a material adverse
effect on the Company's business, financial condition, and operating results.

RISKS ASSOCIATED WITH CLAIMS OF DEFAMATION

Publishing of print and online content and television programming involves the
risk of claims of libel or other forms of defamation. Civil and criminal
liability for libelous or otherwise defamatory content posted to the interactive
spaces in the Company's online publications is not settled under law. Although
the Company has obtained what it believes to be adequate insurance coverage for
potential claims of libel and other forms of defamation, there can be no
assurance the Company will not be exposed to litigation, forcing the Company to
expend funds and other resources not anticipated in the current operating
budgets and projections. Any such litigation, whether or not resulting in a
ruling requiring the payment of damages, could have a material adverse effect on
the Company's business, financial condition, and operating results. The Company
has already defended and settled, without payment or other concession but at
significant expense, one defamation lawsuit. See "Business -- Litigation."

RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY RIGHTS

13
<PAGE> 16

elements of its trademarks, trade dress, and similar proprietary rights to third
parties, including in connection with Wired magazine's international editions
and other media properties that may be controlled operationally by third
parties. While the Company attempts to ensure that the quality of its brands is
maintained by such licensees, there can be no assurance that such licensees will
not take actions that might materially and adversely affect the value of the
Company's proprietary rights or the reputation of its products, either of which
could have a material adverse effect on the Company's business. Moreover, while
the Company believes that it has the right to use Wired, HotWired, and its other
marks in connection with its business, and it generally has the right to
prohibit others from using such marks in certain fields of use, there can be no
assurance that the Company will be able to maintain such rights. From time to
time the Company has been, is, and expects to continue to be subject to legal
proceedings and claims in the ordinary course of its business, including claims
of alleged infringement of the trademarks and other intellectual property rights
of third parties by the Company and its licensees. For example, the Company has
been involved in a dispute with America Online regarding the scope of use of the
mark "Netizen." While the Company believes that it will be able to resolve this
dispute on terms satisfactory to the Company, there can be no assurance in this
regard. Such claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources. The Company is not aware of any
legal proceedings or claims that the Company believes will have, individually or
in the aggregate, a material adverse effect on the Company's business, financial
condition, and results of operations. See "Business -- Litigation."

CONCENTRATION OF STOCK OWNERSHIP

Upon the completion of the offerings, the present directors, executive officers,
and greater than 5% stockholders and their respective affiliates will
beneficially own approximately 56% of the outstanding Common Stock of the
Company (54% of the outstanding Common Stock if the Underwriters' over-allotment
option is exercised in full). As a result of their ownership, the directors,
executive officers, and greater than 5% stockholders and their respective
affiliates collectively will be able to control all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of the Company.
See "Principal Stockholders" and "Description of Capital Stock."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the offerings, there has been no public market for the Company's Common
Stock, and there can be no assurance that an active public market for the
Company's Common Stock will develop or be sustained after the offerings. The
initial public offering price will be determined by negotiation between the
Company and the representatives of the U.S. Underwriters based upon several
factors. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The trading price of the
Company's Common Stock could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations or new media properties by the Company or its competitors, changes
in financial estimates by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable to the
Company, and other events or factors. Moreover, in some future quarter the
Company's operating results may fall below the expectations of securities
analysts and investors. In such event, the market price of the Company's Common
Stock would likely be materially and adversely affected. In addition, the stock
market in general, and the market prices for Internet-related companies in
particular, have experienced extreme volatility that often has been unrelated to
the operating performance of such companies. These broad market and industry
fluctuations may adversely affect the trading price of the Company's Common
Stock, regardless of the Company's operating performance.

14
<PAGE> 17

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of a substantial number of shares of the Company's Common Stock in the
public market could have the effect of depressing the prevailing market price of
its Common Stock. Upon the completion of the offerings, the Company will have
outstanding 20,961,518 shares of Common Stock (assuming no exercise of
outstanding options after September 30, 1996). Of these shares, the 4,750,000
shares sold in the offerings will be freely transferable without restriction or
further registration under the Securities Act of 1933 (the "Securities Act")
unless purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act ("Affiliates"), which shares will be subjected to
the resale limitations of Rule 144. All of the remaining 16,211,518 shares (the
"Pre-IPO Shares") outstanding upon the completion of the offerings are subject
to lock-up agreements (the "Lock-up Agreements") entered into between the
stockholders and the Representatives of the U.S. Underwriters as described
below. Beginning 180 days after the date of the Prospectus upon the expiration
of the Lock-up Agreements, 4,025,052 of the Pre-IPO Shares held by
non-Affiliates will become freely tradeable and 11,224,930 additional Pre-IPO
Shares held by Affiliates will become eligible for public resale subject to
compliance with certain volume restrictions set forth in Rule 144. The remaining
961,536 of the Pre-IPO Shares (including 76,925 shares held by Affiliates) will
become eligible for public resale subject to compliance with certain timing,
manner of sale, and volume restrictions set forth in Rule 144 beginning in or
after May 1998.

All of the stockholders of the Company have entered into Lock-up Agreements with
the Representatives of the U.S. Underwriters providing that, with certain
limited exceptions, such stockholders will not offer, sell, contract to sell,
grant an option to purchase, make a short sale of, or otherwise dispose of or
engage in any hedging or other transaction that is designed or reasonably
expected to lead to a disposition of any shares of Common Stock or any option or
warrant to purchase shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Goldman, Sachs & Co.
Other than the 4,750,000 shares being offered in the offerings, as of the date
of this Prospectus no shares of Common Stock will be eligible for immediate sale
in the public market until the expiration of the 180-day Lock-up Agreements with
the Representatives of the U.S. Underwriters. Goldman, Sachs & Co. may, in its
sole discretion and at any time with or without notice, release all or any
portion of the securities subject to Lock-up Agreements, in which case such
shares would be eligible for sale immediately upon release. Goldman, Sachs & Co.
has informed the Company that it has no current intention to release shares from
the Lock-up Agreements prior to the expiration thereof. Any request for release
would be evaluated by Goldman, Sachs & Co. in light of, and the decision whether
or not to permit early release of shares would be dependent upon, the facts and
circumstances existing at the time of the request.

As of September 30, 1996, options to purchase an aggregate of 2,435,364 shares
of Common Stock were outstanding. Rule 701 under the Securities Act provides
that, beginning 90 days after the date of this Prospectus, shares of Common
Stock acquired upon the exercise of outstanding options may be resold by persons
other than Affiliates subject only to the manner of sale provisions of Rule 144,
and by Affiliates subject to all provisions of Rule 144 except the two-year
minimum holding period. The Company intends to file one or more registration
statements on Form S-8 under the Securities Act to register shares of Common
Stock subject to stock options that will permit the resale of such shares,
subject to the Rule 144 volume limitations applicable to Affiliates, vesting
restrictions with the Company, and Lock-up Agreements between the option holders
and the Company and the Representatives of the U.S. Underwriters.

Holders of 15,835,904 shares of outstanding Common Stock (including 11,275,492
shares held by Affiliates) have the right to require the Company to register
their shares of Common Stock under the Securities Act. If such registration
rights are exercised, the shares registered can be sold without any holding
period or sales volume limitation. Registration and sale of such shares could
have an adverse effect on the trading price of the Common Stock. See
"Description of Capital Stock -- Registration Rights."

15
<PAGE> 18

ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS AND DELAWARE LAW

After the completion of the offerings, the Board of Directors will have the
authority to issue up to 7,500,000 shares of Preferred Stock and to determine
the price, rights, preferences, privileges, and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
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. The issuance of Preferred Stock may have the effect of
delaying, deferring, or preventing a change of control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock. The Company has no present plans to issue
shares of Preferred Stock. Further, certain provisions of the Company's charter
documents, including provisions eliminating the ability of stockholders to take
action by written consent and limiting the ability of stockholders to raise
matters at a meeting of stockholders without giving advance notice, may have the
effect of delaying or preventing changes in control or management of the
Company, which could have an adverse effect on the market price of the Company's
Common Stock. Finally, certain aspects of Delaware law applicable to the Company
may have the effect of discouraging takeover attempts. See "Description of
Capital Stock."

NO SPECIFIC USE OF PROCEEDS

The Company has not designated any specific use for the net proceeds from the
sale by the Company of Common Stock offered hereby, except for the application
of approximately $5.0 million of such net proceeds for the repayment and
termination of the Company's revolving credit facility. Rather, the Company
intends to use the remaining net proceeds primarily for product development and
international expansion. Remaining proceeds will be used for working capital and
other general corporate purposes. Accordingly, management will have significant
flexibility in applying the net proceeds of the offerings. See "Use of
Proceeds."

DILUTION

The initial public offering price is higher than the book value per outstanding
share of Common Stock. Accordingly, purchasers in the offerings will suffer
immediate and substantial dilution of $10.51 (as of September 30, 1996) in the
net tangible book value per share of Common Stock from the initial public
offering price. Additional dilution will occur upon the exercise of outstanding
stock options. See "Dilution."

16
<PAGE> 19

THE COMPANY

Wired Ventures, Inc. is a new kind of global, diversified media company engaged
in creating compelling, branded content. Its current businesses include
publishing Wired magazine and programming original content on the Web primarily
through the HotWired Network. The Company also launched a series of book titles
beginning in September 1996 and is developing a television program based on its
The Netizen online program. The Company believes that it has developed Wired and
HotWired into strong brands that symbolize new media and the digital age.
Although over 90% of the Company's revenues to date have been from Wired
magazine, the Company has devoted and will continue to devote substantial
resources to extend its brands into new print, online, and television media
properties.

The Company's businesses historically have been conducted in partnership and
limited liability company form through Wired Partners, a California general
partnership (from its formation in October 1992 through January 1993), Wired USA
Ltd., a California limited partnership (from its formation in January 1993
through January 1994), Wired Ventures, Ltd., a California limited partnership
(from its formation in January 1994 through May 28, 1996), and Wired Ventures,
Ltd.'s majority interest in HotWired Ventures LLC, a California limited
liability company (from its formation in January 1995 through May 28, 1996). All
operations and operating assets and liabilities resided in Wired Ventures, Ltd.
and HotWired Ventures LLC from January 1994 through May 28, 1996.

Except for the historical financial information presented in this Prospectus and
as otherwise indicated, all information in this Prospectus: (i) gives effect to
a reorganization transaction effected on May 28, 1996 in which (a) the Company
succeeded to the assets, liabilities and businesses of Wired Holdings Inc., a
California corporation, Wired USA Ltd., and Wired Ventures, Ltd. and issued
approximately 14,000,000 shares of the Company's Series A Preferred Stock
therefor (the "Recapitalization"); and (b) the Company acquired the minority
participants' interests in HotWired Ventures LLC in exchange for approximately
1,250,000 shares of the Company's Series A Preferred Stock (the "Business
Combination") (the Recapitalization and the Business Combination being
collectively referred to as the "Reorganization"); (ii) gives effect to a
financing transaction on May 28, 1996 in which 625,000 shares of the Company's
Series B Preferred Stock (convertible into 961,534 shares of Common Stock based
on an assumed initial public offering price of $13.00 per share) were issued to
investors for $20.00 in cash per share (the "Preferred Stock Financing"); (iii)
gives effect to the repricing by the Company of certain outstanding stock
options in September 1996; (iv) gives effect to a one-for-two reverse split of
the Preferred and Common Stock of the Company to be effected in October 1996;
and (v) assumes no exercise of the Underwriters' over-allotment option. Unless
otherwise indicated, all references to the "Company" in this Prospectus include
the above-named predecessors in interest to the Company as a result of the
Reorganization and the wholly owned subsidiaries of the Company: HardWired,
Inc., a Delaware corporation; HotWired, Inc., a Delaware corporation; Wired
Magazine Group, Inc., a California corporation; Wired Television, Inc., a
Delaware corporation; Wired New York, a California corporation; Wired World,
L.L.C., a Delaware limited liability company; and Wired UK, a United Kingdom
unlimited company. See "Certain Transactions" and "Description of Capital
Stock."

The Company was incorporated in Delaware in March 1996. The Company's executive
offices are located at 520 Third Street, Fourth Floor, San Francisco, California
94107, and its telephone number is (415) 276-5000.

17
<PAGE> 20

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 4,750,000 shares of Common
Stock offered in the offerings are estimated to be approximately $56,127,000
($64,742,000 if the Underwriters' over-allotment option is exercised in full) at
an assumed initial public offering price of $13.00 per share and after deducting
the estimated underwriting discount and offering expenses.

The principal purposes of the offerings are to obtain additional capital, to
create a public market for the Company's Common Stock, and to facilitate future
access by the Company to the public equity markets. The Company anticipates that
it will use the net proceeds primarily for product development and international
expansion. Remaining proceeds will be used for working capital and other general
corporate purposes. The Company also intends to use approximately $5.0 million
of such net proceeds for the repayment and termination of the Company's
revolving credit facility, which bears interest at a rate equal to adjusted
LIBOR plus 3.25% and is due in September 2000. The borrowings under this line of
credit have been used for direct mail activities to increase the subscription
base for Wired magazine. Although the Company may use a portion of the net
proceeds to license or acquire new products or technologies from others or to
acquire or invest in businesses complementary to the Company's current business,
the Company currently has no specific agreements or commitments in this regard.

The Board of Directors and management of the Company will have significant
flexibility in applying the net proceeds from the offerings. The amounts and
timing of the Company's actual expenditures will depend upon numerous factors,
including the status of the Company's product development efforts, competition,
and marketing and sales activities. Pending such uses, the Company intends to
invest the net proceeds from the offerings in short-term, investment-grade,
interest-bearing securities. See "Risk Factors -- No Specific Use of Proceeds."

DIVIDEND POLICY

The Company has not declared or paid any cash dividends since its inception. The
Company currently intends to retain future earnings, if any, for use in the
operation and expansion of the business. The Company does not intend to pay any
cash dividends in the foreseeable future.

18
<PAGE> 21

DILUTION

The negative net tangible book value of the Company as of September 30, 1996 was
approximately $4.0 million, or $0.25 per share of Common Stock on a pro forma
basis after giving effect to the conversion of all outstanding shares of
Preferred Stock into shares of Common Stock. "Pro forma net tangible book value
per share" is determined by dividing the pro forma number of outstanding shares
of Common Stock into the net tangible book value of the Company (total tangible
assets less total liabilities). After giving effect to the sale by the Company
of the 4,750,000 shares of Common Stock offered in the offerings at an assumed
initial public offering price of $13.00 per share, after deducting the estimated
underwriting discount and offering expenses, the pro forma net tangible book
value of the Company as of September 30, 1996 would have been approximately
$52.1 million, or $2.49 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $2.74 per share to the
Company's existing stockholders and an immediate dilution in pro forma net
tangible book value of $10.51 per share to new investors purchasing shares of
Common Stock in the offerings. The following table illustrates the per share
dilution in pro forma net tangible book value to new investors:

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........ $13.00
Pro forma net tangible book value per share
as of September 30, 1996.......................... $(0.25)
Increase per share attributable to new investors..... 2.74
-----
Pro forma net tangible book value per share after the
offerings............................................ 2.49
------
Dilution per share to new investors.................... $10.51
------
</TABLE>

- --------------------------------------------------------------------------------

The following table summarizes, on a pro forma basis as of September 30, 1996,
assuming the exercise of all options to purchase Common Stock that were vested
as of September 30, 1996, the number of (and percentages of) shares of Common
Stock purchased from or issuable by the Company, the total (and percentages of)
consideration paid or to be paid to the Company and the average price per share
paid or payable by existing stockholders, vested optionholders as of September
30, 1996, and the investors purchasing shares of Common Stock in the offerings,
based upon an assumed initial public offering price of $13.00 per share (before
deducting the estimated underwriting discount and offering expenses):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION WEIGHTED
---------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------ ----------- ------ ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 16,211,518 74.4% $24,109,759 26.5% $ 1.49
Vested
optionholders(1)...... 821,223 3.8 4,983,451 5.5 6.07
New investors........... 4,750,000 21.8 61,750,000 68.0 13.00
------------------------------------------------
21,782,741 100.0% $90,843,210 100.0%
=========== ===== ============ =====
</TABLE>

- --------------------------------------------------------------------------------

(1) Includes vested options to purchase a total of 562,038 shares, with a
weighted average exercise price of $5.24 per share, held by existing
stockholders.

The foregoing table assumes the exercise of all stock options outstanding and
vested as of September 30, 1996. Assuming such options are not exercised, the
shares purchased by new investors would represent 22.7% of the total number of
shares purchased and the consideration paid by new investors would represent
71.9% of the total consideration paid.

The foregoing table assumes no exercise of outstanding unvested stock options.
As of September 30, 1996, there were unvested options to purchase a total of
1,611,017 shares of Common Stock with a weighted average exercise price of
$10.06 per share. To the extent that any of these options are exercised, there
will be further dilution to new investors. See "Capitalization" and Note 7 of
Notes to Consolidated Financial Statements.

19
<PAGE> 22

CAPITALIZATION

The following table sets forth: (i) the capitalization of the Company as of
September 30, 1996; and (ii) the pro forma capitalization of the Company as
adjusted as of such date to give effect to the conversion into shares of Common
Stock of all outstanding shares of Preferred Stock, the sale of the 4,750,000
shares of Common Stock offered in the offerings at an assumed initial public
offering price of $13.00 per share and the deduction of the estimated
underwriting discount and offering expenses, and the repayment of the Company's
short-term debt.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Short-term debt............................................................... $ 5,000 $ --
--------------------
Long-term note payable........................................................ 1,272 1,272
Stockholders' equity(1):
Preferred Stock, $0.001 par value per share; 50,000,000 shares authorized,
15,874,982 shares issued and outstanding actual; 7,500,000 shares
authorized, none issued or outstanding pro forma as adjusted............. 16 --
Common Stock, $0.001 par value per share; 60,000,000 shares authorized, 2
shares issued and outstanding actual; 75,000,000 shares authorized,
20,961,518 shares issued and outstanding pro forma as adjusted(2)........ -- 21
Additional paid-in capital.................................................... 40,005 96,127
Deferred compensation......................................................... (3,578) (3,578)
Accumulated deficit........................................................... (36,830) (36,830)
Other......................................................................... (61) (61)
--------------------
Total stockholders' equity (deficit).......................................... $ (448) $ 55,679
--------------------
Total capitalization.......................................................... $ 824 $ 56,951
--------------------
</TABLE>

- --------------------------------------------------------------------------------
(1) See Note 7 of Notes to Consolidated Financial Statements.

(2) Excludes: (i) 2,435,364 shares issuable upon the exercise of stock options
outstanding on September 30, 1996 with a weighted average exercise price of
$8.72 per share; (ii) 2,481,432 shares reserved for future issuance under
the Company's 1996 Equity Incentive Plan; and (iii) 50,000 shares reserved
for future issuance under the Company's 1996 Non-Employee Director Stock
Option Plan.

20
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below as of December 31,
1994, 1995 and September 30, 1996, and for the years ended December 31, 1993,
1994 and 1995 and the nine-month period ended September 30, 1996 are derived
from the consolidated financial statements of the Company, which consolidated
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, and are included elsewhere herein. The
consolidated balance sheet data as of December 31, 1993 is derived from audited
consolidated financial statements of the Company that are not included in this
Prospectus. The selected consolidated financial data set forth below for the
nine-month period ended September 30, 1995 are unaudited but have been prepared
on the same basis as the audited consolidated financial statements and, in the
opinion of management, contain all adjustments, consisting only of normal
recurring adjustments, that management believes necessary for a fair
presentation of the financial position and results of operations for these
periods. Historical results are not necessarily indicative of the results of
operations to be expected in the future. The selected consolidated financial
information set forth below should be read in conjunction with "The Company,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA(1):
Revenues:
Print......................................... $ 2,928 $ 8,833 $23,313 $ 15,388 $ 22,761
Online........................................ -- 348 1,942 1,348 2,348
----------------------------------------------
Total revenues......................... 2,928 9,181 25,255 16,736 25,109
----------------------------------------------
Costs and expenses:
Print production and distribution............. 2,356 7,638 14,897 9,981 14,958(2)
Online production and development............. 51 318 1,854 1,004 5,488(2)
Sales and marketing........................... 748 2,795 9,776 5,809 12,861(2)
General and administrative.................... 797 1,967 6,661 4,304 14,089(2)
Write-off of in-process research and development... -- -- -- -- 20,500
----------------------------------------------
Total costs and expenses............... 3,952 12,718 33,188 21,098 67,896
----------------------------------------------
Operating loss......................... (1,024) (3,537) (7,933) (4,362) (42,787)
Interest income (expense), net.................. (10) 98 156 72 (88)
Minority interest (3)........................... -- -- 427 107 846
Wired UK preacquisition loss (3)................ -- -- 854 854 --
----------------------------------------------
Loss before taxes............................... (1,034) (3,439) (6,496) (3,329) (42,029)
Tax expense..................................... (2) (18) (9) (5) (9)
----------------------------------------------
Net loss............................... $(1,036) $(3,457) $(6,505) $ (3,334) $(42,038)
----------------------------------------------
Pro forma net loss per share(4)............... $ (0.37) $ (2.47)
----------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ SEPTEMBER 30,
1993 1994 1995 1996
------ ------ ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 645 $ 1,750 $ 7,234 $ 3,997
Working capital deficit......................... (12) (797) (1,244) (6,791)
Total assets.................................... 1,859 5,111 13,218 18,271
Long-term note payable.......................... -- -- 1,185 1,272
Accumulated deficit............................. (1,252) (4,709) (11,214) (36,830)
Total stockholders' deficit..................... (381) (153) (1,507) (448)
</TABLE>

- --------------------------------------------------------------------------------
(1) The Company began operations in October 1992. For the period from October
1992 (inception) to December 31, 1992, the Company had no revenues and the
net loss was approximately $216,000.

(2) For the nine months ended September 30, 1996, print production and
distribution, online production and development, sales and marketing, and
general and administrative expenses included non-cash compensation expense
relating to stock options granted and stock issued of $1.3 million,
$644,000, $549,000, and $3.9 million, respectively.

(3) See Note 4 of Notes to Consolidated Financial Statements.

(4) See Note 2 of Notes to Consolidated Financial Statements. In accordance with
APB Opinion No. 15, net loss per share has been supplementally computed
assuming the issuance as of the beginning of each period presented of a
sufficient number of shares of Common Stock in the offerings to permit
repayment of the Company's revolving credit facility with the net proceeds
thereof. The resulting supplemental net loss per share amounts for the year
ended December 31, 1995 and the nine months ended September 30, 1996 would
have been $(0.37) and $(2.40), respectively.

21
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and the notes thereto included elsewhere in this Prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors
including, but not limited to, those discussed in "Risk Factors" and elsewhere
in this Prospectus.

OVERVIEW

The Company commenced operations in October 1992. Wired magazine was launched in
January 1993 and is now in its fourth year of publishing. In October 1994, the
Company launched the HotWired Network, a network of online content sites
available on the Web. The Company is actively pursuing the extension of its
editorial and creative vision to other media, including books and television,
and the development of new media products, including online media properties,
magazines, books, television, and international editions of existing media
products.

From inception through September 30, 1996, the Company generated cumulative
revenues of approximately $62.5 million, more than 90% of which were
attributable to magazine operations, and realized cumulative operating losses of
approximately $55.5 million. Although the Company has experienced significant
growth in revenues each year since its inception, prior growth rates are not
necessarily indicative of future operating results. Due to the Company's limited
operating history and limited resources, among other factors, there can be no
assurance that profitability or significant revenues on a quarterly or annual
basis will be realized in the future. Moreover, the Company expects to continue
to incur operating losses through at least 1997.

Since its inception, the Company has experienced substantial growth, which has
required it to significantly increase the scale of its operations and,
correspondingly, its operating expenses. The increase in operating expenses
reflects the hiring of additional personnel in all functional areas, an increase
in sales and marketing activities, and the funding of development of new
products and technologies. The Company expects that operating expenses will
increase faster than revenues for at least the next 18 months and, as a result,
the Company expects to incur operating and net losses through at least 1997.
There can be no assurance that the Company can maintain or increase its revenues
in the future to offset its increased operating expenses.

The Company recognizes print advertising revenue and magazine production costs
at the time the issue is circulated. Subscription circulation revenue for Wired
magazine is deferred and recognized over the life of the subscription period,
generally one to two years. Sales to single copy distributors are recognized as
revenue in the month of distribution utilizing historical experience to estimate
the ultimate single copy sales of magazines. The Company recognizes online
advertising revenue over the period in which the advertisements are displayed.
Product development expenditures are expensed as incurred.

The Company's businesses historically have been conducted in partnership and
limited liability company form through Wired Partners, Wired Holdings Inc.,
Wired USA Ltd., Wired Ventures, Ltd., and Wired Ventures, Ltd.'s majority
ownership interest in HotWired Ventures LLC. The Reorganization, which resulted
in the restructuring of the Company into its current holding company/operating
company structure, was completed in May 1996. See "The Company." The
Recapitalization component of the Reorganization, which consisted of the
combination of the various equity interests in Wired Ventures, Ltd., including
those of Wired Holdings Inc. and Wired USA Ltd., to form Wired Ventures, Inc.,
reflects a combination of companies under common control and has been accounted
for on a historical cost basis. The Business Combination component of the
Reorganization, which consisted of the acquisition of the minority interests in
HotWired Ventures LLC, has been accounted for under the purchase method. The

22
<PAGE> 25

allocation of the purchase price of the minority interests in HotWired Ventures
LLC included the recording of intangible assets, net of deferred income taxes,
of approximately $24.5 million, of which approximately $20.5 million was
expensed in the second quarter of 1996 as in-process research and development in
a one-time, non-cash charge. The $4.0 million balance of these intangible assets
will be amortized over their estimated useful lives of three years.

The Company has recorded deferred compensation of $9.9 million for the
difference between the grant price and the deemed fair market value of the
Company's Common Stock for shares subject to options granted and stock issued in
the first six months of 1996. Of such amount, $6.4 million was recognized in the
nine months ended September 30, 1996 and the balance will be amortized over the
remaining vesting period of the options, including $380,000 to be recognized in
the three months ending December 31, 1996.

RESULTS OF OPERATIONS

The following table sets forth, as a percentage of total revenues, consolidated
statement of operations data for the periods indicated:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------- --------------
1993 1994 1995 1995 1996
--- --- --- ---- ---
<S> <C> <C> <C> <C> <C>
Revenues:
Print......................................... 100 % 96 % 92 % 92 % 91%
Online........................................ -- 4 8 8 9
-----------------------------------------------
Total revenues......................... 100 100 100 100 100
-----------------------------------------------
Costs and expenses:
Print production and distribution............. 80 83 59 59 59
Online production and development............. 2 4 7 6 22
Sales and marketing........................... 26 31 39 35 51
General and administrative.................... 27 21 26 26 56
Write-off of in-process research and
development................................. -- -- -- -- 82
-----------------------------------------------
Total costs and expenses............... 135 139 131 126 270
-----------------------------------------------
Operating loss......................... (35 ) (39 ) (31 ) (26 ) (170)
Minority interest............................... -- -- 2 1 3
Wired UK preacquisition loss.................... -- -- 3 5 --
-----------------------------------------------
Net loss............................... (35 )% (39 )% (26 )% (20 )% (167)%
-----------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

Revenues

Print revenues consist principally of print advertising and circulation
(subscription and single copy sales) revenues. Online revenues consist of
advertising revenues. Total revenues were $2.9 million, $9.2 million, and $25.3
million in 1993, 1994, and 1995, respectively. Total revenues were $16.7 million
and $25.1 million for the nine months ended September 30, 1995 and 1996,
respectively. The increases were attributable to increases in all components of
revenue. Print advertising revenues were $1.6 million, $4.5 million, and $14.8
million for 1993, 1994, and 1995, respectively. Print advertising revenues were
$8.9 million and $13.8 million for the nine months ended September 30, 1995 and
1996, respectively. The increases in print advertising revenues from 1993 to
1995 were primarily due to increases in the number of advertising pages per
issue and increased advertising rate bases corresponding to increased
circulation. The increase in print advertising revenues for the nine months
ended September 30, 1996 as compared to the nine months ended September 30, 1995
was primarily attributable to increased advertising rate bases corresponding to
increased circulation and an increase in the average number of

23
<PAGE> 26

advertising pages per issue. The advertising rate base per issue was not
reported until October 31, 1994, when it was first reported as 100,000. From
that time, it was: 100,000 until December 31, 1994; 130,000 from January 1, 1995
to January 31, 1995; 170,000 from February 1, 1995 to July 31, 1995; 240,000
from August 1, 1995 to December 31, 1995; 300,000 from January 1, 1996 to July
31, 1996; and 325,000 from August 1, 1996 to the present. The average number of
advertising pages per issue was 32, 60, and 102 in 1993, 1994, and 1995,
respectively. The average number of advertising pages per issue was 98 and 100
for the nine months ended September 30, 1995 and 1996, respectively. The Company
expects the average number of advertising pages per issue to vary from quarter
to quarter; however, to date the number of advertising pages in the last three
issues of the calendar year has been generally higher than other issues.
Circulation revenues were $1.3 million, $4.0 million, and $7.8 million in 1993,
1994, and 1995, respectively. Circulation revenues were $5.8 million and $7.8
million for the nine months ended September 30, 1995 and 1996, respectively. The
increases in circulation revenues were attributable to increased subscriptions
and, to a lesser extent, increased single copy sales. While the Company cannot
predict with certainty the amounts or sources of its future revenues, it
currently anticipates that subscription revenues will increase as a percentage
of total revenues.

Online advertising revenues were $348,000 and $1.9 million in 1994 and 1995,
respectively, and there were no online advertising revenues in 1993. Online
advertising revenues were $1.3 million and $2.3 million for the nine months
ended September 30, 1995 and 1996, respectively. The increases in online
revenues were primarily due to growth in the number of advertisements on the
HotWired Network. While the Company cannot predict with certainty the amounts or
sources of its future revenues, it currently anticipates that online advertising
revenues will increase as a percentage of total revenues.

Print Production and Distribution Costs

Print production and distribution costs include editorial, production, and
design expenditures associated with the Company's magazine and book products.
Print production and distribution costs were $2.4 million, $7.6 million, and
$14.9 million in 1993, 1994, and 1995, respectively. Print production and
distribution costs were $10.0 million and $15.0 million for the nine months
ended September 30, 1995 and 1996, respectively. Approximately $1.3 million of
these costs for the nine months ended September 30, 1996 are attributable to the
amortization of deferred compensation expense. Excluding this compensation
expense, the increases are attributable to the growth in circulation of Wired
magazine and the costs associated with increased staffing in the editorial and
design areas. Print production costs as a percentage of print revenues increased
from 80% in 1993 to 86% in 1994, declined to 64% in 1995, and increased to 66%
for the first nine months of 1996 (excluding amortization of deferred
compensation expense). The overall decline in print production and distribution
costs as a percentage of print revenues was primarily attributable to the
increase in print advertising revenues as a percentage of print revenues,
increased operating efficiencies, and a change in the mix of single copy sales
and subscriptions as components of total circulation. Subscription revenues,
which generally carry lower distribution costs per unit sold than single copy
revenues, have increased as a percentage of total circulation revenues in each
period presented. The Company expects print production costs to increase in
absolute dollars to the extent its circulation increases, but to remain
relatively flat or decline as a percentage of print revenues. However, there can
be no assurance that the Company's print revenues will grow at a rate equal to
or exceeding that of its print production and distribution costs, if at all.

Online Production and Development Costs

Online production and development costs consist primarily of the payroll costs
associated with developing, producing, and delivering content on the Company's
online media properties. Online production costs were $51,000, $318,000, and
$1.9 million in 1993, 1994, and 1995, respectively. Online production and
development costs were $1.0 million and $5.5 million for the nine months ended
September 30, 1995 and 1996, respectively. Approximately $644,000 of these

24
<PAGE> 27

costs for the nine months ended September 30, 1996 are attributable to the
amortization of deferred compensation expense. Excluding this compensation
expense, these increases were attributable to increased staffing of editorial,
design, engineering, and production departments to expand the Company's online
programming. The Company anticipates substantial increases in online production
costs in the future as it increases the scope of its online activities. There
can be no assurance that the Company will be able to generate sufficient online
revenues to cover its online production costs, and failure to do so will have a
material adverse effect on the Company's business, financial condition, and
operating results.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of direct mail costs associated
with Wired magazine, payroll and related expenses, consulting fees, commission
paid to sales representatives, and advertising expenses. Sales and marketing
expenses were $748,000, $2.8 million, and $9.8 million in 1993, 1994, and 1995,
respectively. Sales and marketing expenses were $5.8 million and $12.9 million
for the nine months ended September 30, 1995 and 1996, respectively.
Approximately $549,000 of these costs for the nine months ended September 30,
1996 are attributable to the amortization of deferred compensation expense.
Excluding this compensation expense, these increases primarily resulted from
expenditures on direct marketing campaigns for Wired magazine of $11,000, $1.6
million, and $5.7 million in 1993, 1994, and 1995, respectively, and $2.8
million and $7.2 million for the nine months ended September 30, 1995 and 1996,
respectively. In addition, a portion of such increases is attributable to adding
six new employees to the online sales force during the latter part of 1995. The
Company anticipates a substantial increase in sales and marketing expenses in
the future, both in absolute dollars and as a percentage of revenues, as it
expands its print, online, and broadcast efforts.

General and Administrative Expenses

General and administrative expenses consist of payroll and related expenses for
executive, finance, and administrative personnel, professional fees, and other
general corporate expenses. General and administrative expenses were $797,000,
$2.0 million, and $6.7 million in 1993, 1994, and 1995, respectively. General
and administrative expenses were $4.3 million and $13.7 million for the nine
months ended September 30, 1995 and 1996, respectively. Approximately $3.9
million of these costs for the nine months ended September 30, 1996 are
attributable to the amortization of deferred compensation expense. Excluding
this compensation expense, these increases are primarily attributable to the
growth in the Company's finance, senior management, and support personnel
associated with the online business. The Company expects general and
administrative expenses to increase in absolute dollars in future periods as the
Company incurs additional costs related to being a public company and expands
its administrative staff and facilities.

Write-off of In-Process Research and Development

The acquisition of minority interests in HotWired Ventures LLC, which has been
accounted for using the purchase method, resulted in the recording of intangible
assets of approximately $24.5 million, net of deferred taxes, of which
approximately $20.5 million has been expensed as in-process research and
development as a one-time, non-cash charge during the nine months ended
September 30, 1996. See Note 4 of Notes to Consolidated Financial Statements.

Minority Interest

Minority interest represents the minority participants' share of the losses of
HotWired Ventures LLC prior to the Business Combination. See Note 4 of Notes to
Consolidated Financial Statements.

25
<PAGE> 28

Wired UK Preacquisition Loss

In 1994, the Company entered into a joint venture with Guardian Media Group plc
("Guardian") for the purpose of publishing the United Kingdom edition of Wired
magazine. At formation, the Company contributed the right to use certain
intellectual property to the joint venture and Guardian contributed cash of
approximately $216,000 in exchange for their respective 50% interests. In July
1995, the Company purchased Guardian's 50% interest in the joint venture for a
nominal amount. The Company recorded this acquisition using step acquisition
accounting, has included the joint venture in its consolidated financial
statements as though it had been acquired at the beginning of 1995, and has
recorded in its consolidated statement of operations the preacquisition losses
applicable to Guardian's 50% interest up to the date of acquisition. As a
result, in 1995 the Company reduced its net loss by the $854,000 of
preacquisition losses attributable to Guardian's interest in Wired UK up to the
date of the acquisition. See Note 4 of Notes to Consolidated Financial
Statements.

Income Taxes

From inception until the Recapitalization, because the Company was incurring net
operating losses but was operating as a series of "flow through" entities
(partnerships, "S" corporations, and limited liability companies) for tax
purposes, it incurred minimal income tax expenses and has minimal net operating
loss ("NOL") carryforwards. As a result of the Reorganization and incorporation
of the Company's businesses into a taxable "C" corporation, losses incurred by
the Company following the Reorganization will result in the accumulation of NOL
carryforwards. Such NOL carryforwards should be available to offset future
profits, if any.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited consolidated statement of
operations data for each of the four quarters of 1995 and the first three
quarters of 1996, as well as the percentage of the Company's total revenues
represented by each item. The unaudited consolidated financial statements have
been prepared on the same basis as the audited consolidated financial statements
contained herein and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, that management believes
necessary for a fair presentation of the financial position and results of
operations for such periods. Such data should be read in conjunction with the
Company's consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus. In view of the Company's recent growth and other
factors, the Company believes that quarter-to-quarter comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance.

26
<PAGE> 29

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996
------- ------- ------- ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues:
Print............................. $ 3,936 $5,606 $ 5,846 $ 7,925 $ 7,124 $ 7,386 $ 8,251
Online............................ 342 461 545 594 497 621 1,230
----------------------------------------------------------------------
Total revenues............. 4,278 6,067 6,391 8,519 7,621 8,007 9,481
----------------------------------------------------------------------
Costs and expenses:
Print production and
distribution.................... 3,147 3,386 3,448 4,916 4,309 5,587 5,062
Online production and
development..................... 166 311 527 850 1,245 2,184 2,059
Sales and marketing............... 1,952 1,883 1,974 3,967 3,397 4,377 5,087
General and administrative........ 1,444 1,259 1,601 2,357 2,510 6,969 4,610
Write-off of in-process research
and development................. -- -- -- -- -- 20,500 --
----------------------------------------------------------------------
Total costs and expenses... 6,709 6,839 7,550 12,090 11,461 39,617 16,818
----------------------------------------------------------------------
Operating loss............. (2,431 ) (772) (1,159) (3,571 ) (3,840 ) (31,610 ) (7,337 )
Interest income (expense), net...... 15 15 42 84 (11 ) (75 ) (2 )
Minority interest................... -- -- 107 320 499 347 --
Wired UK preacquisition loss........ -- -- 854 -- -- -- --
----------------------------------------------------------------------
Loss before taxes................... (2,416 ) (757) (156) (3,167 ) (3,352 ) (31,338 ) (7,339 )
Tax expense......................... (2 ) (1) (2) (4 ) (9 ) -- --
----------------------------------------------------------------------
Net loss................... $(2,418 ) $ (758) $ (158) $(3,171 ) $(3,361 ) $(31,338) $ (7,339 )
----------------------------------------------------------------------
PERCENT OF TOTAL REVENUES DATA:
Revenues:
Print............................. 92 % 92% 91% 93 % 93 % 92 % 87 %
Online............................ 8 8 9 7 7 8 13
----------------------------------------------------------------------
Total revenues............. 100 100 100 100 100 100 100
Costs and expenses:
Print production and
distribution.................... 73 56 54 58 56 70 53
Online production and
development..................... 4 5 8 10 16 27 22
Sales and marketing............... 46 31 31 46 45 55 54
General and administrative........ 34 21 25 28 33 87 48
Write-off of in-process research
and development................. -- -- -- -- -- 256 --
----------------------------------------------------------------------
Total costs and expenses... 157 113 118 142 150 495 177
----------------------------------------------------------------------
Operating loss............. (57 ) (13) (18) (42 ) (50 ) (395 ) (77 )
Interest income (expense), net...... -- -- 1 1 -- (1 ) --
Minority interest................... -- -- 2 4 6 4 --
Wired UK preacquisition loss........ -- -- 13 -- -- -- --
----------------------------------------------------------------------
Net loss................... (57 )% (13)% (2)% (37 )% (44 )% (392 )% (77 )%
----------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

The Company experienced a significantly larger net loss in the second quarter of
1996 compared to the prior and subsequent quarters partially as a result of two
non-cash charges. First, the Company's acquisition of minority interests in
HotWired Ventures LLC resulted in a one-time expense of $20.5 million
attributable to the acquisition of in-process research and development. Second,
for the nine months ended September 30, 1996, the Company recorded compensation
expense totaling approximately $6.4 million (of which $6.0 million was recorded
in the second quarter of 1996) of the total $9.9 million of deferred
compensation expense attributable to stock options granted and stock issued
during the first six months of 1996. The following discussion excludes the
impact of these charges.

27
<PAGE> 30

The Company's total revenues for the quarter ended September 30, 1996 increased
due to higher online advertising revenues, which nearly doubled from the quarter
ended June 30, 1996 as a result of the introduction of HotBot and other new
online properties, and an increase in the number of advertising pages sold in
Wired magazine. Excluding the impact of $26.4 million in non-cash charges
recorded in the second quarter of 1996 and the related amortization of deferred
compensation expense and intangible assets of approximately $700,000 in the
third quarter of 1996, the net loss increased from the second quarter to the
third quarter primarily as a result of additional growth in online development
and marketing activities and the introduction of a direct mail campaign to build
the circulation of the United Kingdom edition of Wired magazine.

Print revenues increased from quarter to quarter in 1995 and from quarter to
quarter in 1996, reflecting the impact of growth in the magazine subscriber base
on advertising rate bases. Over the quarterly periods presented, Wired
magazine's paid circulation base has grown from an average of 200,000 for the
first quarter of 1995 to an estimated 315,000 for the third quarter of 1996.
This increase fueled growth in the magazine's average advertising rate base per
issue, which grew from 156,000 for the first quarter of 1995 to 325,000 for the
third quarter of 1996. The increase in print revenues from the third quarter of
1995 to the fourth quarter of 1995 as well as the decrease in print revenues
from the fourth quarter of 1995 to the first two quarters of 1996 are the result
of seasonal factors that generally result in higher print advertising revenues
during the fourth quarter. Average advertising pages per issue were 97 in the
third quarter of 1995, growing to 113 for the fourth quarter of 1995. The
Company further capitalized on these seasonal factors by issuing a special 13th
edition of the magazine in the fourth quarter of 1995.

Online revenues have generally increased from quarter to quarter, reflecting the
impact of increased traffic to, and thus increased capacity for advertising on,
the HotWired Network. Online revenues decreased from the fourth quarter of 1995
to the first quarter of 1996, reflecting the impact of eliminating from the
HotWired Network one program that was not meeting the Company's expectations.

Generally, the Company's costs and expenses as a percentage of revenues were
higher in the first and fourth quarters of 1995 and the first three quarters of
1996 resulting from two distinct development phases of the Company's business.
During the first quarter of 1995, the Company was focused on building the
circulation base of Wired magazine, and during the fourth quarter of 1995 and
the first three quarters of 1996, the Company was expanding its online
programming operations. Print production and distribution costs have increased
from quarter to quarter, reflecting the impact of growing magazine circulation.
Print production and distribution costs as a percentage of print revenues were
higher in the first quarter of 1995 as compared to the second and third quarters
of 1995 as a result of a higher proportion of single copy sales in total
magazine circulation during the first quarter of 1995, and was higher in the
fourth quarter of 1995 as a result of the production of a special edition of the
magazine during the period. Online production costs, sales and marketing
expenses, and general and administrative expenses increased most notably in the
fourth quarter of 1995 and the first three quarters of 1996 as the online
business developed and expanded its editorial, production, design, engineering,
senior management, and finance staffs. Sales and marketing expenses as a
percentage of total revenues were higher during the first and fourth quarters of
1995 and the first three quarters of 1996 due to the costs of significant direct
mail campaigns undertaken in such periods.

Partly as a result of the emerging nature of the markets in which the Company
competes, the Company is unable to accurately forecast its future revenues. The
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall, and a shortfall in actual revenues as compared
to estimated revenues would have an immediate material adverse effect on the
Company's business, financial condition, and operating results. In addition, the
Company currently intends to increase substantially its operating expenses to
develop new online and television programming, magazines, and books, and to
expand its sales and marketing activities. To the extent that such expenses
precede or are not subsequently

28
<PAGE> 31

followed by increased revenues, the Company's business, financial condition, and
operating results will be materially and adversely affected.

As a result of the Company's limited operating history, the Company does not
have relevant historical financial information for a significant number of
periods on which to base planned revenues and operating expenses. The Company
expects to experience significant fluctuations in future quarterly and annual
operating results that may be caused by many factors, including (i) the seasonal
nature of the advertising business, where the second and fourth calendar
quarters for magazine publishing are generally characterized by higher
advertising revenues; (ii) the ability of the Company to maintain or increase
the paid circulation for Wired magazine and future publications; (iii) the cost
of paper, postage, and other costs associated with magazine production and
distribution; (iv) the ability to maintain or increase print and online
advertising rate bases; (v) the ability to reasonably predict newsstand and
store sales of its magazines and books and thereby limit the returns of unsold
products; (vi) the anticipated increases in operating expenses to support the
expansion of its existing print and online businesses, the development of new
magazine and online content sites, and the Company's book publishing and
television efforts; (vii) the size and rate of growth of the market for Internet
products and online content; (viii) the introduction by others of products that
are competitive with those of the Company; and (ix) the general economic
conditions in the United States and worldwide. As a result of the foregoing,
period-to-period comparisons of the Company's results of operations are not
necessarily meaningful and should not be relied upon as an indication of future
performance.

Due to all of the foregoing factors, it is likely that the Company's operating
results will fall below the expectations of the Company, securities analysts, or
investors in some future quarter. In such event, the trading price of the Common
Stock will be materially and adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations primarily through
private sales of equity securities, the sale of products and advertising, and
debt. Through September 30, 1996, the Company raised approximately $28.0 million
from the sale of equity interests in private financings and debt. In 1993, 1994,
and 1995, the Company used $769,000, $1.1 million, and $3.3 million,
respectively, in operating activities. In the nine months ended September 30,
1996, the Company used $15.9 million in operating activities. Since inception,
cash used in operating activities resulted primarily from operating losses and
increases in accounts receivable associated with the increases in revenues,
partially offset by increases in accrued expenses and deferred subscription
revenues.

In 1993, 1994, and 1995 and for the nine months ended September 30, 1996, the
Company's investing activities consisted primarily of purchases of capital
equipment, primarily computer and communications equipment and software. Capital
expenditures were $53,000, $688,000, $1.5 million, and $2.1 million in 1993,
1994, 1995, and the nine months ended September 30, 1996, respectively. The
Company had no material commitments for capital expenditures as of September 30,
1996. The Company expects that its capital expenditures will increase as the
Company's employee base continues to grow.

29
<PAGE> 32

In September 1996, the Company secured a commitment from Signet Bank ("Signet")
under which Signet will make available to the Company a new credit facility of
$10.0 million in place of the existing $6.5 million line of credit it has
provided to the Company. Outstanding borrowings under the line of credit
facility will be secured by all tangible and intangible assets of the Company.
The agreement prescribes that the first $5.0 million borrowed under the line of
credit facility be used to repay the Company's existing short-term bank debt of
$5.0 million. The remaining $5.0 million may be used to fund operating expenses.
The Company will use $5.0 million of the net proceeds of the offerings to repay
its existing short-term bank debt and does not anticipate any borrowings under
the new credit facility. See Note 5 of Notes to Consolidated Financial
Statements.

At September 30, 1996, the Company had cash and cash equivalents of $4.0 million
and a working capital deficit of $6.8 million. The Company believes that the net
proceeds from the sale of the Common Stock to be sold in the offerings will be
sufficient to meet its product development, international expansion, working
capital and capital expenditure requirements through at least the end of 1997.
However, the Company may need to raise additional funds in order to support more
rapid expansion, develop new or enhance existing products, respond to
competitive pressures, acquire complementary businesses, assets or technologies,
or respond to unanticipated requirements. The Company may seek to raise
additional funds through private or public sales of securities, strategic
relationships, bank or lease financings, or otherwise. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
the stockholders of the Company will be reduced, stockholders may experience
additional dilution, and such securities may have rights, preferences, and
privileges senior to those of the holders of the Company's Common Stock. There
can be no assurance that additional financing will be available when needed on
terms favorable to the Company, if at all. If adequate funds are not available
or are not available on acceptable terms, the Company may be unable to develop
new or enhance existing products, take advantage of future opportunities, or
respond to competitive pressures or unanticipated requirements, which would have
a material adverse effect on the Company's business, financial condition, and
operating results.

30
<PAGE> 33

BUSINESS

The following discussion of the Company's business contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors including, but not limited to, those
set forth under "Risk Factors" and elsewhere in this Prospectus.

OVERVIEW

Wired Ventures, Inc. is a new kind of global, diversified media company engaged
in creating compelling, branded content. Its current businesses include
publishing Wired magazine and programming original content on the Web primarily
through its HotWired network of online content sites (the "HotWired Network").
The Company also launched a series of book titles in September 1996, and is
developing a television program based on its The Netizen online program. The
Company believes that it has developed Wired and HotWired into strong brands
that symbolize new media and the digital age. Although over 90% of the Company's
revenues to date have been from Wired magazine, the Company has devoted and will
continue to devote substantial resources to extend its brands into new print,
online, and television media properties.

Wired magazine and the Company's online content sites have award-winning content
and design that have attracted large and rapidly growing audiences with young,
well educated, and affluent demographics that the Company believes are highly
sought after by advertisers. The Company also believes that with its creative,
research, technological, sales, and management expertise, and its established
brands, it has created a platform from which to launch additional brands across
multiple media. In addition, the Company believes that its brands and media
properties are well positioned to capitalize on the expected growth in the use
of the Internet and the Internet advertising market. A report by Forrester
Research in May 1996 estimated that total spending for online advertising will
reach $4.8 billion by 2000, up from $80 million in 1996.

MISSION AND STRATEGY

The Company aims to create smart media for smart people around the world - high
quality information and entertainment products aimed at a well educated,
affluent, technologically savvy, and influential consumer group. Its mission is
to build a new kind of global, diversified media company for the 21st century
utilizing its ability to create compelling, branded content across multiple
media, its technological and research capabilities, its strong connection to
consumers and advertisers, and its commitment to journalistic and artistic
excellence. The Company's strategy to achieve its mission includes the following
elements:

Create Smart Media For Smart People Around The World

The Company believes that creating high quality information and entertainment
products aimed at a well educated, affluent, technologically savvy, and
influential consumer group is the key to sustaining the rapid growth of its
audiences, attracting advertisers, and maintaining advertising rates generally
higher than those of its competitors. In addition, the Company believes that by
focusing on a demographic group that includes today's thought leaders and early
adopters of new ideas and technologies, it will also attract a broader group of
consumers who are influenced by this group's ideas and viewpoints.

Leverage Existing Brands and Create New Brands

The Company believes it has developed Wired, HotWired, and their related brands
into brands that symbolize new media and the digital age. The Company intends to
strengthen its existing brands by continuing to publish compelling print and
online content for growing audiences and extending its existing brands across
media including books and television. In addition, the Company intends to apply
its creative resources and its expertise to develop new brands with distinct
creative visions for print, online, and television. The Company believes that
this diversi-

31
<PAGE> 34

fication will enable it to create products that appeal to wider audiences with
demographic characteristics similar to those of its existing consumers. The
Company also believes that its HotWired Network and other online media
properties provide a platform from which to rapidly and cost-effectively launch
and test new brands, which can then be extended across media.

Expand Globally

The Company's products are available to consumers worldwide by subscription or
through the Web. Localized editions of Wired magazine, which contain a
significant amount of original content, are currently published in Japan and the
United Kingdom. The Company also expects to publish material in the German
language in 1997. The Company believes that it has gained valuable experience
from its Japanese and United Kingdom publishing activities. The Company intends
to leverage this experience to new opportunities to broaden the global
production and dissemination of its branded products and to create additional
localized editions of its print and online properties.

Increase Technological Capabilities

The Company has pioneered the development of several new technologies for online
media properties and intends to increase its technological capabilities in the
future. The Company develops and acquires proprietary software technologies to
deliver online content and services with advanced features that help create a
richer experience for its users and strengthen advertiser relationships.

Capitalize on Consumer Profiling Capabilities

The Company believes that its ability to target and develop relationships with
its consumers will enhance the success of its media properties. In addition to
collecting and maintaining profiles of its magazine readers, the Company uses
proprietary technologies to obtain, manage, and analyze large amounts of
volunteered or observed data regarding its online users. This information is
then used by the Company's sales team in soliciting specific advertiser
categories. It is also used by the Company's online advertisers to target
particular users with advertising messages and by the Company to generate
personalized editorial material for its online users. The Company also
frequently surveys a panel of more than 65,000 online members that have
volunteered to answer in-depth queries. The Company believes these capabilities
enable it to develop and refine its own content, enhance the user's experience,
and develop and strengthen its relationships with advertisers, thereby
supporting its premium advertising rates.

Develop Unique Advertising Programs

The Company intends to continue developing unique advertising programs that
increase advertiser retention rates and leverage the favorable demographics of
Wired magazine, the HotWired Network, and the Company's other products. To date,
these programs have included advertising packages that involve placement across
different Wired products, online placements that directly associate an
advertiser's product with editorial content, and increased access to the
Company's online marketing research and experience in exchange for increased
advertising commitments. In addition, the Company is developing new forms of
commercial sponsorship whereby the sponsor gains the full benefit of co-branding
program content in exchange for ongoing financial and co-marketing commitments
to the program. For example, the Levi Strauss Dockers(R) brand became the
exclusive sponsor of the HotWired Network's Dream Jobs program in September
1996.

Develop and Maintain Strategic Relationships

Strategic relationships with publishers, online media, and television
programmers and distributors are important to the Company's success. The Company
develops and maintains such strategic relationships to expand brand awareness
and to extend the reach of its products

32
<PAGE> 35

through product and content distribution, expansion into international markets,
and the development of products for different media. For example: the Company is
developing a new television program based on its The Netizen online program with
funding partially provided under an agreement with MSNBC Cable Channel, L.L.C.;
is publishing the Japanese edition of Wired magazine through a license agreement
with Dohosha Publishing Co., Ltd.; is operating HotBot through a strategic
alliance with Inktomi Corporation; and is developing content for future
distribution through emerging interactive media channels in conjunction with
several strategic partners, including the @Home Network and the PointCast
Network.

The Company's strategy involves substantial risk. There can be no assurance that
the Company will be successful in implementing its strategy or that its
strategy, even if implemented, will lead to growth or profitability of the
Company. If the Company is unable to implement its strategy effectively, the
Company's business, financial condition, and operating results would be
materially adversely affected.

PRODUCTS

Wired Magazine -- United States Edition

Background. Wired magazine was launched in January 1993 to cover the Digital
Revolution, a term popularized by the Company that describes the profound
changes caused by convergence of the computer, media, and communications
industries. With Wired magazine's blend of compelling editorial content and
highly innovative design, the Company has created a unique magazine genre. Wired
is not a computer magazine; it is about the people, companies, and ideas of the
Digital Revolution.

Wired magazine's standard monthly departments and columns include:
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Rants & Raves: Reader feedback
Electric Word: Bulletins from the front line of the Digital Revolution
Fetish: The latest objects of technolust
Scans: People, companies, and ideas that matter
Reality Check: The real timetable for the implementation of new
technologies
Follow the Money: The art of the deal
Deductible Junkets: Conferences and events for the digital vanguard
Electrosphere: Short features on topics important to the Digital
Revolution
Idees Fortes: One-page pieces about interesting ideas
Street Cred: User criticism of software, hardware and new media
products
Net Surf: Notable sites on the Web
Nicholas Negroponte: Insight and ideas from MIT's Media Lab Director
</TABLE>

- --------------------------------------------------------------------------------

In addition to retaining its own staff writers, the Company draws from a
community of well known contributors, including: Steven Levy, the author of
Hackers; Po Bronson, the author of Bombardiers; Esther Dyson, Chair of the
Electronic Frontier Foundation and publisher of Release 1.0; Nicholas
Negroponte, Director of the MIT Media Lab and the author of Being Digital; Mitch
Kapor, founder of Lotus Development Corporation; John Perry Barlow, the author
of The Economy of Ideas; and Paul Saffo, Research Fellow at the Institute for
the Future.

Wired magazine's growth has been strong from its launch, as shown in the
following table:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERCENT OF
PAID AVERAGE CIRCULATION
CIRCULATION ADVERTISING FROM
AT PERIOD REVENUES SUBSCRIPTIONS
PERIOD END PER ISSUE AT PERIOD END
------ --------- ---------- ------------
<S> <C> <C> <C>
1993............................................ 90,000 $ 265,000 25%
1994............................................ 168,000 $ 377,000 37%
1995............................................ 261,000 $1,136,000 60%
At September 30, 1996........................... 325,000 $1,510,000 64%
</TABLE>

- --------------------------------------------------------------------------------

33
<PAGE> 36

Awards. Wired magazine has been reviewed favorably by industry sources. Listed
below are some of the awards that Wired magazine has received:
- --------------------------------------------------------------------------------

American Society of Magazine Editors: National Magazine Award for General
Excellence (1994)
American Society of Magazine Editors: National Magazine Award for Design (1996)
ADWEEK Magazine: Startup of the Year Award (1993)
Digital Hollywood Awards: Best Digital Magazine (1995 and 1996)
Folio Magazine: Editorial Excellence Award (1994, 1995, and 1996)
International Press Awards: Best International Smaller Publisher (1994)
Tenth Annual Computer Press Awards: Best Broad Interest Magazine (1994)
- --------------------------------------------------------------------------------

Demographics. Wired magazine's readership is young, affluent, and well
educated. The Company believes this group is largely comprised of people who are
influential in making corporate and household purchasing decisions and are
therefore highly sought after by advertisers. Based on an independent survey
conducted by Intelliquest in 1995, the Company believes that Wired magazine was
the magazine most effective in reaching senior management involved in worksite
computer software purchase decisions, surpassing such competitors as Fortune, PC
Magazine, and BusinessWeek. Wired magazine's 1995 Subscriber Survey, conducted
by Beta Research Corp., showed that readers of Wired magazine spend an average
of over two hours reading each issue of Wired magazine, a statistic the Company
believes compares favorably with that of its competitors, and revealed the
following demographics:

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Average age.......................................................... 37
Average annual household income...................................... $122,000
Average household net worth.......................................... over $600,000
Percent with post-graduate study..................................... 48%
Percent working in managerial positions.............................. 52%
</TABLE>

- --------------------------------------------------------------------------------

Advertisers. Wired magazine's advertisers range from consumer goods companies
to computer software and hardware vendors. Wired magazine's top 50 advertisers
in terms of advertising revenues for the first nine issues of 1996 are:
- --------------------------------------------------------------------------------

Absolut Vodka
Accent Worldwide Inc.
Acer, Inc.
Anheuser-Busch
Companies, Inc.
(Budweiser division)
Apple Computer, Inc.
Bayer Corporation
Calvin Klein Inc.
Chrysler Corporation
COMPAQ Computer
Corporation

Connectix Corporation

Creative Technology Ltd.

Decker Outdoor Corp. (Teva)
Dewar's
Digital Equipment
Corporation
Epson America, Inc.
Fujitsu Ltd.
The GAP, Inc.
Global Village
Communication, Inc.
Grand Metropolitan PLC
H&R Block, Inc.
The Hewlett-Packard
Company
Hitachi, Ltd.

In Focus Systems, Inc.

Intel Corporation
International Business
Machines Corporation
International Data Group
Kingston Technology Corp.
l.a. Eyeworks

Luckman Interactive, Inc.

Maxis
Motorola, Inc.
NEC Corporation
Origin Technology, Inc.

Pearson PLC

Philips Electronics NV

Robertson Stephens &

Company LLC

Samsung Electronics
America/Information
Systems Division
The Saturn Corporation
Silicon Graphics, Inc.
Sony Corp.
Symantec Corporation

Tommy Hilfiger

Toyota Motor Corp.

United Parcel Service of

America, Inc.

UUNet Technologies Inc.
Video On Line
Volkswagen of America Inc.

7th Level, Inc.

- --------------------------------------------------------------------------------

34
<PAGE> 37

Such top 50 advertisers represented approximately 54% of Wired magazine's total
advertising revenues for the first nine issues of 1996, with no single
advertiser representing more than 5% of Wired magazine's total advertising
revenues for such issues.

Since its inception, Wired magazine has been able to maintain a consistently
high advertising rate, in terms of cost per thousand readers ("CPM"). In
addition, in contrast to its competitors, which the Company believes offer
significant volume-related discounts that are not disclosed on their published
rate cards, the Company does not offer discounts not disclosed on its published
rate cards. Over 50% of Wired magazine's advertisers during 1995 committed to at
least six pages of advertising (generally one page in each of at least six
issues). In 1995, six of Wired magazine's top 10 advertisers also purchased
advertising on the HotWired Network. The Company has recently completed sales of
advertising for its November 1996 issue, which will be its largest issue to
date, with 166 pages of advertising.

Wired Magazine -- International Editions

Wired magazine is currently published in the United States, Japan, and the
United Kingdom, is available by subscription worldwide, and is available for
newsstand purchase in many countries. In addition, the Company expects to
publish material in the German language in 1997. Each international edition of
Wired magazine contains a significant amount of original content written
specifically for such edition, as well as content taken from the United States
or other international editions of Wired magazine. The Company believes that
this global pool of editorial material gives the Company a global point of view
that appeals to Wired magazine readers. The Company also believes that these
features distinguish Wired magazine from other international publications, which
are often merely translations of domestic editions, and also increase its
chances for consumer acceptance. See "Risk Factors -- Risks Associated with
International Expansion."

Interactive Media

The Company's current online media properties consist of multiple brands on the
HotWired Network (including the recently launched HotBot search engine), the
Suck.com online content site, and Wired magazine's content site on America
Online. These online media content sites feature original, branded content that
changes on a regular, and in many cases daily, basis. Underpinning the Company's
online media enterprise is a commitment to technological leadership - the
ability to anticipate and meet user and advertiser needs through innovative
technology. The Company has developed several proprietary technologies, shared
among all of the Company's online media properties, that the Company believes
enable it to enhance the user's experience and strengthen advertiser
relationships.

The HotWired Network

Background. The Company's flagship online media offering, launched in October
1994, is the HotWired Network, which features original editorial material on
topics such as politics, travel, technology, arts, entertainment, health,
careers, and lifestyle. In addition, it contains highlights of the current
issues of Wired magazine and full text archives of past issues of Wired magazine
and provides access to the Company's Web search engine service, HotBot. Users
can access the HotWired Network's "programs" through the main HotWired Network
site (http://www.hotwired.com) or in most cases through each program's own
distinct Web address. The HotWired Network's users have the option to become
members of the HotWired Network. Membership is free and gives members access to
many features not available to non-members, including discounts on Wired
magazine subscriptions, a personalized "What's New" feature that enables users
to receive custom generated lists of materials the user has not yet viewed, and
the ability to participate in the Company's interactive discussion spaces. The
member registration system allows the Company to obtain and maintain online user
profile data, which it then uses to create, maintain, and enhance user and
advertiser relationships. In addition to providing strong editorial content, the
Company believes it is breaking new ground in

35
<PAGE> 38

the use of digital audio and video on the Web and in its development and use of
live chat and asynchronous discussion spaces.

Standard programming on the HotWired Network includes:
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Ask Dr. Weil (http://www.drweil.com): Dr. Andrew Weil, M.D., a Harvard-trained
physician and best-selling author who is an expert in traditional and
alternative medicine, answers questions about health and wellness in an
interactive format, along with a database of helpful information on hundreds of
common ailments
ClubWired (http://www.hotwired.com/club): The Company's auditorium space, based
on its proprietary Java-based chat environment, which features guests ranging
from U.S. Senators to popular musicians to prominent authors
Cocktail (http://www.cocktailtime.com): Includes classic drink recipes introduced
every Friday, a mixologist's dream database of drinks, and opinionated bartender
commentary
Dream Jobs (http://www.dreamjobs.com): The editor's choice of the best jobs
currently available in the media, technology, and online industries
HotBot (http://www.hotbot.com): A comprehensive Web-wide search engine designed
to search the complete text of all documents on the Web.
Net Surf Central (http://www.netsurfcentral.com): A guided tour around the Web
uncovering the quirky and the informative, the bizarre and the imaginative
The Netizen (http://www.netizen.com): Political coverage designed to reflect the
interests of the online community
Packet (http://www.packet.com): Daily reporting on Internet business, technology,
culture, and gossip, along with a half-hour weekly audio program with industry
personalities
Pop (http://www.pop.com): Reporting on the arts and entertainment of the new
digital culture
Rough Guides (http://www.hotwired.com/rough): Interactive database of travel
destinations and discussion forums for independent travelers, provided through
an alliance with the publishers of the Rough Guides travel book series
Talk.com (http://www.talk.com): The Company's proprietary chat environment,
written entirely in Sun Microsystems' Java language
Threads (http://www.hotwired.com/piazza/threads): The Company's proprietary
conference space, where users can read and members can initiate, read, or
respond to threaded discussions
Webmonkey (http://www.webmonkey.com): A service station for the Web, with regular
columns on browsers, HTML, plug-ins, and technology, plus software
demonstrations, tutorials, and an interactive database where members can "tune
up" their browsers
Wired Magazine (http://www.hotwired.com/wired): Wired magazine content and
highlights, as well as interactive forums where users can communicate with each
other and with Wired magazine's writers, editors, and designers
Wired Source (http://www.wiredsource.com): The Wired editors' guide to research on
the Net
</TABLE>

- --------------------------------------------------------------------------------

In addition, the Company is developing a continually updated online news service
that will provide news from the perspective of the digital generation utilizing
news feeds from outside sources and original content written by the Company's
editors and contributors. This news service is expected to attract additional
traffic to the HotWired Network by providing additional reasons to visit the
HotWired Network several times a day. This news service is also expected to
facilitate the distribution of the Company's content through alternative
channels, such as the PointCast Network, the @Home Network and Netscape Mail. In
addition to the daily news service, the Company expects to distribute certain
regular HotWired Network programming, certain new media products, and
advertising through these emerging distribution channels. It is anticipated that
such channels will generate incremental advertising revenues, increase awareness
of the Company's branded products, and drive additional traffic to the Company's
Web sites.

The first of these alternative distribution channels is expected to be the
HotWired channel on the PointCast Network(TM), scheduled to begin broadcast
distribution during the first quarter of 1997. HotWired has agreed to provide a
branded content channel available for selection by PointCast Network viewers on
PointCast Network client software units distributed by PointCast

36
<PAGE> 39

and preconfigured as a default channel on the HotWired-branded version of the
PointCast client software, which is expected to be distributed through the
Company's Web sites. The Company will retain the exclusive right to sell
advertising and sponsorships on the HotWired channel and will pay PointCast
monthly fees based on total advertising revenues generated by such channel. The
HotWired channel will also be designed to drive traffic to HotWired's Web sites.

As with Wired magazine, growth in the use of and advertising on the HotWired
Network has been strong from the start. Since its inception in October 1994, the
HotWired Network has grown to over an estimated 440,000 registered members as of
September 30, 1996. For the eight months ended August 31, 1996, registered
members represented approximately 16% of the total number of visitors to the
HotWired Network, excluding HotBot. For the three months ended September 30,
1996, the HotWired Network had an average of over 138,000 visitors per weekday,
and it had approximately 50.3 million page views during that period. Online
advertising revenues were $621,000 for the three months ended June 30, 1996 and
doubled to $1.2 million for the three months ended September 30, 1996.

Awards. The HotWired Network has been reviewed favorably by industry sources.
Listed below are some of the awards the HotWired Network has received:
- --------------------------------------------------------------------------------

Digital Hollywood Awards: Best Site of the Year (1996)
Digital Hollywood Awards: Best of Digital Hollywood (1995)

The National Information Infrastructure Arts & Entertainment Award (1995)

Entertainment Weekly Magazine: One of the Top Multimedia Products for 1995
(Flux)
Tenth Annual Computer Press Awards: Best Online Publication (1994)
Advertising Age Magazine: Best Online Magazine (1994)
Japanese Multimedia Grand Prix: Best in Multimedia (1994)
- --------------------------------------------------------------------------------

Demographics. Like that of Wired magazine, the audience of the HotWired Network
represents a demographic group with strong advertiser appeal. Through research,
the Company has established a profile of its online users. The Company believes
that the users of the HotWired Network are technologically savvy thought leaders
and early adopters of new ideas and technology who will be influential in the
continuing development of the Web. The HotWired Network's 1996 user research
revealed the following demographics:
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Average age............................................................ 33
Median annual household income......................................... $52,700
Percent with post-graduate study....................................... 36%
Percent who have been online two years or more......................... 55%
</TABLE>

- --------------------------------------------------------------------------------
The survey was fielded to a random sample (1 in 10) of HotWired Network users
accessing the front door of the HotWired Network from September 6, 1996 through
September 13, 1996. With a cooperation rate of approximately 25%, the final
sample size for the survey was 2,093 users. Data presented is for respondents 18
years of age and older (94.2% of survey respondents).

Advertisers. The HotWired Network's demographics have attracted a unique mix of
premier advertisers. Excluding advertising on the HotBot search engine service,
the HotWired Network's top 25 advertisers in terms of advertising revenues for
the first nine months of 1996 were:

- --------------------------------------------------------------------------------

Accent Software, Inc.

American Airlines

Apple Computer, Inc.

Architext, Inc.

AT&T Corp.

Huntington Bank

In Focus Systems, Inc.

Infoseek Corp.
Intel Corporation
Inter-Continental Hotel of New York
International Business Machines Corporation
Microsoft Corporation

37
<PAGE> 40

NEC Corporation
Netscape Communications Corporation
NYNEX Interactive Yellow Pages
Open Text Corp.

Oracle Corporation

PointCast Network
Pontiac (Division of General Motors
Corporation)
ROLM Communications, Inc.
The Saturn Corporation
Toyota Motor Corp.
Travelocity
U.S. Web, Inc.
VISA International

- --------------------------------------------------------------------------------

Such top 25 advertisers represented approximately 57% of the HotWired Network's
total advertising revenues for the first nine months of 1996. Each of Microsoft
Corporation and NYNEX Interactive Yellow Pages represented more than 5% of the
HotWired Network's total advertising revenues for the same period.

The Company offers advertisers several different models for sponsoring content
on the HotWired Network. These include:

Advertising Banners. Online advertising banners are a format -- now copied
extensively on the Web -- that the Company pioneered on the HotWired Network in
1994. Banner placements on the Company's Websites typically are charged at a
cost per thousand impressions (CPM), which ranges between $20 and $150. The rate
an advertiser pays is negotiated and depends on several factors: rate-card rates
for the banner site location, customized domain or key word targeting, inclusion
of research and promotional elements, and volume discounts. Because there are no
page views in chat forums, the HotWired Network's planned billing model for
placement of ad banners in its real-time chat forums (such as the Talk.com and
ClubWired programs) is expected to be based on time-based increments beginning
in the fourth quarter of 1996.

Sponsorships. These consist of long-term exclusive sponsorships of specific
HotWired Network programming, such as the commitment by the Oldsmobile division
of General Motors Corporation to sponsor and fully underwrite the Packet program
for 12 months beginning in September 1996.

Site Co-branding. Site co-branding is a format introduced by the Company in
1996 through which the sponsor underwrites and actively co-markets a HotWired
Network site in exchange for exclusive long-term sponsorship and deeper
integration of brand presence within site content. For example, in September
1996 Levi Strauss & Co. began a 12-month commitment to co-brand the Dream Jobs
site with its Dockers(R) casual-wear brand, and it will co-market the site as
part of its planned Dockers(R) print advertising campaign in Spring 1997.

During the first eight months of 1996, over 86% of total available ad banner
inventory on the HotWired Network (including HotBot) was placed, notwithstanding
a relatively higher average CPM for these placements than for the Company's
online competitors. The Company believes it has been able to maintain this high
rate of ad placement at premium prices due to the quality of its content, its
audience demographics, the length of time spent by users per page view, the
Company's advanced abilities to rotate banner placements dynamically according
to "smart targeting" criteria customized to advertisers' unique needs, its
research and reporting capabilities, and its added-value programs (such as
assistance in online promotions and inclusion of advertising messages in
HotFlash emails to members and in the ClubWired chat environment).

HotBot Search Engine. The Company's search engine service, HotBot, was launched
on the Web in May 1996 in order to further leverage the Company's online brand
presence and its advertising sales capabilities. HotBot is currently accessible
on the Web directly and through the HotWired Network. In addition, in August
1996, the Company launched a co-branded version of HotBot that is accessible to
users of BellSouth Telecommunications, Inc.'s proprietary Internet service, is
featured on the BellSouth homepage, and includes advertising specifically

38
<PAGE> 41

targeted to BellSouth's users. HotBot is being commercialized through a
strategic alliance with Inktomi Corporation. Under the agreement, Inktomi
licenses its search engine technology to the Company and operates the service,
and the Company provides interface design, marketing, and advertising sales. A
significant portion of net advertising revenues is paid to Inktomi as a
licensing fee. HotBot is the first search engine service designed to search the
complete text of the 50 to 60 million documents currently estimated to be on the
Web. Many of the currently popular services search only half that number. HotBot
is also able to provide advertisers with the ability to target ads based on the
keywords from a user's query, the domain from which the user is accessing the
service, and the type of browser and computer the user is running. Advertising
on HotBot is priced competitively with other search engine offerings at a CPM of
$20.00 for non-targeted impressions and at higher CPMs for keyword-targeted
impressions. The Company expects that the number of page views for HotBot will
continue to be substantially higher than those of the editorial programs on the
HotWired Network.

Global Expansion. The HotWired Network is accessible throughout the world on
the Web. The Company is exploring the development of localized versions,
involving customized language, content, and advertising, of the HotWired
Network, in regions of Western Europe and Asia.

Suck.com

Suck.com (http://www.suck.com) began as an underground, anonymously produced Web
site containing sharp commentary on the Web and popular culture. Since its debut
in August 1995, the Company believes that Suck.com has become one of the most
popular, most discussed, and most imitated sites on the Web. In September 1996,
Suck.com had approximately 6,500 to 7,100 visitors per weekday. Purchased by the
Company in March 1996, Suck.com remains editorially independent from the
HotWired Network and maintains a separate brand identity.

In May 1996, Suck.com added a series of new content areas that expanded and
reinforced the attitudes established on the original Suck.com Web site. These
five weekly programs are:
- --------------------------------------------------------------------------------

Vacuum: Parody of Internet community (reader mail)
The Pitch: The latest Web concept that's "too stupid to fail"
Filler: Facts, quotes, figures, and search results, as filtered by the Suck.com
editors
Zero Baud: Discussions of offline living
Net.Moguls: Virtual "trading cards" highlighting conspicuous characters from
the Internet world
- --------------------------------------------------------------------------------

Suck.com began generating revenues through advertising in May 1996. Its
advertisers to date have included Big Book, Marinex Multimedia/The East Village,
Tripod, Inc., Black Star Beer, Wizards of the Coast, Music Boulevard, and
Tanqueray. Each advertiser is guaranteed that its advertising message will be
viewed at least 100,000 times every four weeks. In return for this guarantee,
sponsors are required to commit to between eight and 24 weeks of advertising.
Each advertisement is rotated through the daily Suck.com home page and the five
weekly programs. In September 1996, the basic price for eight weeks of
advertising was $20,000; this rate may be discounted significantly for
longer-term advertising commitments or for other reasons. Suck.com requires that
each advertisement be animated using Sun Microsystems, Inc.'s Java programming
language.

Wired Magazine on America Online

The Company provides programming related to Wired magazine on America Online
(keyword: Wired). This programming includes highlights of the current issue of
the magazine and full-text archives of past issues. In addition, this site
offers an interactive discussion space where users can communicate with each
other as well as with writers, editors, and designers of the magazine. The
Company earns a percentage of America Online's user fees based on traffic to the
site. While the revenues attributable to this site have not been significant to
date, this site

39
<PAGE> 42

has been a cost-effective way of generating Wired magazine subscriptions,
although there can be no assurances that this will continue to be the case.

Proprietary Technologies

The Company believes that a key to its future success is to develop innovative
software technologies and to deliver online content with advanced features that
create a richer experience for its users and strengthen relationships with
advertisers. In keeping with its commitment to technology leadership, the
Company believes it was the first Web publisher to offer an integrated threaded
discussion space, a member registration system, and custom pages dynamically
generated through database queries. The Company's current development efforts
include the incorporation of video and digital sound into its online content
sites. In order to remain at the forefront of Web technology, the Company has an
in-house staff of 37 people devoted to engineering and technology development.
Some of the software technologies developed by the Company are described below:

Real-Time Chat. Talk.com incorporates familiar "chat room" features of popular
online services and can be used on any platform with any browser that supports
Java. Among the key features of Talk.com are multiple user nicknames,
member-created chat rooms, "instant" private messages, and live auditorium
events. Because the chat service is written in Java, new features and updates
can instantly be made available to users. The Company believes the Talk.com
server software is one of the first high-performance server applications written
entirely in Java. The software is designed to be scalable to support large
numbers of simultaneous users. The software is also able to run in a distributed
mode over several machines and is designed to take advantage of Internet
protocol multicasting, enabling enhanced performance on multicast networks such
as the @Home Network.

Threaded Discussion. Threads is based on the idea of threaded discussions,
which are conversations consisting of a series, or "thread," of user-posted
messages. The system provides users with a discussion area to discuss issues and
topics of interest to the HotWired Network community. The Company believes
Threads is unique on the Web in its feature set and scale, and its threaded
discussion areas have been some of the HotWired Network's most popular features.
Every piece of editorial content on the HotWired Network is linked into threaded
discussion pages created by the HotWired Network's users and contributors. The
standout feature of Threads is the ability to post to the discussion using HTML,
the language of the Web itself. In other words, each user can employ the exact
same tools as the Company's contributors and editors, allowing a level of
expression not seen in prior conferencing systems. The Company believes this
development is a step toward two-way content creation.

Personalized Web Pages and Browser Targeting. The Company has developed user
customization technology that generates personalized Web pages that are created
"on the fly" and are specific to each user. An example is the HotWired Network's
custom "What's New" page, which uses data captured by the Company's user
tracking and database system to generate a custom page for each registered
HotWired Network member that highlights the content sections that the specific
member has not previously viewed. The highlights are based on the member's
previous visits to the HotWired Network, preferences expressed by the member,
and newly posted features and articles. This technology also enables the Company
to send versions of the HotWired Network's Web pages that are optimized for the
user's computer and Web browser software. The Company's technology allows a user
who is running Netscape Navigator on a Macintosh to have a HotWired Network
experience that is substantially similar to that of a user who is visiting the
HotWired Network from America Online and running Windows 95 on a PC. This
capability is implemented through the integration of database technology with
the HotWired Network's publishing system.

Targeted Advertising. The Company's Smart Targeting Service is an advertisement
insertion system that allows advertisers to target specific users by specified
characteristics, such as by

40
<PAGE> 43

demographic attributes, domain computing platform, browser software or Internet
service provider. The first use of this system in early 1996 allowed the Company
to sell to United Kingdom-based advertisers advertisements that will be viewed
only by users having Internet domain names specific to the United Kingdom. In
addition, Individual, Inc. ran an advertising campaign in August 1996 targeted
at Fortune 1000 Internet domain names to market its
Newspage.com news service. The Company believes that its targeted advertising
technology provides the Company with a competitive advantage by enabling
advertisers to establish a one-to-one marketing relationship with the HotWired
Network's users.

HardWired Books

The Company has established a book publishing subsidiary, HardWired, Inc., which
released its first book in September 1996. A total of six books, many of which
contain or will contain content derived from Wired magazine, are scheduled for
publishing in the Fall/Winter 1996 book season. The books which have been or are
to be published in the upcoming season are:

- --------------------------------------------------------------------------------

Mind Grenades - Manifestos From the Future, by John Plunkett and Louis Rossetto:
A compilation of the stunning and provocative graphic introductions from the
first 30 issues of Wired magazine, which has been chosen as a featured alternate
of the Book of the Month Club and the Quality Paperback Book Club

The Medium is the Massage - An Inventory of Effects, by Marshall McLuhan: A
reprint of Marshall McLuhan's 1967 best-seller

Wired Style - Principles of English Usage in the Digital Age, by the editors of
Wired magazine, which has been chosen as a selection of the Book of the Month
Club and the Quality Paperback Book Club

Digerati - Encounters with the Cyber Elite, by John Brockman, which has been
chosen as a selection of the Newbridge Personal Computing and Executive Book
Clubs

Reality Check, by Brad Wieners and David Pescovitz: The real timetable for the
implementation of new technologies, which has been chosen as a featured
alternate of the Quality Paperback Book Club and as a selection of the Newbridge
Personal Computing and Executive Book Clubs

BOTS - The Origin of a New Species, by Andrew Leonard: An investigation of the
emerging, complex world of intelligent agents

- --------------------------------------------------------------------------------

DEVELOPMENT PROJECTS

The Company has many creative and business concepts in various stages of
development. These development projects include the following:

New Online Media Properties

The Company is continually exploring new ideas for online media properties. The
Company uses the HotWired Network as a cost-effective vehicle for market-testing
these new ideas. As such concepts mature, they may become full-fledged programs
on the HotWired Network, such as Ask Dr. Weil or Dream Jobs, or completely
separate online media properties, such as Suck.com. In addition, successful
online concepts may be extended to other media. The Company also believes that
its HotWired Network and other online media properties provide a platform from
which to rapidly and cost-effectively launch and test new brands, which can then
be extended across media.

41
<PAGE> 44

New Magazines

The Company is currently exploring several new magazine concepts that are
editorially distinct from the Company's existing products. The Company began
assembling dedicated staff for one such magazine in 1996 and may launch one or
more new magazines in 1997. Each of these magazines will cover a specific topic
of interest to consumers with attractive demographics similar to those of Wired
magazine readers and the Company's online media property users. These magazines
will also feature high-quality editorial material and innovative design.

Television

Leveraging the Company's programming and design resources, as well as the
strength of the Wired and related brands, the Company is exploring the
development of television programming. The Company's first planned television
production is expected to be Netizen TV, a brand extension building on The
Netizen political commentary program (http://www.netizen.com) on the HotWired
Network and section in Wired magazine. Development of Netizen TV is being
partially funded under an agreement with MSNBC Cable Channel, L.L.C., a joint
venture between The National Broadcasting Company and Microsoft Corporation.
This program is currently planned as a 30-minute weekly program of political
coverage from the perspective of the Digital Revolution. The Netizen program is
expected to be a combination of a studio discussion format and on-site location
reports, and, if MSNBC Cable Channel, L.L.C. exercises its option to produce the
show, the Company will receive a per-program license fee for each episode
delivered to MSNBC Cable Channel, L.L.C. The Company will not share in
associated advertising revenues. As the Company continues to explore programming
possibilities, it will evaluate other sources of television revenues, including
sharing in advertising revenues.

The Company's development projects involve substantial risk. There can be no
assurance that the Company's new business efforts will result in new products or
will be successful. If the Company is unable to create or commercialize new
products, its business, financial condition, and operating results may be
materially and adversely affected. The foregoing discussion contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
Prospectus.

ADVERTISING SALES

The Company's sales organization includes professionals with advertising agency
backgrounds, as well as experienced sales executives hired from other media
companies. The Company believes that understanding the sales process from both
the buyer's and seller's point of view provides a strong foundation for both
traditional media packages and more innovative and complex sponsorship-type
sales. The Company provides regular training and education to its sales staff
and believes it has built one of the most knowledgeable sales teams in the new
media sector.

The Company believes it enjoys stable, long-term relationships with many top
national advertisers in the technology and consumer categories. Many
advertisers, including Absolut Vodka, Apple Computer, Inc., and NEC Corporation,
have been advertising with Wired magazine since the first issues in 1993. Eight
of Wired magazine's 10 largest advertisers in 1993 have advertised in one or
more issues of Wired magazine in 1996. The Company believes the basis for these
strong relationships is client satisfaction with advertising results, as well as
the Company's commitment to innovative marketing solutions, research, and
customer service. Because the Company's print and interactive environments are
perceived to be leading-edge in both content and design, many advertisers create
advertising campaigns specifically for the Company's products.

42
<PAGE> 45

The Company reaches beyond technology advertisers to also include a substantial
number of consumer advertisers. Key advertiser categories in Wired magazine
include computer hardware and software, telecommunications, online services,
automotive, liquor, fashion, entertainment, and financial services. When the
Company expanded into online media with the launch of the HotWired Network, many
of its existing advertisers, including AT&T Corp. and IBM, allocated additional
funds to advertising on the HotWired Network. For the first eight months of
1996, 42% of the HotWired Network's advertisers also advertised previously in
Wired magazine.

The magazine sales force consists of in-house sales professionals in San
Francisco, Boston, New York, and London. As of September 30, 1996, there were a
total of 29 members of the United States magazine sales department, including 14
sales executives, sales support staff, and personnel who provide research,
promotional support, and value-added programs for advertisers. In addition to
the full-time magazine sales staff, the Company has contracts with outside
representatives based in Detroit, Atlanta, Dallas, and Italy.

Initially, the magazine sales staff was also responsible for selling online
advertising. Due to the rapid growth in online advertising, the differences
between interactive and print sales, and the frequently separate handling of
interactive and print budgets within advertising agencies, the Company is now
building a separate sales team dedicated to the Company's online media
properties. As of September 30, 1996, the interactive sales force consisted of
10 people in San Francisco and 5 people in New York. The HotWired Network's
sales opportunities include standard advertising banners as well as sponsorship
and co-branding models. In the case of banner sales, the advertiser provides a
banner on a HotWired Network page that generally links to the advertiser's Web
site. In the case of sponsorship and co-branding arrangements, the advertiser
has a deeper relationship with the content of a particular program, which
identifies the advertiser's brand more directly with the Company's program. For
example, the Company recently entered into a one-year sponsorship arrangement
with Levi Strauss & Co. under which the Dockers(R) brand will co-market the
Dream Jobs program.

The Company is currently selling advertising packages that combine both print
and online opportunities. As the Company creates new properties in print,
online, and television, advertisers will be offered packages that follow media
lines, brand lines, or geography. The Company believes these packages enable its
advertisers to cost-effectively reach their target audiences, while providing
the Company the opportunity to capture a larger portion of their advertising and
promotional budgets.

MARKETING AND DISTRIBUTION

The Company continually seeks to identify and develop cross-promotional
opportunities in all areas of the Company. In addition, the Company's in-house
telephone and e-mail customer service staffs cross-sell the Company's products.

The Company uses publicity and promotions to increase brand awareness and
position its brands, as well as to generate subscriptions and increase online
traffic. Many of the Company's editors, designers, programmers, and contributors
are recognized as experts in their fields and are regularly contacted by the
press to comment on developments and trends in business, politics, technology,
and lifestyle. The Company intends to invest in expanded marketing and
promotional activities including billboard, bus, and other outdoor advertising,
targeted cable television advertising, and continued print advertising in both
trade and consumer publications.

Magazine Marketing and Distribution

Wired magazine is distributed through both subscriptions and single copy sales.
The majority of growth in paid circulation has come from subscription sales,
which have grown from roughly 21,000 subscriptions at the end of 1993 to an
estimated 208,000 subscriptions at September 30, 1996. These subscriptions are
generated through a mix of direct mail marketing, online promo-

43
<PAGE> 46

tion, insert cards in the magazine and other publications, and advertising.
Another source of subscriptions is the magazine's content areas on the HotWired
Network and America Online. Single copy sales have grown from an average of
64,000 copies per month during 1993 to an estimated 97,000 copies per month
during the first nine months of 1996. The single copy price has been $4.95 since
inception. For the first nine months of 1996, the Company sold in excess of 40%
of all copies shipped for single copy distribution, which the Company believes
compares favorably with its competitors. The Company uses third-party
distributors to distribute the United States and international editions of Wired
magazine. The United States edition of Wired magazine is distributed nationally
primarily by International Circulation Distributors - The Hearst Corporation and
to retailers, smaller stores, computer stores, and internationally by various
other distributors. The United Kingdom edition is published by the Company and
distributed through a third-party distributor. The Japanese edition is published
by Dohosha Publishing Co., Ltd. under a licensing arrangement. The Company
expects both single copy and subscription sales to increase but expects
subscription sales to increase as a percentage of total circulation revenues.
There can be no assurance, however, that circulation sales will increase at the
rate anticipated or at all.

The primary tool used for circulation marketing is direct mail. After extensive
and ongoing testing, the current tested list universe is 13 million names,
indicating potential for continued growth through direct mail. The list universe
is comprised of several distinct groups, including computer users, business
people, retail consumer groups, and similar demographic groups. The Company has
also found that many of the new mailing lists coming onto the market from
Internet-related businesses are effective in attracting new subscribers. To the
extent Internet-related business continues to grow, the Company expects that
additional attractive mailing lists will become available. The Company mails
major campaigns on a quarterly basis. The roll-out subscription price for direct
mail offers is $24.95, with renewals occurring at either the basic rate of
$39.95 or $29.95. The Company is currently testing a $19.97 subscription price.
Approximately 44% of all first-time direct mail subscribers, and approximately
66% of all other subscribers have renewed their subscriptions. Additionally, the
Company recently began an online advertising campaign and is also producing a
television commercial to run on cable networks, primarily CNN. The goal of both
efforts is to sell magazine subscriptions.

Interactive Media Marketing and Distribution

The Company's marketing of its online media properties has been focused to date
almost exclusively on online venues. This has included: outreach to the
supervisors of Web sites ("Webmasters") to increase the number of online links
made to the HotWired Network's programs; promotion of the HotWired Network's
programs, particularly live events, in appropriate Usenet newsgroups; purchase
of advertising space on frequently visited sites, including Netscape, Yahoo!,
and Infoseek; and creation of online promotions using internal marketing banners
on the HotWired Network. Traditional advertising for the HotWired Network has
been limited to the monthly placement of advertisements in Wired magazine. In
addition, the HotWired Network has co-sponsored several trade shows and
entertainment events, including the DCI Web World conference and exposition, the
SIGGRAPH multimedia conference and exposition, the MacIntosh New York Music
Festival, and the Toyota Comedy Festival. The Company plans to increase total
marketing expenditures for its online media properties in order to increase
traffic and aggressively build brand awareness. The Company is also engaged in
active discussions with third parties regarding the distribution of its online
content through such third parties' proprietary services.

HardWired Marketing and Distribution

HardWired books are published by the Company and distributed in the United
States and Canada through Publishers Group West Incorporated ("PGW"). The
Company's book marketing program includes a cooperative agreement with PGW for
advertising in wholesaler catalogs, book trade publications, consumer outlets,
and national account promotions. The Company also expects to promote its books
through trade shows, trade and consumer print advertise-

44
<PAGE> 47

ments (including Wired magazine), electronic kiosks, and online advertising
(including on the Company's online media properties), author appearances on
television and radio, book tours, and speaking engagements.

Television Marketing and Distribution

The Company expects to employ the same cross-promotion techniques for its
television programming as it does for its other media properties. In addition,
the Company is currently exploring various methods for marketing its television
programming, including billboards and television advertisements.

COMPETITION

Competition in the magazine publishing business is also intense with respect to
subscription sales and single copy distribution and display. Wired magazine is
editorially unique, covering a broad range of topics relating to the Digital
Revolution, including technology, business and lifestyle. As such, the Company
competes with many general interest magazines, including computer magazines such
as BYTE and PC Magazine, business magazines such as BusinessWeek and Fortune and
lifestyle magazines such as Rolling Stone and GQ. There can be no assurance that
one or more other magazines or online content sites, including new magazines or
online content sites developed by the Company, will not significantly undermine
the marketing efforts of Wired magazine or significantly impact the sources of
its circulation or advertising revenues. If this were to occur, there would be a
material adverse effect on the Company's business, financial condition, and
operating results.

To the extent that the Internet infrastructure is expanded and access to the Web
is made easier and less expensive, the Company expects the number of Web users
to continue to grow at a rapid rate. In response to this anticipated growth,
there is an increasing number of companies, some with significantly greater
resources than the Company, developing online content and services for delivery
on the Web, and competing for audiences and the advertising dollars that are
currently being devoted to the Web. The Company's online content sites compete
with other online content sites such as America Online's Global Network
Navigator, cnet, Starwave's ESPNet, and Time-Warner's Pathfinder. The Company's
search engine service competes with services such as AltaVista, Excite,
Infoseek, Lycos, and Yahoo!. All of the Company's online media properties
compete for advertising dollars with Web browser companies such as Netscape.
There can be no assurance that one or more of the Company's competitors or the
Company's own media properties will not significantly undermine the Company's
marketing efforts for its

45
<PAGE> 48

online media properties or attract a significant amount of advertising revenues
away from the Company.

The Company's book publishing operations will compete for sales with numerous
other publishers and retailers, as well as with other media, including the
Company's own magazine and online media products. In addition, the acquisition
of publishing rights to books by leading authors is highly competitive, and the
Company will compete with numerous other book publishers. There can be no
assurance that the Company's book publishing efforts will be successful, or that
the costs of such efforts will not have a material adverse effect on the
Company's business, financial condition, and operating results.

The creation, production, and distribution of television programming is a highly
competitive business, as each television program competes with other television
programming and with other forms of entertainment. Furthermore, competition in
the television industry is expected to increase as the number and variety of
basic cable and pay television services available continue to grow. There is
active competition among all production companies in these industries for the
services of producers, directors, actors, and others and for the acquisition of
literary properties. With respect to the distribution of television product,
there is significant competition from independent producers and distributors as
well as major studios. Revenues for filmed entertainment product depend in part
on general economic conditions, but the competitive position of a producer or
distributor is still greatly affected by the quality of, and public response to,
the entertainment product it makes available to the marketplace. There can be no
assurance that the Company's efforts in television programming will result in
programming which is marketable to advertisers and distributors or will be
commercially successful, or that the cost of creating and producing television
programming, whether successful or not in the market, will not have a material
adverse effect on the Company's business, financial condition, and operating
results.

TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS

The Company regards its copyrights, trademarks, trade dress, trade secrets, and
similar intellectual property as critical to its success, and the Company relies
upon trademark and copyright law, trade secret protection, and confidentiality
and license agreements with its employees, customers, partners, and others to
protect its proprietary rights. The Company pursues the registration of its
material trademarks in the United States and, based upon anticipated use, in
certain other countries. The Company has applied for and registered the "Wired"
mark in a variety of classes in the United States and numerous other countries
and has applied for the registration of certain of its other trademarks,
including "HotWired," "Wired TV," "HardWired," "HotBot," and "Wired Online."
Effective trademark, copyright, and trade secret protection may not be available
in every country in which the Company's products are available. The Company has
licensed in the past, and it expects that it may license in the future, elements
of its trademarks, trade dress, and similar proprietary rights to third parties,
including in connection with Wired magazine's international editions and other
media properties that may be controlled operationally by third parties. While
the Company attempts to ensure that the quality of its brands is maintained by
such licensees, there can be no assurance that such licensees will not take
actions that might materially and adversely affect the value of the Company's
proprietary rights or the reputation of its products, either of which could have
a material adverse effect on the Company's business. Moreover, while the Company
believes that it has the right to use Wired, HotWired, and its other marks in
connection with its business, and it generally has the right to prohibit others
from using such marks in certain fields of use, there can be no assurance that
the Company will be able to maintain such rights. From time to time the Company
has been, is, and expects to continue to be subject to legal proceedings and
claims in the ordinary course of its business, including claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties by the Company and its licensees. For example, the Company has been
involved in a dispute with America Online regarding ownership of the mark
"Netizen." While the Company believes that it will be able to

46
<PAGE> 49

resolve this dispute on terms satisfactory to the Company, there can be no
assurance in this regard. Such claims, even if not meritorious, could result in
the expenditure of significant financial and managerial resources. The Company
is not aware of any legal proceedings or claims that the Company believes will
have, individually or in the aggregate, a material adverse effect on the
Company's business, financial condition, or results of operations. See
"Business -- Litigation."

EMPLOYEES

The Company believes that a key to its future success is the continued
contribution of its management, creative, technical, and sales employees. In
particular, the Company benefits from the reputation, imagination, and
experience of key creative managers, such as Louis Rossetto, the Company's Chief
Executive Officer, and Kevin Kelly, Wired magazine's Executive Editor, and the
Company's Creative Directors, John Plunkett and Barbara Kuhr. The Company also
benefits from the business and technology expertise of Andrew Anker, Chief
Executive Officer of HotWired, Inc. In addition, the Company's senior management
team, including Jane Metcalfe, the Company's President, and Dana Lyon, Vice
President of Wired Magazine Group, Inc., has extensive advertising and
publishing experience, and has created sales teams for the Company's print and
online businesses that the Company believes are key to its success. Mr. Rossetto
and Ms. Metcalfe, the Company's co-founders, are domestic partners. Ms. Metcalfe
currently anticipates taking a leave of absence of approximately three months
beginning in the first quarter of 1997.

As of September 30, 1996, the Company had a total of 347 full-time employees. Of
these employees, 160 are engaged in content development and design, 39 are
engaged in engineering and technology development, 65 are engaged in sales and
marketing, 18 are engaged in circulation, and 65 are engaged in general,
finance, and administrative activities. Of the Company's employees, 128 work on
Wired magazine, 165 work on the Company's online media properties, 10 work on
the Company's book properties, 9 work on television programming development and
35 work for all Wired businesses in a general, finance, or administrative
capacity. None of the Company's employees is represented by a labor union.
Certain planned activities of WiredTV may in the future result in the employment
of unionized personnel. The Company has experienced no work stoppages and
considers its relations with employees to be good.

LITIGATION

The Company is not presently party to any material litigation. However, as a new
media publisher, the Company has been and anticipates that it will in the future
be subject to litigation including allegations of defamation. For example,
during 1994 and 1995, the Company was involved in a dispute involving a claim of
defamation arising out of an article that appeared in the January 1994 issue of
Wired magazine. Although the Company expended substantial resources in its
defense, this matter was settled without any payment or other concession by the
Company.

FACILITIES

The Company's headquarters are located in San Francisco, California, and the
Company has offices in New York City, Washington D.C., and London. All 130,000
square feet of office space are leased under agreements that expire on various
dates through 2006. The Company believes that suitable additional or alternative
space, including space available under lease options, will be available at
commercially reasonable terms for future expansion.

47
<PAGE> 50

MANAGEMENT

EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

The executive officers, key employees and directors of the Company are as
follows:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- -------
<S> <C> <C>
Louis Rossetto(1)................. 47 Chief Executive Officer and Chair of
the Board
Jane Metcalfe(1).................. 34 President and Director
Jeffrey Simon(1).................. 34 Chief Financial Officer and Secretary
Andrew Anker(1)................... 31 Vice President -- Interactive; Chief
Executive Officer, HotWired, Inc.
Rex Ishibashi(1).................. 32 Vice President -- Corporate and
Business Development
John Plunkett..................... 43 Creative Director
Barbara Kuhr...................... 42 Creative Director
Kevin Kelly....................... 44 Executive Editor -- Wired magazine
Peter Rutten...................... 39 President, HardWired, Inc.
Dana Lyon......................... 40 Vice President, Wired Magazine Group,
Inc.
H. William Jesse, Jr.(2).......... 44 Director
Scott Sassa....................... 37 Director
Lawrence Wilkinson(2)............. 46 Director
</TABLE>

- --------------------------------------------------------------------------------
(1) Executive Officer

(2) Member of the Audit and Compensation Committees

Mr. Rossetto, a founder of the Company and Publisher and Editor-In-Chief of
Wired magazine since its launch in January 1993, has served as the Chief
Executive Officer and Chair of the Board of Wired Ventures, Inc. since its
inception in March 1996. Prior to the Reorganization, Mr. Rossetto served as
Chief Executive Officer of Wired Holdings Inc., predecessor in interest to the
Company, since its inception in January 1993. From November 1989 until January
1993, Mr. Rossetto worked on developing Wired magazine. From April 1989 to
November 1989, Mr. Rossetto served as Editor-In-Chief of O Magazine, a Dutch
language men's lifestyle magazine. In 1986, Mr. Rossetto founded Electric Word,
a computer magazine. In 1994, he was named Co-Journalist of the Year (along with
Ms. Metcalfe) by the Society of Professional Journalists, Northern California
Chapter. Mr. Rossetto holds a B.A. in Political Science and an M.B.A. from
Columbia University.

Ms. Metcalfe, a founder of the Company, has served as the President and a
director of Wired Ventures, Inc. since its inception in March 1996. Prior to the
Reorganization, Ms. Metcalfe served as President of Wired Holdings Inc. since
its inception in January 1993. From December 1990 to January 1993, Ms. Metcalfe
worked on developing Wired magazine. From March 1988 to December 1990, Ms.
Metcalfe worked for Electric Word magazine, most recently as Associate
Publisher. Prior to that, she was Director of Export Sales at Valentine Palomba,
a Paris couturier. In 1994, Ms. Metcalfe was named Co-Journalist of the Year
(along with Mr. Rossetto) by the Society of Professional Journalists, Northern
California Chapter. Ms. Metcalfe holds a B.A. in International Relations from
The University of Colorado.

Mr. Simon has served as Chief Financial Officer and Secretary of Wired Ventures,
Inc. since May 1996. From November 1995 to May 1996, Mr. Simon was Vice
President and Chief Financial Officer of HotWired Ventures LLC. Prior to joining
the Company, from February 1994 to November 1995, Mr. Simon was Director of
Business Planning and Analysis for GE Capital Commercial Real Estate Services, a
real estate finance company, and from December 1992 to February 1994, was the
Controller for GE Capital Aircraft Leasing Corporation, an aircraft leasing
company. From August 1990 to October 1992, he was Assistant Controller for Wells

48
<PAGE> 51

Fargo Nikko Investment Advisors, an investment advisory firm. From 1984 to 1990,
Mr. Simon worked at KPMG Peat Marwick, an independent certified public
accounting firm, most recently in the positions of Senior Tax Manager and Audit
Manager. Mr. Simon is a Certified Public Accountant and holds an M.B.A. and a
B.S. in Business Administration from the University of California, Berkeley.

Mr. Anker has served as Vice President - Interactive of Wired Ventures, Inc. and
Chief Executive Officer of its subsidiary, Hotwired, Inc., since May 1996. Prior
to the Reorganization, he served as President and Chief Executive Officer of
HotWired Ventures LLC from its founding in January 1995 to May 1996, after
joining as Wired Ventures, Ltd.'s Vice President and Chief Technology Officer in
March 1994. From January 1992 to March 1994, Mr. Anker was a Principal of
Sterling Payot Company, an investment banking firm, where he remains an Advisory
Principal. From February 1991 to January 1992, he served as Director of
Development of AdExpress Company, an advertising technology firm. Mr. Anker
serves on the board of Gauge Technologies, Inc. Mr. Anker holds a B.A. in
Economics from Columbia University.

Mr. Ishibashi has served as Vice President - Corporate and Business Development
of Wired Ventures, Inc. since May 1996, previously serving as its Chief
Financial Officer and Secretary since its inception in March 1996. From December
1995 to May 1996, he served as Chief Financial Officer and Vice President of
Business Affairs for Wired Ventures, Ltd. Prior to joining the Company, Mr.
Ishibashi worked for The 3DO Company, an interactive games company, from March
1993 to November 1995, most recently as Director of Finance. From July 1992 to
March 1993, Mr. Ishibashi served as an independent financial consultant, and the
Executive Vice President and Chief Financial Officer of Wilderness Trail Bikes,
a mountain bike company. From August 1985 to July 1992, Mr. Ishibashi worked for
KPMG Peat Marwick, an independent certified public accounting firm, most
recently as Senior Audit Manager in the Tokyo and San Francisco offices. Mr.
Ishibashi is a Certified Public Accountant and holds a B.S. in Business
Administration from the University of California, Berkeley.

Mr. Plunkett has served as Creative Director for Wired magazine since its launch
in January 1993 and for Wired Ventures, Inc. since March 1996. Together Mr.
Plunkett and Ms. Kuhr are the co-creators of the look and feel of both Wired
magazine and the HotWired Network, as well as the recently launched HardWired
books. For the past six years, Mr. Plunkett also has been a partner in Plunkett
+ Kuhr, a design firm whose work has been featured in numerous national and
international design publications, including Communication Arts and Graphis, and
received awards from the American Institute of Graphic Arts, the American Center
for Design, and the Society of Publication Designers. Previously, Mr. Plunkett
was a senior designer for the corporate design firm Pentagram Design in New
York. In total, Mr. Plunkett has over 15 years of experience with electronic
pre-press and high-end printing. Mr. Plunkett holds a graduate degree in design
from the California Institute of the Arts.

Ms. Kuhr has served as Creative Director for the HotWired Network since its
launch in October 1994, and for Wired Ventures, Inc. since March 1996. Together
Mr. Plunkett and Ms. Kuhr are the co-creators of the look and feel of both Wired
magazine and the HotWired Network, as well as the recently launched HardWired
books. For the past six years, Ms. Kuhr also has been a partner in
Plunkett + Kuhr, a design firm whose work has been featured in numerous national
and international design publications, including Communication Arts and Graphis,
and received awards from the American Institute of Graphic Arts, the American
Center for Design, and the Society of Publication Designers. From 1987 to 1990,
Ms. Kuhr was a senior designer for the corporate design firm Chermayeff and
Geismar Associates in New York. Ms. Kuhr holds a design degree from Montana
State University.

Mr. Kelly has served as the Executive Editor of Wired magazine since September
1992. From 1985 to January 1990, Mr. Kelly was Editor and Publisher of Whole
Earth Review, a national magazine reporting on unorthodox technical and cultural
news. In January 1990, Mr. Kelly left the Whole Earth Review on sabbatical.
During the time between his sabbatical and joining the

49
<PAGE> 52

Company, he authored Out of Control, a book on future technology published by
Addison Wesley. He also launched the Electronic Whole Earth Catalog on CD-ROM,
edited Signal, a book on personal communication tools, and founded and owned
Nomadic Books, a mail order company. Mr. Kelly serves as a director of the WELL,
one of the first online communities.

Mr. Rutten has served as Publisher and President of HardWired since its founding
in July 1995 and as President of HardWired, Inc. since May 1996. From December
1992 through June 1995, Mr. Rutten was the Creative Director at Michael Wolff &
Company, Inc., now Wolff New Media, Inc., a New York-based book and Web
publishing firm. Prior to that, Mr. Rutten worked as a Media Development
Consultant and, between August 1990 and May 1992, he co-authored the book "Where
We Stand -- Can America Make it in the Global Race for Wealth, Health, and
Happiness?" (published by Bantam). From April 1989 through July 1990, Mr. Rutten
served as the Executive Editor of O Magazine, a Netherlands-based publication
written in Dutch. From 1986 to April 1990, he worked for Electric Word magazine,
in the last year as its Executive Editor.

Ms. Lyon has served as Vice President of Wired Magazine Group, Inc. since May
1996 and as Associate Publisher of Wired magazine since July 1994. Prior to
joining the Company, Ms. Lyon worked for Conde-Nast Publications, where she
served as Advertising Manager of Gourmet from July 1993 to July 1994 and as
Advertising Manager of Vanity Fair from February 1989 to July 1992. Prior to her
publishing experience, she served for eight years as an account executive with
J. Walter Thompson. Ms. Lyon holds a B.A. from Ohio Wesleyan University.

Mr. Jesse has served as a director of the Company since its inception in March
1996. Prior to that, he served as a director of Wired Holdings Inc. since its
inception in January 1993. Mr. Jesse is Chairman and President of HWJesse&Co, a
San Francisco-based firm providing financial and business advisory services to
private and closely-held companies. He co-founded and has served as a director
since 1989 of Sterling Payot Company, an investment banking company, and has
served as President of Jesse, Payot & Co., Inc., an investment holding company
since 1988. Mr. Jesse has also served since 1988 as Chair and Chief Executive
Officer of Vineyard Properties Corporation, a manager of California vineyard
properties. Mr. Jesse also serves on the boards of AdExpress Company, The Wine
Group, Inc., Specialized Bicycle Components, Inc., Aidells Sausage Company LLC,
Sonic Force LLC, and Trans Ocean Ltd. Mr. Jesse has a B.S. and an M.S. from
Lehigh University and an M.B.A. from Harvard University.

Mr. Sassa has served as a director of the Company since October 1996. Mr. Sassa
served as President of Turner Entertainment Group, a division of Turner
Broadcasting System, Inc., a multimedia company, from September 1992 through
October 1996. He also served on the Board of Directors of Turner Broadcasting
System, Inc. from September 1992 through October 1996. As President of Turner
Entertainment Group, Mr. Sassa was responsible for all operations and
programming for Turner Entertainment Networks, which includes TBS Superstation,
Turner Network Television (TNT), Cartoon Network, and Turner Classic Movies, and
was responsible for Turner Home Entertainment, which includes Turner Home Video,
Hanna Barbera, and Turner Pictures. From October 1990 through August 1991, Mr.
Sassa served as President of Turner Entertainment Networks, a division of Turner
Broadcasting System, Inc. From March 1988 through September 1990, Mr. Sassa
served as executive vice president of Turner Network Television, a division of
Turner Broadcasting System, Inc. where he was responsible for the launch of the
network.

Mr. Wilkinson has served as a director of the Company since May 1996. Mr.
Wilkinson is the cofounder, and has served as President and Chief Executive
Officer since 1990, of Global Business Network ("GBN"), a consulting firm
specializing in strategic positioning issues and product, service, and venture
development. Prior to 1990, Mr. Wilkinson served as President of Colossal
Pictures, a film production company. Mr. Wilkinson has produced numerous
television programs, multimedia titles, and feature films, including the feature
film Crumb (Sony Pictures Classics). He also has contributed regularly to
general and business periodicals and national

50
<PAGE> 53

television, cable, and radio business news programs, including Wired magazine,
Backstage, Business Times, Nightly Business Report, and The Wall Street Journal
Report. Mr. Wilkinson serves on the boards of Broderbund Software, GBN and
Colossal Pictures. Mr. Wilkinson has a B.A. from Davidson College, a B.Phil.
from Oxford University and an M.B.A. from Harvard University.

BOARD COMMITTEES

The Audit Committee of the Board of Directors, which currently consists of Mr.
Jesse and Mr. Wilkinson, was formed in May 1996 to review the internal
accounting procedures of the Company and consult with and review the services
provided by the Company's independent public accountants. The Compensation
Committee of the Board of Directors, which currently consists of Mr. Jesse and
Mr. Wilkinson, was formed in May 1996 to review and recommend to the Board the
compensation and benefits of all officers of the Company and review general
policies relating to compensation and benefits of employees of the Company. The
Compensation Committee also administers the issuance of stock options and other
awards under the Company's 1996 Equity Incentive Plan.

DIRECTOR COMPENSATION

All directors are reimbursed for expenses incurred in connection with attendance
at meetings of the Company's Board of Directors. Each non-employee director of
the Company will be eligible to receive stock option grants under the Company's
1996 Director Stock Option Plan. Directors who are also employees of the Company
are eligible to receive stock options and other equity grants under the
Company's 1996 Equity Incentive Plan. See "-- Employee Benefit Plans."

EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded to or earned by the
Company's Chief Executive Officer and the other executive officers of the
Company (collectively, the "Named Executive Officers") for the year ended
December 31, 1995:

SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) COMPENSATION
------------------------ ------- ------------
<S> <C> <C>
Louis Rossetto................................... $ 88,558 --
Chief Executive Officer
Jane Metcalfe.................................... 88,558 --
President
Jeffrey Simon.................................... 12,500(2) $15,000(3)
Chief Financial Officer and Secretary
Andrew Anker..................................... 140,369 4,938(4)
Vice President - Interactive
Rex Ishibashi.................................... 4,167(5) --
Vice President - Corporate and Business
Development
</TABLE>

- --------------------------------------------------------------------------------
(1) Includes amounts earned but deferred at the election of the Named Executive
Officer under the Company's 401(k) plan.
(2) Mr. Simon joined the Company in November 1995; this number reflects an
annual salary of $110,000.
(3) Represents reimbursement for relocation costs.
(4) Represents medical insurance premiums paid by the Company on behalf of Mr.
Anker.
(5) Mr. Ishibashi joined the Company in December 1995; this number reflects an
annual salary of $110,000.

51
<PAGE> 54

STOCK OPTION INFORMATION

The Company did not grant options to any of the Named Executive Officers in 1995
and none of the Named Executive Officers exercised any options during 1995 or
held any options at the end of 1995.

EMPLOYEE BENEFIT PLANS

1996 Equity Incentive Plan

The Company's 1996 Equity Incentive Plan (the "Incentive Plan") under which
4,250,000 shares of Common Stock are reserved for future issuance, was adopted
by the Board of Directors in May 1996. The Incentive Plan provides for the grant
of stock options, stock bonuses and stock appreciation rights and the sale and
issuance of restricted stock by the Company to its employees, officers,
directors and consultants.

The term of stock options granted under the Incentive Plan may not exceed 10
years. The exercise price of options granted under the Incentive Plan will be
determined by the Board of Directors but, in the case of a nonstatutory stock
option, cannot be less than 85% of the fair market value of the Common Stock on
the date of the option grant and, in the case of an incentive stock option,
cannot be less than 100% of the fair market value of the Common Stock on the
date of grant. Options granted under the Incentive Plan generally vest in
periodic installments that are determined by the Board. No option may be
transferred by the optionee other than by will or the laws of descent or
distribution or, in certain limited circumstances, pursuant to a qualified
domestic relations order. An optionee whose relationship with the Company or any
affiliate ceases for any reason (other than death or disability) may exercise
options in the three-month period following such cessation unless such options
terminate or expire sooner by their terms.

In addition to, or in tandem with, awards of stock options, the Board of
Directors may grant participants restricted stock awards to purchase the
Company's Common Stock for not less than 85% of its fair market value at the
time of grant or stock bonus awards of the Company's Common Stock. Shares of
stock sold or awarded under the Incentive Plan may, but need not be, subject to
a repurchase option in favor of the Company in accordance with a vesting
schedule determined by the Board of Directors or Compensation Committee. The
Board of Directors may also grant stock appreciation rights of the Company's
Common Stock in addition to, or in tandem or concurrently with, other awards
under the Incentive Plan. The terms of all such awards will be determined by the
Board of Directors.

Shares that (a) are subject to issuance upon exercise of an option but cease to
be subject to such stock option for any reason other than exercise of such stock
option, (b) are subject to another award granted under the Incentive Plan but
are forfeited or are repurchased by the Company at the original issue price, or
(c) are subject to an award that otherwise terminates without shares being
issued will again be available for grant and issuance in connection with future
awards under the Incentive Plan. In the event of a merger of the Company with or
into another corporation or the acquisition by any entity of 50% of the voting
stock of the Company, all outstanding options must either be assumed or
substituted by the surviving entity. If the surviving entity determines not to
assume or substitute such options, the options terminate as of the closing of
the merger or consolidation if not exercised prior to the closing.

1996 Non-Employee Director Stock Option Plan

The Board of Directors adopted a 1996 Non-Employee Director Stock Option Plan
(the "Directors' Plan") in May 1996. The total number of shares of Common Stock
reserved for issuance and granted under the Directors' Plan is 50,000. The
Directors' Plan provides for the grant of nonstatutory stock options to
non-employee directors of the Company. The Directors' Plan is designed to work
automatically without administration; however, to the extent administration

52
<PAGE> 55

is necessary, it will be performed by the Board. The Directors' Plan provides
that each person who is a non-employee director of the Company upon the closing
of the offerings, or becomes a non-employee director after such date will be
granted an option (the "First Option") to purchase 1,250 shares of Common Stock
on the date on which the optionee first becomes a non-employee director of the
Company. Thereafter, on January 1 of each year each non-employee director will
be granted an additional option to purchase 1,250 shares of Common Stock,
prorated for partial years of service (a "Subsequent Option"). Each First Option
and Subsequent Option will be subject to vesting over a four-year period. The
exercise price of all stock options granted under the Directors' Plan will be
equal to the fair market value of a share of the Company's Common Stock on the
date of grant of the option. Options granted under the Directors' Plan will have
a term of 10 years. The Directors' Plan does not set a maximum or a minimum
number of shares for which options may be granted to any one non-employee
director. No option granted under the Directors' Plan will be transferable by
the optionee other than by will or the laws of descent or distribution or
pursuant to a qualified domestic relations order (as defined by the Internal
Revenue Code of 1986, as amended (the "Code")), and each option will be
exercisable, during the lifetime of the optionee, only by such optionee.

In the event of a merger of the Company with or into another corporation or a
sale of substantially all of the Company's assets, each non-employee director
will have a reasonable time within which (i) to exercise his or her options,
including any part of an option that would not otherwise be exercisable prior to
the effectiveness of the transaction, at which time the options will terminate
or the right to exercise their options, including any part of an option that
would not otherwise be exercisable, or (ii) to receive a substitute option with
comparable terms, for an equivalent number of shares of stock of the acquiring
or successor corporation. The Board of Directors may amend or terminate the
Directors' Plan; provided, however, that no such action may adversely affect any
outstanding option, and the provisions regarding the grant of options under the
plan may be amended only once in any six-month period, other than to comport
with changes in the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or the Code. If not terminated earlier, the Directors' Plan has a term
of 10 years.

401(k) Plan

In August 1995, the Company adopted an employee savings plan (the "401(k) Plan")
covering all of the Company's eligible full-time employees. Pursuant to the
401(k) Plan, eligible employees may elect to reduce their current compensation
by up to the lesser of 20% of their annual compensation or the statutorily
prescribed annual limit ($9,500 in 1996) and have the amount of such reduction
contributed to the 401(k) Plan. In addition, eligible employees may make
rollover contributions to the 401(k) Plan from a tax-qualified retirement plan.
The 401(k) Plan is intended to qualify under Section 401 of the Code, so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on the 401(k) Plan contributions, are not taxable to employees until
withdrawn from the 401(k) Plan, and so that contributions by the Company, if
any, will be deductible by the Company when made. The Company does not presently
intend to make any matching or discretionary contributions.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

The Company's Restated Certificate of Incorporation provides that directors of
the Company will not be personally liable for monetary damages to the Company or
its stockholders for any breach of their fiduciary duty as directors, except for
(i) any breach of such director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) liability arising
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) any transaction from which a director derives an improper personal benefit.

The Company's Restated Certificate of Incorporation and Bylaws provide that
directors and officers of the Company may be indemnified to the fullest extent
permitted by Delaware law, as it now exists or may in the future be amended,
against all expenses and liabilities reasonably

53
<PAGE> 56

incurred in connection with service for or on behalf of the Company, including
payment of expenses in defending an action or proceeding in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by the
person indemnified to repay such payment if it is ultimately determined that
such person is not entitled to indemnification. The Restated Certificate of
Incorporation and Bylaws also provide that the rights of directors and officers
to such indemnification is not exclusive of any other right now possessed or
hereafter acquired under any statute, agreement or otherwise.

The Company has entered into indemnification agreements with each of its
executive officers and directors. Each indemnification agreement provides that
such officer or director will be indemnified by the Company to the fullest
extent permitted by the Company's Bylaws and Delaware law, as it now exists or
may in the future be amended, and against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of the Company.
The Company will also authorize under the indemnification agreements to advance
payment of expenses in defending an action or proceeding upon receipt of an
undertaking by the person indemnified to repay such payment if it is ultimately
determined that such person is not entitled to indemnification.

54
<PAGE> 57

CERTAIN TRANSACTIONS

Prior to the completion of the Reorganization, which occurred in May 1996, the
Company's businesses were conducted in partnership and limited liability company
form, principally through Wired Partners, a California general partnership (from
its formation in October 1992 through January 1993), Wired USA Ltd. (from its
formation in January 1993 through January 1994), Wired Ventures, Ltd. (from its
formation in January 1994 to May 1996) and HotWired Ventures LLC (from its
formation in January 1995 to May 1996). The ownership of the Company's
constituent entities prior to the Reorganization is summarized below:
- --------------------------------------------------------------------------------

Wired Holdings Inc. ("Holdings"). Holdings, which was owned by 22 individual
shareholders (none of whom individually held a controlling interest), was the
majority owner and general partner of Wired USA Ltd. and a minority owner and
the general partner of Wired Ventures, Ltd. Holdings' only assets were its
ownership interests in these two entities.

Wired USA Ltd. ("USA"). The majority interest in USA was held by its general
partner, Holdings. The remaining interest was held by various limited partners.
From its formation in January 1993 through January 1994, USA owned the assets
associated with Wired magazine and certain other entities. Upon the formation of
Wired Ventures, Ltd. in January 1994, USA transferred its assets to such entity
and thereafter was its majority owner and limited partner. After January 1994,
USA's only asset was its ownership interest in Wired Ventures, Ltd.

Wired Ventures, Ltd. ("Wired Ventures"). Wired Ventures was owned by Holdings,
USA, Advance Magazine Publishers, Inc. ("Advance") (which owned a minority
limited partnership interest) and certain employees (who each owned a minority
limited partnership interest). Wired Ventures owned the assets associated with
Wired magazine and certain other entities, including a majority membership
interest in HotWired Ventures LLC.

HotWired Ventures LLC ("HotWired Ventures"). HotWired Ventures was owned by
Wired Ventures and certain employees and investors (who each owned a minority
membership interest). HotWired Ventures owned the assets associated with the
Company's online media properties.
- --------------------------------------------------------------------------------

The Reorganization was intended to simplify the corporate structure outlined
above such that the Company is a single corporate holding company, Wired
Ventures, Inc., which has wholly owned subsidiaries that conduct the various
aspects of the Company's business. In the Reorganization, the shareholders of
Holdings, the limited partners of USA (other than Holdings), the limited
partners of Wired Ventures (other than USA) and the members of HotWired Ventures
(other than Wired Ventures) contributed their respective interests in such
entities to the Company in exchange for shares of the Company's Series A
Preferred Stock. The Company then contributed its interests in Wired USA, Wired
Ventures and HotWired Ventures to Holdings, resulting in a dissolution of Wired
USA, Wired Ventures and HotWired Ventures and leaving Holdings (which was
renamed Wired Magazine Group, Inc.) as a wholly owned subsidiary of the Company.
The Company's magazine, book, online, and television operations are now
conducted by its subsidiaries, Wired Magazine Group, Inc., HardWired, Inc.,
HotWired, Inc. and Wired Television, Inc., respectively.

Since its inception, the Company has financed a portion of its operations
through the private sales of equity securities of its constituent entities, as
follows:

Launch Financing. In January 1993, Holdings was capitalized with cash and
certain trademarks and other similar intellectual property rights valued at
$79,333 contributed by its predecessor, Wired Partners, a general partnership
comprised of Louis Rossetto, Jane Metcalfe, Charles Jackson and Nicholas
Negroponte. In addition, various investors affiliated with Sterling

55
<PAGE> 58

Payot Company, an investment banking firm ("Sterling Payot"), contributed a
total of $14,000 to Holdings.

Concurrently with the initial capitalization of Holdings in January 1993, USA
was organized and assumed the business of its predecessor, Wired Partners. In
connection with USA's formation, (a) Holdings contributed cash and certain
trademarks and other similar intellectual property rights with an aggregate
value of $93,333 in exchange for a general partnership interest in USA
representing a 62% interest in USA, (b) two seed investors contributed a total
of $225,000 in cash in exchange for Class A limited partnership interests in USA
representing an 18.7% ownership interest in USA, and (c) various new investors
contributed a total of $606,400 in cash in exchange for Class A limited
partnership interests in USA representing an 18.9% ownership interest in USA
(the "Launch Financing"). Sterling Payot served as the Company's placement agent
for the Launch Financing, and certain affiliates of Sterling Payot were
investors in such financing. In connection with the completion of the Launch
Financing, H. William Jesse, Jr., a director of Sterling Payot, became a
director of Holdings.

Subsequently, in November 1993, Holdings issued additional shares of stock to
certain key employees of and consultants to the Company, subject to vesting over
a period of two years.

Circulation Financing. In January 1994, USA entered into a limited partnership
agreement with Holdings and Advance, an affiliate of Conde Nast, to form Wired
Ventures for the purpose of owning and operating Wired magazine. Holdings
contributed the Wired brands, logos and trade names to the new partnership in
exchange for a general partnership interest representing a 3% ownership interest
in Wired Ventures. USA contributed all operations, assets and liabilities
relating to Wired magazine in exchange for a limited partnership interest
representing an 82% ownership interest in Wired Ventures. Advance contributed
$3.0 million in cash to Wired Ventures and an outstanding $500,000
non-interest-bearing convertible note (which was converted to capital) in
exchange for a limited partnership interest representing a 15% ownership
interest in Wired Ventures. Wired Ventures subsequently issued Class B limited
partnership interests constituting subordinated profit interests to certain
Wired Ventures employees.

Online Spinoff and Financing. In January 1995, certain Wired Ventures employees
formed HW Acquisition Group LLC, a California limited liability company (the
"LLC"), and purchased equity interests therein. In March 1995, Wired Ventures
contributed its online publishing business to the LLC in exchange for Class A
membership units representing a 90% ownership interest in the LLC. In connection
with the spinoff of the online business, the LLC changed its name to HotWired
Ventures LLC, and the outstanding employee units were recharacterized as Class B
membership units and subordinated to the return of capital of the Class A
membership units issued to Wired Ventures. In August 1995, additional Class A
membership units were issued to 25 business enterprises and individuals,
including certain affiliates of Sterling Payot, for an aggregate purchase price
of $7.0 million, which reduced Wired Ventures' interest in HotWired Ventures to
74.5%. HotWired Ventures subsequently issued Class C membership units
constituting subordinated profit interests to certain key employees and advisors
of HotWired Ventures. Sterling Payot, certain principals of which were Class A
investors in HotWired Ventures, has performed ongoing business advisory services
for HotWired Ventures. Sterling Payot was issued 600 fully vested Class C
membership units (which were subsequently exchanged for shares of the Company's
Series A Preferred Stock in the Reorganization) for services rendered through
October 1995 and has received options to purchase 7,375 shares of the Company's
Common Stock with an exercise price of $2.00 per share for services rendered
after that date. H. William Jesse, Jr., a director of the Company, co-founded
Sterling Payot and has served as one of its directors since 1989.

Debt Financing. The Company has financed certain of its operations through bank
and other debt financing. In its first year of operation, USA received two loans
from related parties. The first loan, from a relative of the publisher, was for
$50,000 at 6% interest per annum and was repaid subsequent to the formation and
financing of Wired Ventures in 1994. The second loan, in

56
<PAGE> 59

the principal amount of $275,000 at 10% interest per annum, was from the Jackson
Living Trust, a limited partner in USA, and was canceled in connection with the
formation and financing of Wired Ventures in 1994, with part of it being
converted into equity and the remainder being repaid in cash. In connection with
the restructuring of its United Kingdom operations in mid-1995, the Company
guaranteed a non-interest-bearing note payable by Wired UK to its former U.K.
joint venture partner, Guardian Media Group plc, for L1.0 million (approximately
$1.6 million), which is due in July 1998. In November 1995, the Company entered
into a $6.5 million revolving credit facility with Signet Bank to fund the
further expansion of its magazine business, which is secured by all Wired
magazine-related assets. The line bears interest at a rate equal to adjusted
LIBOR plus 3.25% (9% at December 31, 1995). See "Use of Proceeds."

Series B Preferred Stock Financing. In May 1996, the Company sold a total of
625,000 shares of its Series B Preferred Stock (convertible into a total of
961,534 shares of Common Stock based on an assumed initial public offering price
of $13.00 per share) to various investors, including Advance and certain other
preexisting investors in the Company, as well as certain new investors, for
$20.00 per share. Advance purchased 50,000 shares in such financing. In
September 1996, the Company amended its Certificate of Incorporation (i)
eliminating the minimum gross proceeds and minimum price per share requirements
relating to automatic conversion of the Preferred Stock upon the Company's
initial public offering and (ii) providing the holders of its Series B Preferred
Stock with modified anti-dilution protection in connection with the Company's
initial public offering. As a result, upon the completion of the offerings, all
outstanding shares of Preferred Stock will be converted automatically into
shares of Common Stock regardless of the offering price per share or gross
proceeds, with each share of Series B Preferred Stock being converted into a
number of shares equal to $20.00 divided by the per-share price to the public in
the offerings.

Consulting Services. Lawrence Wilkinson, a director of the Company, serves as
the President and Chief Executive Officer of Global Business Network ("GBN").
From June 1995 through June 1996, GBN provided consulting services to the
Company. In compensation for such services, GBN received $5,000 per month and
Mr. Wilkinson received options to purchase 71,338 shares of Common Stock.

Option Repricing. In September 1996, the Company repriced options to purchase
an aggregate of 672,468 shares of Common Stock with an exercise price of $11.90
per share to an exercise price of $10.00 per share and repriced options to
purchase an aggregate of 1,095,366 shares of Common Stock with an exercise price
of $20.00 per share to an exercise price of $12.00 per share. Such repriced
options included options held by executive officers of the Company as set forth
below:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
OLD NEW
NUMBER OF EXERCISE EXERCISE
NAME SHARES PRICE PRICE
----- ---------- ---------- ----------
<S> <C> <C> <C>
Louis Rossetto................................. 150,000 $20.00 $12.00
Jane Metcalfe.................................. 100,000 20.00 12.00
Jeffrey Simon.................................. 44,047 11.90 10.00
45,845 20.00 12.00
Rex Ishibashi.................................. 17,211 11.90 10.00
17,211 20.00 12.00
</TABLE>

- --------------------------------------------------------------------------------

57
<PAGE> 60

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1996, after giving
effect to the conversion of all outstanding shares of Preferred Stock into
shares of Common Stock (based on an assumed initial public offering price of
$13.00 per share), which will occur automatically upon the completion of the
offerings, and as adjusted to reflect the sale of Common Stock offered in the
offerings, for (i) each stockholder who is known by the Company to own
beneficially more than 5% of the Common Stock; (ii) each Named Executive
Officer; (iii) each director of the Company; and (iv) all executive officers and
directors of the Company as a group.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
NUMBER OF SHARES ---------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
---------------------- ------------------ ------- --------
<S> <C> <C> <C>
Louis Rossetto(2).......................... 2,971,525 18.1% 14.0%
Wired Ventures, Inc.
520 Third Street
Fourth Floor
San Francisco, CA 94107
Jane Metcalfe(3)........................... 2,827,663 17.3 13.4
Wired Ventures, Inc.
520 Third Street
Fourth Floor
San Francisco, CA 94107
Advance Magazine Publishers, Inc........... 2,119,979 13.1 10.1
350 Madison Avenue
14th Floor
New York, NY 10017
Jackson Living Trust dtd July 15, 1992..... 1,336,368 8.2 6.4
c/o Clopine Hinkle & Associates
6046 Cornerstone Court West, Suite 2201
San Diego, CA 92121
Nicholas Negroponte........................ 1,210,239 7.5 5.8
MIT Research
20 Ames Street
Cambridge, MA 02139
H. William Jesse, Jr.(4)................... 827,603 5.1 3.9
HWJesse&Co
222 Sutter Street
San Francisco, CA 94108
Andrew Anker(5)............................ 291,538 1.8 1.4
Jeffrey Simon(6)........................... 175,000 1.1 *
Rex Ishibashi(7)........................... 99,999 * *
Scott Sassa................................ -- -- --
Lawrence Wilkinson(8)...................... 87,593 * *
All executive officers and directors as a
group (8 persons)(9)..................... 7,280,921 43.2 33.7
</TABLE>

- --------------------------------------------------------------------------------
* less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
Company believes, based on information furnished by such persons, that the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 16,211,518 shares of Common
Stock outstanding as of September 30, 1996 and 20,961,518 shares of Common
Stock outstanding after the comple-

58
<PAGE> 61

tion of the offerings. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, shares of Common
Stock subject to options held by that person that will be exercisable on or
before November 29, 1996 are deemed outstanding. Such shares, however, are
not deemed outstanding for the purpose of computing the percentage
ownership of any other person.

(2) Includes 200,000 shares of Common Stock subject to immediately exercisable
stock options, of which options to purchase 132,731 shares will be vested as
of November 29, 1996 and the remaining 67,269 shares would be subject to
repurchase if purchased prior to vesting.

(3) Includes 150,000 shares of Common Stock subject to immediately exercisable
stock options, of which options to purchase 105,154 shares will be vested as
of November 29, 1996 and the remaining 44,846 shares would be subject to
repurchase if purchased prior to vesting.

(4) Includes 580,553 shares held by HWJesse&Co, of which Mr. Jesse is the
President, Chief Executive Officer and sole shareholder, and 58,055 shares
held by Pensco Pension Services for the benefit of Mr. Jesse.

(5) Owned by Mr. Anker and his wife as co-trustees of the Anker 1996 Trust.
Includes 25,000 shares of Common Stock subject to immediately exercisable
stock options, of which options to purchase 17,192 shares will be vested as
of November 29, 1996 and the remaining 7,808 shares would be subject to
repurchase if purchased prior to vesting.

(6) Includes 164,892 shares of Common Stock subject to immediately exercisable
stock options, of which options to purchase 43,934 shares will be vested as
of November 29, 1996 and the remaining 120,958 shares would be subject to
repurchase if purchased prior to vesting.

(7) Includes 34,422 shares of Common Stock subject to immediately exercisable
stock options, none of which will be vested as of November 29, 1996.

(8) Includes 71,338 shares of Common Stock subject to immediately exercisable
stock options, 51,940 of which will be vested as of November 29, 1996 and
the remaining 19,398 shares would be subject to repurchase if purchased
prior to vesting.

(9) Includes 645,652 shares of Common Stock subject to immediately exercisable
stock options, of which options to purchase 350,951 shares will be vested as
of November 29, 1996 and the remaining 294,701 shares would be subject to
repurchase if purchased prior to vesting. See Notes 2, 3, 5, 6, 7, and 8.

DESCRIPTION OF CAPITAL STOCK

Immediately following the completion of the offerings, the authorized capital
stock of the Company will consist of 75,000,000 shares of Common Stock, $0.001
par value per share, and 7,500,000 shares of Preferred Stock, $0.001 par value
per share. As of September 30, 1996, and assuming the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock (based on an
assumed initial public offering price of $13.00 per share), there were
outstanding 16,211,518 shares of Common Stock held of record by 113
stockholders.

COMMON STOCK

Subject to preferences that may apply to any Preferred Stock outstanding at the
time, the holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board of Directors may from time to time determine. Each
stockholder is entitled to one vote for each share of Common Stock held on all
matters submitted to a vote of stockholders. Cumulative voting for the election
of directors is not provided for in the Company's Amended and Restated
Certificate of Incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. The
Common Stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon liquidation, dissolution or winding-up of the
Company, the assets legally available for distribution to stockholders are
distributable ratably among the holders of the Common Stock and any
participating Preferred Stock outstanding at that time after payment of
liquidation preferences, if any, on any outstanding Preferred Stock and payment
of other claims of creditors. Each outstanding share of Common Stock is, and all

59
<PAGE> 62

shares of Common Stock to be outstanding upon completion of the offerings will
be, fully paid and nonassessable.

PREFERRED STOCK

Upon the completion of the offerings, all outstanding shares of Preferred Stock
(the "Convertible Preferred") will be converted automatically into shares of
Common Stock. See Note 7 of Notes to Consolidated Financial Statements for a
description of the Convertible Preferred. The Board of Directors is authorized,
subject to any limitations prescribed by Delaware law, to provide for the
issuance of additional shares of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, to fix the powers, designations, preferences, and rights of the shares
of each wholly unissued series and any qualifications, limitations, or
restrictions thereon, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the stockholders. The Board of Directors
may authorize the issuance of Preferred Stock with voting or conversion rights
that could adversely affect the voting power or other rights of the holders of
Common Stock. Thus, the issuance of Preferred Stock may have the effect of
delaying, deferring, or preventing a change in control of the Company. The
Company has no current plan to issue any shares of Preferred Stock.

DELAWARE'S ANTI-TAKEOVER LAW

Upon the completion of the offerings, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law (the
"Anti-Takeover Law") regulating corporate takeovers. The Anti-Takeover Law
prevents certain Delaware corporations, including those whose securities are
listed on the Nasdaq National Market, from engaging, under certain
circumstances, in a "business combination" not approved in advance by the Board
(which includes a merger or sale of more than 10% of the corporation's assets)
with any "interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date that
such stockholder became an "interested stockholder." The effect of the
Anti-Takeover Law is to discourage takeover attempts, including attempts that
might result in a premium over the market price of the Common Stock. A Delaware
corporation may "opt out" of the Anti-Takeover Law with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders' amendment
approved by at least a majority of the outstanding voting shares. The Company
has not "opted out" of the provisions of the Anti-Takeover Law.

REGISTRATION RIGHTS

The holders of 15,835,904 shares of Common Stock (the "Registrable Securities")
have certain rights with respect to the registration of those shares under the
Securities Act. If the Company proposes to register any of its shares of Common
Stock under the Securities Act other than in connection with a Company employee
benefit plan or a corporate reorganization, the holders of Registrable
Securities may require the Company to include all or a portion of their shares
in such registration, subject to certain conditions and limitations. In
addition, beginning one year after the closing date of the offerings, holders of
Registrable Securities may require the Company to register all or any portion of
their Registrable Securities on Form S-3 when such form becomes available to the
Company, subject to certain conditions and limitations. The Company may be
required to effect up to one such registration on Form S-3 per year, and is not
required to effect more than two such registrations. All expenses incurred in
connection with such registrations (other than underwriters' or brokers'
discounts and commissions) will be borne by the Company. All expenses incurred
in connection with such registrations (other than underwriters' discounts and
commissions) will be borne by the Company. The registration rights expire three
years after the date of this Prospectus.

60
<PAGE> 63

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is The First
National Bank of Boston.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of the Company's Common Stock in the
public market could have the effect of depressing the prevailing market price of
its Common Stock. Upon the completion of the offerings, the Company will have
outstanding 20,961,518 shares of Common Stock (assuming no exercise of
outstanding options after September 30, 1996). Of these shares, the 4,750,000
shares sold in the offerings will be freely transferable without restriction or
further registration under the Securities Act of 1933 (the "Securities Act")
unless purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act ("Affiliates"), which shares will be subjected to
the resale limitations of Rule 144. All of the remaining 16,211,518 shares (the
"Pre-IPO Shares") outstanding upon the completion of the offerings are subject
to lock-up agreements (the "Lock-up Agreements") entered into between the
stockholders and the representatives of the U.S. Underwriters as described
below. Beginning 180 days after the date of the Prospectus upon expiration of
the Lock-up Agreements, 4,025,052 of the Pre-IPO Shares (as well as 448,110
additional shares issuable upon the exercise of stock options that will be
vested as of April 1, 1997) will become freely tradeable and 11,224,930
additional Pre-IPO Shares (as well as 701,723 additional shares issuable upon
the exercise of stock options that will be vested as of April 1, 1997) held by
Affiliates will become eligible for public resale subject to compliance with
certain volume restrictions set forth in Rule 144. The remaining 961,536 of the
Pre-IPO Shares (including 76,925 shares held by Affiliates) will become eligible
for public resale subject to compliance with certain timing, manner of sale, and
volume restrictions set forth in Rule 144 beginning in or after May 1998.

All of the stockholders of the Company have entered into Lock-up Agreements with
the Representatives of the U.S. Underwriters providing that, with certain
limited exceptions, such stockholders will not offer, sell, contract to sell,
grant an option to purchase, make a short sale of, or otherwise dispose of or
engage in any hedging or other transaction that is designed or reasonably
expected to lead to a disposition of any shares of Common Stock or any option or
warrant to purchase shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Goldman, Sachs & Co.
Other than the 4,750,000 shares being offered in the offerings, as of the date
of this Prospectus no shares of Common Stock will be eligible for immediate sale
in the public market until the expiration of the 180-day Lock-up Agreements with
the Representatives of the U.S. Underwriters. Goldman, Sachs & Co. may, in its
sole discretion and at any time with or without notice, release all or any
portion of the securities subject to Lock-up Agreements. Goldman, Sachs & Co.
has informed the Company that it has no current intention to release shares from
the Lock-up Agreements prior to the expiration thereof. Any request for release
would be evaluated by Goldman, Sachs & Co. in light of, and the decision whether
or not to permit early release of shares would be dependent upon, the facts and
circumstances existing at the time of the request.

In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned Restricted Shares for at least
two years (and, with respect to non-Affiliates, a person who has beneficially
owned Restricted Shares less than three years), will be entitled to sell in any
three-month period a number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of the Company's Common Stock (approximately
209,600 shares immediately after the offerings) or (ii) the average weekly
trading volume of the Company's Common Stock in the Nasdaq National Market
during the four calendar weeks immediately preceding the date of which notice of
the sale is filed with the Securities and Exchange Commission. Such sales
pursuant to Rule 144 are subject to certain requirements relating to manner of
sale, notice and availability of current public information

61
<PAGE> 64

about the Company. The Securities and Exchange Commission has recently proposed
to reduce the two year holding periods under Rule 144 to one year. If enacted,
such modification will have a material effect on the timing of when certain
shares of Common Stock become eligible for resale.

Prior to the offerings, there has been no public market for the Common Stock of
the Company, and no predictions can be made of the effect, if any, that the sale
or availability for sale of shares of additional Common Stock will have on the
trading price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could adversely affect the trading price of the Common Stock and could impair
the Company's future ability to raise capital through an offering of its equity
securities. See "Description of Capital Stock."

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by its counsel, Cooley Godward LLP, San Francisco, California.
Certain legal matters will be passed upon for the Underwriters by Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation, Palo Alto, California. As
of the date of this Prospectus, certain members of and persons associated with
Cooley Godward LLP beneficially owned 75,267 shares of Common Stock.

EXPERTS

The consolidated financial statements and schedule of the Company as of December
31, 1994 and 1995 and as of September 30, 1996 and for the three-year period
ended December 31, 1995 and the nine-month period ended September 30, 1996 have
been included in this Prospectus and Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein and in the Registration Statement, and upon the
authority of such firm as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

In February 1996, the Company decided to retain KPMG Peat Marwick LLP as the
Company's independent accountants and dismissed Coopers & Lybrand LLP, the
Company's former accountants. The decision to change independent accountants was
ratified and approved by the Company's Board of Directors in May 1996. During
the period from the Company's inception through February 1996 and with respect
to the Company's financial statements for the years ended December 31, 1993 and
1994, there were no disagreements with Coopers & Lybrand LLP

62
<PAGE> 65

regarding any matters with respect to accounting principles or practices,
financial statement disclosure or audit scope or procedure, which disagreements,
if not resolved to the satisfaction of the former accountants, would have caused
Coopers & Lybrand LLP to make reference to the subject matter of the
disagreement in connection with its report. The former accountants' reports for
the years ended December 31, 1993 and 1994 are not a part of the financial
statements of the Company included in this Prospectus and the related financial
statement schedules included elsewhere in the Registration Statement. Such
reports did not contain an adverse opinion or disclaimer of opinion or
qualifications or modifications as to uncertainty, audit scope or accounting
principles. Prior to retaining KPMG Peat Marwick LLP, the Company had not
consulted with KPMG Peat Marwick LLP regarding accounting principles.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto, relating to
the shares of Common Stock offered hereby has been filed by the Company with the
Commission under the Securities Act. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
such Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Commission located at Room 1228, 75 Park Place, New York, New York 10007 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part of the Registration Statement and the
exhibits and schedules thereto may be obtained from those offices upon the
payment of certain fees prescribed by the Commission. In addition, the
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission.

63
<PAGE> 66

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................ F-3
Consolidated Balance Sheets............................................. F-4
Consolidated Statements of Operations................................... F-5
Consolidated Statements of Minority Interest and Stockholders' Equity
(Deficit)............................................................. F-6
Consolidated Statements of Cash Flows................................... F-8
Notes to Consolidated Financial Statements.............................. F-9
</TABLE>

F-1
<PAGE> 67

[THIS PAGE INTENTIONALLY LEFT BLANK.]

F-2
<PAGE> 68

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Wired Ventures, Inc.:

We have audited the accompanying consolidated balance sheets of Wired Ventures,
Inc., a Delaware Corporation, and subsidiaries (the Company) as of December 31,
1994 and 1995 and September 30, 1996, and the related consolidated statements of
operations, minority interest and stockholders' equity (deficit), and cash flows
for each of the years in the three-year period ended December 31, 1995 and for
the nine months ended September 30, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wired Ventures, Inc.
and subsidiaries as of December 31, 1994 and 1995 and September 30, 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 and for the nine months ended
September 30, 1996, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

San Francisco, California

October 18, 1996

F-3
<PAGE> 69

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
DECEMBER 31, -----------------
--------------- PRO FORMA
1994 1995 ACTUAL (NOTE 1)
------ ------ ------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 1,750 $ 7,234 $ 3,997 $ 3,997
Accounts receivable, net of allowances for returns and doubtful
accounts of $2,022, $2,564, $2,546 and $2,546, respectively.......... 2,198 3,071 4,865 4,865
Deferred production costs.............................................. 261 341 736 736
Prepaid expenses....................................................... 95 160 710 710
------------------------------------------
Total current assets............................................ 4,304 10,806 10,308 10,308
Property and equipment, net.............................................. 791 2,216 3,506 3,506
Goodwill and other intangibles, net...................................... -- -- 3,540 3,540
Other assets, net........................................................ 16 196 917 917
------------------------------------------
$ 5,111 $13,218 $ 18,271 $18,271
------------------------------------------
LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable....................................................... $ 2,261 $ 4,237 $ 2,430 $ 2,430
Accrued expenses....................................................... 306 2,356 4,749 4,749
Deferred revenue....................................................... 2,534 3,957 4,920 4,920
Notes payable to bank.................................................. -- 1,500 5,000 5,000
------------------------------------------
Total current liabilities....................................... 5,101 12,050 17,099 17,099
Deferred revenue......................................................... 163 124 348 348
Notes payable............................................................ -- 1,185 1,272 1,272
------------------------------------------
Total liabilities............................................... 5,264 13,359 18,719 18,719
Minority interest........................................................ -- 1,366 -- --
Commitments and contingencies
Stockholders' deficit:
Undesignated preferred stock; $0.001 par value; 15,000,000 shares
authorized, none issued and outstanding as of December 31, 1994 and
1995 and September 30, 1996; 7,500,000 shares authorized, none issued
and outstanding on a pro forma basis................................. -- -- -- --
Series A preferred stock; $0.001 par value; 30,500,000 shares
authorized; 14,330,504, 14,104,356, and 15,249,982 shares issued and
outstanding as of December 31, 1994 and 1995 and September 30, 1996,
respectively; none authorized, issued and outstanding on a pro forma
basis (liquidation preference of $20.00 per share)................... 14 14 15 --
Series B preferred stock; $0.001 par value; 4,500,000 shares
authorized; none issued and outstanding as of December 31, 1994 and
1995, and 625,000 outstanding as of September 30, 1996; none
authorized, issued and outstanding on a pro forma basis (liquidation
preference of $20.00 per share)...................................... -- -- 1 --
Common stock, $0.001 par value; 60,000,000 shares authorized; 2 shares
issued and outstanding as of December 31, 1994 and 1995, and
September 30, 1996, respectively; 75,000,000 shares authorized,
16,211,518 shares issued and outstanding on a pro forma basis........ -- -- -- 16
Additional paid-in capital............................................. 4,542 9,643 40,005 40,005
Deferred compensation.................................................. -- -- (3,578) (3,578)
Deficit accumulated prior to recapitalization.......................... (4,709) (11,214) -- --
Accumulated deficit.................................................... -- -- (36,830) (36,830)
Translation adjustment................................................. -- 50 (61) (61)
------------------------------------------
Total stockholders' deficit..................................... (153) (1,507) (448) (448)
------------------------------------------
$ 5,111 $13,218 $ 18,271 $18,271
------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 70

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------------
1993 1994 1995 1995 1996
------ ------ ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Print................................... $ 2,928 $ 8,833 $23,313 $15,388 $ 22,761
Online.................................. -- 348 1,942 1,348 2,348
----------------------------------------------------------
Total revenues................... 2,928 9,181 25,255 16,736 25,109
----------------------------------------------------------
Costs and expenses:
Print production and distribution....... 2,356 7,638 14,897 9,981 14,958
Online production and development....... 51 318 1,854 1,004 5,488
Sales and marketing..................... 748 2,795 9,776 5,809 12,861
General and administrative.............. 797 1,967 6,661 4,304 14,089
Write-off of in-process research and
development........................... -- -- -- -- 20,500
----------------------------------------------------------
Total costs and expenses......... 3,952 12,718 33,188 21,098 67,896
----------------------------------------------------------
Operating loss................... (1,024) (3,537) (7,933) (4,362) (42,787)
Interest income (expense), net............ (10) 98 156 72 (88)
Minority interest......................... -- -- 427 107 846
Wired UK preacquisition loss (Note 4)..... -- -- 854 854 --
----------------------------------------------------------
Loss before taxes......................... (1,034) (3,439) (6,496) (3,329) (42,029)
Tax expense............................... (2) (18) (9) (5) (9)
----------------------------------------------------------
Net loss......................... $(1,036) $(3,457) $(6,505) $(3,334) $(42,038)
----------------------------------------------------------
Pro forma net loss data (Notes 2 and 4):
Pro forma net loss...................... $(6,505) $(42,038)
----------------------------------------------------------
Pro forma net loss per share............ $ (0.37) $ (2.47)
----------------------------------------------------------
Shares used in computing pro forma net
loss per share........................ 17,397 17,023
----------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 71
WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

CONSOLIDATED STATEMENTS OF MINORITY INTEREST AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED
STOCK COMMON STOCK
MINORITY ----------------- --------------
INTEREST SHARES AMOUNT SHARES AMOUNT
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1992 ..................... $ -- 1,947 $-- -- $--
Issuance of Series A Preferred Stock ......... -- 9,809 12 -- --
Syndication costs ............................ -- -- -- -- --
Net loss ..................................... -- -- -- -- --
----------------------------------------------------
Balances, December 31, 1993 ..................... -- 11,756 12 -- --
Issuance of Series A Preferred Stock ......... -- 1,938 2 -- --
Conversion of debt to Series A
Preferred Stock ............................ -- 637 -- -- --
Net loss ..................................... -- -- -- -- --
----------------------------------------------------
Balances, December 31, 1994 ..................... -- 14,331 14 -- --
Capital contribution of HotWired
Ventures LLC ............................... 1,793 -- -- -- --
Stock repurchase ............................. -- (226) -- -- --
Translation adjustment ....................... -- -- -- -- --
Net loss ..................................... (427) -- -- -- --
----------------------------------------------------
Balances, December 31, 1995 ..................... 1,366 14,105 14 -- --
Net loss accumulated prior to recapitalization
(unaudited) ................................ (846) -- -- -- --
Recapitalization (unaudited) ................. -- -- -- -- --
Aquisition of minority interest in HotWired
Ventures LLC (unaudited) ................... (520) 1,242 1 -- --
Series B Preferred Stock private
placement (unaudited) ...................... -- 625 1 -- --
Compensatory stock option grants
(unaudited) ................................ -- -- -- -- --
Issuance of Series A Preferred Stock
(unaudited) ................................ -- 79 -- -- --
Amortization of deferred compensation
expense (unaudited) ........................ -- -- -- -- --
Stock repurchase (unaudited) ................. -- (176) -- -- --
Translation adjustment (unaudited) ........... -- -- -- -- --
Net loss following recapitalization
(unaudited) ................................ -- -- -- -- --
----------------------------------------------------
Balances, June 30, 1996 (unaudited) ............. $ -- 15,875 $16 -- $--
====================================================
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE> 72

<TABLE>
<CAPTION>
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DEFERRED PRIOR TO ACCUMULATED TRANSLATION
CAPITAL COMPENSATION RECAPITALIZATION DEFICIT ADJUSTMENT
---------- ------------ ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1992 ..................... $ 252 $ -- $ (216) $ -- $ --
Issuance of Series A Preferred Stock ......... 661 -- -- -- --
Syndication costs ............................ (54) -- -- -- --
Net loss ..................................... -- -- (1,036) -- --
------------------------------------------------------------------------------
Balances, December 31, 1993 ..................... 859 -- (1,252) -- --
Issuance of Series A Preferred Stock ......... 2,998 -- -- -- --
Conversion of debt to Series A
Preferred Stock ............................ 685 -- -- -- --
Net loss ..................................... -- -- (3,457) -- --
------------------------------------------------------------------------------
Balances, December 31, 1994 ..................... 4,542 -- (4,709) -- --
Capital contribution of HotWired
Ventures LLC ............................... 5,105 -- -- -- --
Stock repurchase ............................. (4) -- -- -- --
Translation adjustment ....................... -- -- -- -- 50
Net loss ..................................... -- -- (6,505) -- --
------------------------------------------------------------------------------
Balances, December 31, 1995 ..................... 9,643 -- (11,214) -- 50
Net loss accumulated prior to recapitalization
(unaudited) ................................ -- -- (5,208) -- --
Recapitalization (unaudited) ................. (16,422) -- 16,422 -- --
Aquisition of minority interest in HotWired
Ventures LLC (unaudited) ................... 24,852 -- -- -- --
Series B Preferred Stock private
placement (unaudited) ...................... 12,299 -- -- -- --
Compensatory stock option grants
(unaudited) ................................ 9,139 (9,139) -- -- --
Issuance of Series A Preferred Stock
(unaudited) ................................ 790 (790) -- -- --
Amortization of deferred compensation
expense (unaudited) ........................ -- 5,969 -- -- --
Stock repurchase (unaudited) ................. (296) -- -- -- --
Translation adjustment (unaudited) ........... -- -- -- -- (34)
Net loss following recapitalization
(unaudited) ................................ -- -- -- (29,491) --
------------------------------------------------------------------------------
Balances, June 30, 1996 (unaudited) ............. $ 40,005 $(3,960) $ -- $(29,491) $ 16
==============================================================================
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balances, December 31, 1992 ..................... $ 36
Issuance of Series A Preferred Stock ......... 673
Syndication costs ............................ (54)
Net loss ..................................... (1,036)
--------
Balances, December 31, 1993 ..................... (381)
Issuance of Series A Preferred Stock ......... 3,000
Conversion of debt to Series A
Preferred Stock ............................ 685
Net loss ..................................... (3,457)
--------
Balances, December 31, 1994 ..................... (153)
Capital contribution of HotWired
Ventures LLC ............................... 5,105
Stock repurchase ............................. (4)
Translation adjustment ....................... 50
Net loss ..................................... (6,505)
--------
Balances, December 31, 1995 ..................... (1,507)
Net loss accumulated prior to recapitalization
(unaudited) ................................ (5,208)
Recapitalization (unaudited) ................. --
Aquisition of minority interest in HotWired
Ventures LLC (unaudited) ................... 24,853
Series B Preferred Stock private
placement (unaudited) ...................... 12,300
Compensatory stock option grants
(unaudited) ................................ --
Issuance of Series A Preferred Stock
(unaudited) ................................ --
Amortization of deferred compensation
expense (unaudited) ........................ 5,969
Stock repurchase (unaudited) ................. (296)
Translation adjustment (unaudited) ........... (34)
Net loss following recapitalization
(unaudited) ................................ (29,491)
--------
Balances, June 30, 1996 (unaudited) ............. $ 6,586
========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE> 73

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $(1,036) $(3,457) $(6,505) $(3,334) $(42,038)
Adjustments to reconcile net loss to net cash used in
operating activities:
Minority interest........................................ -- -- (427) (107) (846)
Preacquisition losses.................................... -- -- (854) (854) --
Accretion of note payable................................ -- -- -- -- 87
Depreciation and amortization............................ 18 87 470 283 1,475
Amortization of deferred compensation.................... -- -- -- -- 6,351
Loss on disposition of property and equipment............ 17 -- -- -- 39
Equipment acquired in exchange for advertising........... (132) (34) (361) (282) (283)
Write-off of in-process research and development......... -- -- -- -- 20,500
Changes in operating assets and liabilities:
Accounts receivable, net............................... (824) (1,372) (873) (478) (1,794)
Deferred production costs.............................. (88) (66) (80) (140) (395)
Prepaid expenses....................................... (29) (65) (65) (235) (635)
Accounts payable and accrued expenses.................. 791 1,697 4,026 2,564 437
Deferred revenue....................................... 514 2,153 1,384 1,188 1,187
--------------------------------------------------------
Net cash used in operating activities............... (769) (1,057) (3,285) (1,395) (15,915)
--------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................... (53) (688) (1,509) (90) (2,059)
Proceeds from sale of equipment............................ 8 -- -- -- --
Other assets............................................... 15 (10) (205) (205) (36)
--------------------------------------------------------
Net cash used in investing activities............... (30) (698) (1,714) (295) (2,095)
--------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions by HotWired Ventures LLC minority
participants............................................. -- -- 6,898 6,898 --
Convertible loan from related parties...................... 500 -- -- -- --
Repurchase of Series A preferred stock..................... -- -- (4) -- (296)
Loans (repayments) from related parties.................... 325 (140) -- -- --
Issuance of Series A preferred stock, net.................. 673 3,000 -- -- --
Issuance of Series B preferred stock, net.................. -- -- -- -- 12,300
Loan and advances from Guardian Media Group plc............ -- -- 2,039 1,211 --
Syndication and deferred offering costs.................... (54) -- -- -- (620)
Net proceeds from bank loan................................ -- -- 1,500 -- 3,500
--------------------------------------------------------
Net cash provided by financing activities........... 1,444 2,860 10,433 8,109 14,884
Effect of foreign exchange rate changes...................... -- -- 50 9 (111)
--------------------------------------------------------
Increase (decrease) in cash and cash equivalents............. 645 1,105 5,484 6,428 (3,237)
Cash and cash equivalents, beginning of period............... -- 645 1,750 1,750 7,234
--------------------------------------------------------
Cash and cash equivalents, end of period..................... $ 645 $ 1,750 $ 7,234 $ 8,178 $ 3,997
--------------------------------------------------------
Supplemental cash flow disclosure -- cash paid for
interest................................................... $ 1 $ 16 $ 16 $ -- $ 156
--------------------------------------------------------
Supplemental disclosure of noncash investing and financing
activities:
Equipment acquired in exchange for advertising............. $ 132 $ 34 $ 361 $ 282 $ 283
Services rendered in exchange for advertising.............. 178 140 836 393 911
Conversion of notes payable to capital..................... -- 685 -- -- --
Accrual of stock and stock option deferred compensation.... -- -- -- -- 9,929
Issuance of stock to acquire minority interest in HotWired
Ventures LLC............................................. -- -- -- -- 24,853
--------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 74

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

(1) THE COMPANY

Wired Ventures, Inc. ("Wired" or the "Company"), is a new kind of global,
diversified media company engaged in creating content for print, online, and
other media.

The Company (a Delaware C corporation) was recapitalized in May 1996 such that
the ownership interests of Wired Holdings Inc. (previously a California S
corporation), Wired USA Ltd., and Wired Ventures Ltd. were contributed to the
Company and approximately 14,000,000 shares of the Company's Series A preferred
stock were issued to the owners of such entities. The effective ownership
percentage of each respective equity holder in the Company after the
recapitalization is the same as their respective interests in the operating
assets and liabilities of the Company prior to the recapitalization, and there
was no change in control as a result of the recapitalization. Thus, all indirect
and direct ownership interests in Wired Ventures, Ltd. have been converted to
direct ownership interests in Wired Ventures, Inc. The consolidated financial
statements reflect the accounting for this transaction as a combination of
companies under common control.

The Company's businesses were historically conducted in partnership and limited
liability company form, beginning with Wired Partners in 1992, and continuing
through Wired USA Ltd., a California limited partnership (from its formation in
January 1993 to January 1994) and Wired Ventures, Ltd., a California limited
partnership (from its formation in January 1994 to May 1996). From January 1994
to May 1996, all businesses were conducted by Wired Ventures, Ltd. Wired
Ventures, Inc. (via Wired Ventures, Ltd.) maintained a majority interest in
HotWired Ventures LLC, a California limited liability company (from its
formation in January 1995 through May 1996), and in May 1996 acquired the
remaining minority interest (see Note 4). Wired Holdings Inc. and Wired USA Ltd.
had no operations, operating assets, or operating liabilities.

The Company's significant subsidiaries as of September 30, 1996 can be
summarized as follows:

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
WIRED VENTURES,
INC.
COMPANY LEGAL FORM OWNERSHIP %
------- --------- -------------
<S> <C> <C>
Wired Magazine Group, Inc........... California Corporation 100%
HotWired, Inc....................... Delaware Corporation 100%
Wired UK............................ United Kingdom Unlimited Company 100%
</TABLE>

- --------------------------------------------------------------------------------

Wired Magazine Group, Inc. publishes Wired magazine, which is sold on newsstands
and through subscriptions. HotWired Inc. publishes editorial material on the
World Wide Web through its HotWired network of online content sites. Wired UK
publishes a local edition of Wired magazine in the United Kingdom, which is sold
on newsstands and through subscriptions.

Liquidity

The Company has incurred recurring losses from operations since inception and as
of September 30, 1996, has a working capital deficit of approximately $6.8
million and a negative tangible net worth of approximately $4.0 million. The
Company has secured additional financing in the form of a line of credit
facility (see Note 5). Management believes that this financing, combined with a
number of cost and growth control measures, would be sufficient to fund

F-9
<PAGE> 75

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

operations for the next twelve months. Management further believes, however,
that achievement of the Company's growth goals will require additional
financing.

Pro Forma Balance Sheet

In May 1996, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission (SEC) permitting Wired to
sell shares of its common stock in connection with a proposed initial public
offering (IPO). If the offering is consummated under the terms presently
anticipated, all the currently outstanding shares of preferred stock will
convert to 16,211,516 shares of common stock upon closing of the IPO. The
conversion of the preferred stock has been reflected in the accompanying pro
forma balance sheet as of September 30, 1996.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its majority owned subsidiaries. Minority interest represents the
minority participants' share of the equity of HotWired Ventures LLC through May
1996.

All material intercompany balances and transactions have been eliminated in
consolidation.

Revenue Recognition

Revenue from the sale of advertising space in magazines is recognized at the
time the issue is circulated.

Proceeds from subscriptions are recognized as revenue over the terms of the
subscriptions, generally one to two years, upon commencement of subscription
services. Subscriptions expiring within one year are included as deferred
revenue and the portion of the subscriptions in excess of one year are
classified as noncurrent deferred revenue.

Sales to newsstand distributors are recognized as revenue in the month of
distribution, net of an allowance for the return of unsold magazines based upon
historical newsstand sales. In the event that actual net sales differ from
estimates, adjustments are made in subsequent months. Historically, these
adjustments have not been significant.

Revenue from the sale of online advertising is recognized over the period
advertisements are displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. Company
obligations typically include guarantees of minimum numbers of page views, or
times that the page containing the advertisement is viewed by users. To the
extent minimum guaranteed page views are not met, the Company defers recognition
of the corresponding revenues until guaranteed page view levels are achieved.
Cash received in advance for online advertising is classified as deferred
revenue and is recognized as revenue over the time the advertisements are
displayed.

F-10
<PAGE> 76

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

Stock-Based Compensation

In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 is effective for fiscal years beginning after
December 15, 1995, and requires that the Company either recognize in its
consolidated financial statements costs related to its employee stock-based
compensation plans, such as stock option and stock purchase plans, or make pro
forma disclosures of such costs in a footnote to the consolidated financial
statements.

The Company has elected to continue to use the intrinsic value-based method of
Accounting Principles Board (APB) Opinion No. 25, as allowed under SFAS No. 123,
to account for all of its employee stock-based compensation plans. SFAS No. 123
did not have a material effect on the Company's consolidated results of
operations or financial position.

Cash and Cash Equivalents

Cash and cash equivalents consist of amounts held with banks with original
maturities of 90 days or less. As of September 30, 1996, the Company had no
significant cash investments subject to the provisions of SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to a concentration
of credit risk consist of cash and cash equivalents and accounts receivable. The
Company holds cash in deposit accounts with various major banks. The Company's
accounts receivable are principally with trade advertisers and newsstand
distributors. The Company generally does not require collateral. Wired's five
primary newsstand distributors accounted for substantially all of the Company's
newsstand revenue and receivables. The Company has historically been dependent
on these five distributors for newsstand revenues and has outsourced its
printing and distribution activities, on which all magazine revenue is
dependent. The Company contracts with all such parties on a month to month
basis.

Deferred Production Costs

Deferred production costs are comprised of those expenses incurred to produce
magazines and book publications which have yet to be released. These costs
normally consist of expenses associated with content, editorial, design,
photography, art and production of Wired magazine and book publications.
Deferred magazine production costs are deferred for approximately one month and
deferred book publishing costs are generally amortized over periods of up to 12
months.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided on the
straight-line basis over an estimated useful life of three years for equipment
and up to ten years for leasehold improvements. Maintenance and repairs are
charged to expense as incurred.

F-11
<PAGE> 77

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

Goodwill and Intangibles

Goodwill represents the excess of the acquisition cost of the minority interest
in HotWired Ventures LLC over the fair value of the net assets acquired and is
being amortized on a straight-line basis over three years. Other intangibles
primarily represents purchased technology, which is being amortized on a
straight-line basis over three years.

Promotion Costs

AICPA Statement of Position 93-7 requires that the Company defer the costs of
direct mail promotions to the extent that they are expected to result in
additional subscription revenues in excess of incremental fulfillment costs. As
the Company estimates that its incremental fulfillment costs are in excess of
its additional subscription revenue, these costs have been expensed as incurred.
Direct mail promotion costs totaled $11,154, $1,602,323, $5,674,000, and
$7,260,546 in 1993, 1994, 1995, and the nine months ended September 30, 1996,
respectively.

Nonmonetary Transactions

Agreements to exchange advertising in Wired magazine and the HotWired network of
online content sites for equipment or services are recorded at the estimated
fair value of the equipment or service.

Foreign Currency Translation

The functional currency of the Company's foreign operations is the U.S. dollar.
All monetary assets and liabilities are translated at the current rate at the
end of the period; nonmonetary assets and liabilities are translated at
historical rates; revenues and expenses are translated at average exchange rates
in effect during the period. Translation and transaction gains and losses have
not been material in any of the periods presented.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Income Taxes

Wired accounts for income taxes under the asset and liability method of
accounting. Under the asset and liability method, deferred tax assets and
liabilities are recognized based on the future tax consequences attributable to
differences between the financial statement carrying amount of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of
changes in tax rates is recognized in income in the period that includes the
enactment date.

F-12
<PAGE> 78

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

Prior to the recapitalization discussed in Note 1, Wired consisted of an S
corporation and several partnerships and limited liability companies for federal
income tax purposes. As such, income was taxed at the individual shareholder or
partner level. Accordingly, tax expense in the accompanying statements of
operations for the years ended December 31, 1993, 1994, and 1995 only includes
the state minimum franchise taxes. The accompanying pro forma net loss data for
the year ended December 31, 1995, and the nine months ended September 30, 1996,
reflect provisions for taxes on a pro forma basis, using the asset and liability
method, as if Wired had been a C corporation since the beginning of those
respective periods, fully subject to federal and state income taxes.

Other than state minimum franchise tax liabilities, no pro forma income taxes
have been reflected in the pro forma net loss data for the year ended December
31, 1995, or for the nine month period ended September 30, 1996, due to the
current period losses.

Pro Forma Net Loss Per Share

Pro forma net loss per share is computed based on the weighted average number of
shares of common stock outstanding and common equivalent shares from stock
options (under the treasury stock method, if dilutive) and preferred stock
outstanding (on an "as if converted" basis, even if antidilutive), giving effect
to the recapitalization as though it had occurred at the beginning of the
earliest period presented. In accordance with certain SEC Staff Accounting
Bulletins, such computations include all common and common equivalent shares
(using the treasury stock method) and preferred shares (on an "as if converted"
basis) issued within 12 months of the offering date as if they were outstanding
for all periods presented using the anticipated IPO price.

In accordance with APB No. 15, net loss per share has been supplementally
computed assuming the issuance as of the beginning of each period presented of a
sufficient number of shares of common stock in the offerings to permit repayment
of the Company's revolving credit facility with the net proceeds thereof. The
resulting supplemental net loss per share amounts for the year ended December
31, 1995 and the nine months ended September 30, 1996 would have been $(0.37)
and $(2.40), respectively.

Interim Financial Statements

The accompanying unaudited consolidated financial statements for the nine months
ended September 30, 1995 have been prepared on substantially the same basis as
the audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the consolidated financial information set forth therein.

F-13
<PAGE> 79

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

(3) BALANCE SHEET AND STATEMENT OF OPERATIONS COMPONENTS

Accounts Receivable

Accounts receivable are recorded net of allowances for potential credit losses,
estimated newsstand returns, and other charges. Accounts receivable as of
December 31, 1994 and 1995 and September 30, 1996 are summarized as follows (in
thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1994 1995 1996
----- ----- -----------
<S> <C> <C> <C>
Print:
Advertising, less allowances of $463, $767 and $645,
respectively............................................. $ 798 $1,869 $2,643
Newsstand, less allowances of $1,544, $1,774 and $1,878,
respectively............................................. 621 549 438
Subscription............................................... 510 219 1,050
Online:
Advertising, less allowances of $15, $23 and $23,
respectively............................................. 269 434 734
----------------- -----------
$2,198 $3,071 $4,865
----------------- -----------
</TABLE>

- --------------------------------------------------------------------------------

Property and Equipment

Property and equipment as of December 31, 1994 and 1995 and September 30, 1996
consisted of the following (in thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1994 1995 1996
----- ----- ------------
<S> <C> <C> <C>
Leasehold improvements....................................... $ 301 $ 561 $1,244
Computer and communications equipment........................ 569 2,136 3,636
Other........................................................ 29 71 123
-----------------------------------
899 2,768 5,003
Less accumulated depreciation and amortization............... 108 552 1,497
-----------------------------------
$ 791 $2,216 $3,506
-----------------------------------
</TABLE>

- --------------------------------------------------------------------------------

Depreciation and amortization expense for property and equipment for the years
ended December 31, 1994 and 1995 and the nine months ended September 30, 1996
was $87,491 $444,953, and $1,012,691 respectively.

F-14
<PAGE> 80

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

Print Revenue

Print revenue for the years ended December 31, 1993, 1994, and 1995 and for the
nine month periods ended September 30, 1995 and 1996 are summarized as follows
(in thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Advertising................................... $1,589 $4,524 $14,756 $ 8,938 $13,775
Subscriptions................................. 381 1,930 4,940 3,576 5,465
Newsstand sales, net.......................... 958 2,114 2,896 2,229 2,332
Mailing lists and other....................... -- 265 721 645 1,189
-----------------------------------------------------
$2,928 $8,833 $23,313 $15,388 $22,761
-----------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

Online Advertising Revenue

Online advertising revenue consists of revenue from selling advertisements to
corporate sponsors which are placed in content sections.

(4) BUSINESS COMBINATIONS

Wired UK

Wired UK was formed in 1994. The Company contributed intellectual property in
exchange for a 50% interest and Guardian Media Group plc (Guardian), a United
Kingdom corporation, contributed cash of approximately $216,000 for its 50%
interest. Wired UK had no material results of operations prior to 1995.

In July 1995, Ventures purchased Guardian's 50% interest in Wired UK.
Accordingly, the net assets of Wired UK have been included in the accompanying
consolidated balance sheet as of December 31, 1995.

The Company recorded this acquisition using step acquisition accounting, in
accordance with Accounting Research Bulletin No. 51, by including the joint
venture in its consolidated financial statements as though it had been acquired
at the beginning of 1995, and reduced its net loss by the $854,000 of
preacquisition losses attributable to Guardian's 50% interest up to the date of
acquisition. The pro forma combined results of operations for the year ended
December 31, 1995, as if the acquisition had occurred at the beginning of that
year, would have reflected no change in consolidated total revenues and would
have reflected an increase in the consolidated net loss of $854,000 ($0.05 per
share). This effect is included in the pro forma combined results of operations
presented below.

The fair value of assets and liabilities acquired generally approximated
historical cost, except for the forgiveness of approximately $270,000 of a note
balance as part of the acquisition agreement. The note bears no interest and,
therefore, was discounted by approximately $370,000 to its present value of
approximately $1,200,000, based on a rate of 9%. After effecting the forgiveness
and discounting of the loan, the purchase price of $80 was equal to the fair
value of the assets and liabilities acquired.

F-15
<PAGE> 81

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

HotWired Ventures LLC

In May 1996, the Company purchased the minority interest in HotWired Ventures
LLC in exchange for approximately 1.2 million shares of Series A preferred
stock. The Company has accounted for this transaction using the purchase method,
and accordingly, the operating results of HotWired Ventures LLC previously
attributable to minority interests have been included in the consolidated
financial statements from the date of acquisition.

The value of the stock was allocated as follows (in thousands):
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Fair value of net tangible assets acquired......................................... $ 371
Research and development in-process................................................ 20,500
Purchased technology and goodwill, net of deferred income taxes.................... 3,982
------
$24,853
------
</TABLE>

- --------------------------------------------------------------------------------

The amounts allocated to purchased technology and other intangibles, net of
deferred taxes, are being amortized over three years. The research and
development in-process was written off and charged to operations in the second
quarter of 1996. Approximately $450,000 in amortization of goodwill has been
recognized in the nine months ended September 30, 1996.

The following pro forma combined results of operations for the year ended
December 31, 1995 and the nine months ended September 30, 1996 are presented as
if the business combination with HotWired Ventures LLC had occurred at the
beginning of the period (HotWired Ventures LLC had no significant operations
prior to 1995). The $20.5 million charge associated with in-process research and
development has been reflected in each period of the following pro forma
summary. The pro forma summary also reflects the acquisition of Wired UK (see
above) as if the acquisition had occurred at the beginning of 1995. The pro
forma summary does not necessarily reflect the results of operations as they
would have been if the Company, the minority interest in HotWired Ventures LLC,
and Wired UK had constituted a single entity during such periods.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, NINE MONTHS ENDED
1995 SEPTEMBER 30, 1996
----------- ---------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Total revenues.......................................... $ 25,255 $ 25,109
-------------------------------------
Pro forma net loss...................................... $(29,613) $(43,439)
-------------------------------------
Pro forma net loss per share............................ $ (1.70) $ (2.55)
-------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

(5) NOTE PAYABLE AND LINE OF CREDIT

Note Payable

Wired UK has a note payable with a stated value of L1,000,000 (approximately
$1,600,000) to Guardian (see Note 4), which is due in July 1998, bears no
interest, and has an estimated

F-16
<PAGE> 82

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

present value of approximately $1,200,000. The note is payable on demand with a
stated interest rate of 5% in the event of certain changes in ownership or
certain transactions with Guardian. In the event that the Company enters into
certain joint venture transactions in Continental Europe, Guardian has the right
to convert its loan to equity of the new joint venture.

Line of Credit

The Company maintains a $6,500,000 line of credit collateralized by all of the
Company's tangible and intangible assets. The line bears an interest rate of
prime plus 1.25% (9.5% as of September 30, 1996) and expires on September 30,
2000. The line of credit prescribes that $5,000,000 thereof may be used only to
increase Wired magazine's subscription base. The remaining $1,500,000 may be
used only to repay the note payable to Guardian by Wired UK (see Note 4). The
outstanding balance on the line of credit was $1,500,000 and $5,000,000 at
December 31, 1995 and September 30, 1996, respectively. The proceeds of the
financing were used to finance certain direct mail promotion costs of Wired
magazine. The Company was not in compliance with certain nonfinancial covenants
as of December 31, 1995 and as of September 30, 1996. The Company has obtained a
waiver from the bank with respect to these nonfinancial covenants. Accordingly,
the obligation has been classified as a current liability.

On September 26, 1996, the Company secured a commitment from a bank under which
the bank will make available to the Company a line of credit facility of $10
million. The commitment expires on November 15, 1996 in the event that closing
of this facility does not occur. The line will bear an interest rate of LIBOR
plus 4% or the prime rate plus 2%, at the option of the Company, and expires on
December 15, 1997. On December 31, 1996 or in the event of the Company's
noncompliance with certain financial covenants or the Company's completion of an
IPO, the interest rate will increase to 18%. In the event of any other default,
including late payment, the interest rate will increase by an additional 2%.
Beginning January 1, 1997, the Company will pay an interest rate of 1.25% per
month on the unused balance of the line of credit facility, unless it is
otherwise cancelled or unavailable. The agreement prescribes that the first $5
million of the line of credit facility be used to repay the Company's existing
short-term bank debt of $5 million. The remaining $5 million may be used to fund
operating expenses. Outstanding borrowings under the line of credit will be
secured by all tangible and intangible assets of the Company.

(6) INCOME TAXES

Tax expense recorded in the accompanying historical consolidated financial
statements represents state minimum franchise taxes of approximately $1,600,
$18,000, $9,000 and $9,000 for the years ended December 31, 1993, 1994, and 1995
and the nine months ended September 30, 1996, respectively.

Prior to the recapitalization discussed in Note 1, Wired consisted of an S
corporation and several partnerships and limited liability companies. As a
result of the recapitalization, Wired is now taxed as a C corporation.

F-17
<PAGE> 83

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

The pro forma provisions for income taxes reflect the tax expense that would
have been reported if Wired had been a C corporation. The components of pro
forma income taxes are as follows (in thousands):
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
---------------- ------------------
<S> <C> <C>
Pro forma income taxes:
Current:
Federal.......................................... $ -- $ --
State............................................ 9 9
----------------------------------------
Total pro forma tax expense................. $ 9 $ 9
----------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
The following tabulation reconciles the statutory corporate federal income tax
benefit (computed by multiplying Wired's loss before income taxes by 34%) to
Wired's pro forma income tax expense (in thousands):
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------- -----------------
<S> <C> <C>
Pro forma expected income tax benefit.............. $(2,209) $(14,290)
State taxes, net of federal effect................. 9 9
In-process research and development charge......... -- 6,970
Unutilized net operating losses.................... 2,209 7,302
-------------------------------------------
Pro forma tax expense..................... $ 9 $ 9
-------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

The tax effects of temporary differences that give rise to significant portions
of the actual net deferred tax asset as of September 30, 1996, and the pro forma
net deferred tax assets as of December 31, 1995 and September 30, 1996 are
presented below (in thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ACTUAL PRO FORMA PRO FORMA
SEPTEMBER 30, 1996 DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Reserves and accruals................ $ 347 $ 754 $ 354
Deferred revenue..................... 1,589 1,650 1,589
Capitalized production costs......... -- 188 --
Net operating loss carryforwards..... 3,805 2,364 8,512
Property and equipment............... -- 103 --
------ ------ ------
Total gross deferred tax assets...... 5,741 5,059 10,455
Valuation allowance................ (5,509) (5,059) $(10,223)
------ ------ ------
Net deferred tax assets....... 232 -- 232
------ ------ ------
Deferred tax liabilities:
Property and equipment............... (232) -- (232)
------ ------ ------
-- -- --
------ ------ ------
</TABLE>

- --------------------------------------------------------------------------------

F-18
<PAGE> 84

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

(7) STOCKHOLDERS' EQUITY

Reverse Stock Split

In September 1996, the Board of Directors authorized, and in October 1996 the
stockholders approved, a one-for-two reverse split of all of the Company's
series of preferred and common stock. All references in the consolidated
financial statements to number of shares and per share amounts have been
retroactively restated to reflect the decreased number of shares outstanding.

Preferred Stock

Each share of Series A and B preferred stock is convertible into common stock at
the exchange rate in effect at the time of conversion and is subject to
appropriate adjustment for common stock splits, stock dividends, and similar
transactions. Conversion is automatic upon a majority vote of the holders of
preferred stock or upon the closing of a public offering of common stock. The
exchange ratio for Series B preferred stockholders is equal to the ratio of the
liquidation preference, or $20.00 per share, to the IPO price per share. The
exchange ratio for all other stockholders is one to one.

Each holder of Series A and B preferred stock is entitled to the number of votes
equal to the number of shares of common stock into which such preferred stock is
convertible.

Each holder of preferred stock is entitled to receive, when and as declared by
the Board, noncumulative dividends at the annual rate of $1.60 per share of
Series A preferred stock and $1.60 per share of Series B preferred stock in
preference and priority to any payment of any dividend on common stock. Each
holder of preferred stock will participate pro rata on dividends paid on the
common stock.

In the event of liquidation, the holders of Series B preferred stock are
entitled to a per share liquidation preference equal to $20.00, plus all
declared and unpaid dividends, after which all Series A preferred stock are
entitled to a per share liquidation preference equal to $20.00, plus all
declared but unpaid dividends.

There are no redemption or sinking fund provisions applicable to preferred
stock.

In January 1996, the Company issued equity interests which represented
approximately 74,000 shares of Series A preferred stock to certain of its
employees, and recorded deferred compensation expense of approximately $790,000,
based on their deemed fair value. This amount is being amortized over the
vesting period of the Company's repurchase rights to such shares, which is based
upon the employees continuing employment with the Company.

The Company repurchased approximately 226,000 and 176,000 shares of Series A
preferred stock in December 1995 and January 1996, respectively, at a total cost
of approximately $4,000 and $296,000, respectively.

1996 Equity Incentive Plan

In March and May 1996, respectively, the Board adopted and the stockholders
approved the 1996 Equity Incentive Plan ("1996 Equity Plan") and reserved
3,000,000 shares of common stock

F-19
<PAGE> 85

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

for issuance. In May 1996, the Board reserved an additional 1,250,000 shares of
common stock for issuance under the 1996 Equity Plan. The 1996 Equity Plan
provides for the grant of stock options and stock bonuses and the issuance of
restricted stock by the Company to its employees, officers, directors and
consultants.

In the nine months ended September 30, 1996, the Company issued options for the
purchase of an aggregate of approximately 1.8 million shares of common stock
pursuant to the plan at prices varying between $11.90 and $20.00. In September
1996, these options were repriced by the Company and reissued at prices ranging
from $10.00 to $12.00. In addition, the Company issued options for the purchase
of an aggregate of approximately 700,000 shares of common stock outside of the
plan at a price of $2.00. Options generally vest to the extent of 25% upon the
first anniversary of the employee hire date and an additional 1/36 of the
unvested shares vest ratably over the following 36 months.

The Company recorded $9.1 million in deferred compensation expense for the
difference between the grant price and the deemed fair value of the common
stock. The deferred compensation will be amortized over the vesting period of
the individual options, generally four years. The Company recorded $6.3 million
in amortization of compensation expense related to such options, in the nine
months ended September 30, 1996.

1996 Non-Employee Director Stock Option Plan

Under the 1996 Non-Employee Director Stock Option Plan ("1996 Director Plan"),
adopted and approved in May and July of 1996, respectively, the Company may
grant options to its management personnel for up to 50,000 shares of common
stock. No shares have been issued under the 1996 Director Plan.

SFAS No. 123, Accounting for Stock-Based Compensation

The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. The Company recorded $6.3 million in amortization of deferred
compensation expense related to stock options in the nine months ended September
30, 1996. Had compensation costs for the Company's stock-based compensation
plans been determined consistent with SFAS No. 123, the Company's pro forma net
loss and pro forma net loss per share for the nine months ended September 30,
1996 would have been $41,745,000 and $2.45, respectively.

The fair value of options granted during the nine months ended September 30,
1996 for employee services were estimated on the date of grant using the minimum
value method with the following weighted-average assumptions: risk-free interest
rate of 6.25 percent, expected life of 4.5 years, and no dividends.

F-20
<PAGE> 86

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

The fair value of options granted during the nine months ended September 30,
1996 for other than employee services, representing approximately 58,000 of the
total options granted, were estimated on the date of grant using the
Black-Scholes Pricing Model with the following weighted-average assumptions:
risk-free interest rate of 6.28 percent, expected life of 4.5 years, expected
volatility of 55 percent, and no dividends.

A summary of the status of the Company's fixed employee benefit plans as of
September 30, 1996, and changes during the period then ended is presented below
(shares in thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
----- ---------------
<S> <C> <C>
Outstanding at beginning of period................................ -- $ --
Granted........................................................... 2,490 12.97
Forfeited......................................................... (55) 19.28
Cancelled......................................................... (1,769) 16.92
Regranted......................................................... 1,769 11.24
---------
Outstanding at end of period...................................... 2,435 $ 8.72
------
Options vested at end of period................................... 821 $ 6.07
------
Weighted-average fair value of options granted during the nine
month period at exercise price equal to market price at grant
date............................................................ $ 3.37
Weighted-average fair value of options granted during the nine
month period at exercise price less than market price at grant
date............................................................ $ 8.70
</TABLE>

- --------------------------------------------------------------------------------

The following table summarizes information about fixed stock options outstanding
at September 30, 1996 (shares in thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------- OPTIONS VESTED
WEIGHTED-AVG. -------------------------
RANGE OF NUMBER REMAINING WEIGHTED-AVG. NUMBER WEIGHTED-AVG.
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE VESTED EXERCISE PRICE
------------- --------- ------------- ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
$2 666 4.0 years $ 2.00 455 $ 2.00
10 to 12 1,769 4.5 11.24 366 11.12
----------- ------
$2 to 12 2,435 4.5 8.72 821 6.07
---------- ------
</TABLE>

- --------------------------------------------------------------------------------

(8) EMPLOYEE BENEFIT PLANS

Retirement and Savings Program

The salary deferral "401(k)" plan allows employees to defer up to 20% of their
salary subject to certain limitations. The Company may make discretionary
contributions to the plan, however, no employer contributions have been made
since inception.

F-21
<PAGE> 87

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

(9) Commitments and Contingencies

Lease Commitments

The Company leases certain office space and office equipment under noncancelable
operating leases with terms exceeding one year. Future minimum lease payments
under noncancelable operating leases as of September 30, 1996 are as follows (in
thousands):

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
-----------
<S> <C> <C>
Three months ending December 31, 1996................................................ $ 205
1997................................................................................. 727
1998................................................................................. 695
1999................................................................................. 669
2000................................................................................. 658
2001 and thereafter.................................................................. 3,147
-----
$6,101
-----
</TABLE>

- --------------------------------------------------------------------------------

Net rental expense under operating leases for the years ended December 31, 1993,
1994, and 1995 and the nine months ended September 30, 1996 were $29,463,
$70,038, $238,931, and $478,668 respectively.

Legal Matters

Wired and its subsidiaries are involved in a number of claims arising in the
ordinary course of business. Wired and its subsidiaries believe these matters
will be resolved without material adverse effect on the Company's or its
subsidiaries' financial position, results of operations or cash flows.

(10) RELATED PARTY TRANSACTIONS

In November 1993, the Company received a noninterest bearing convertible loan
from AMPI for $500,000. This loan was converted to capital upon formation of
Wired Ventures, Ltd. in January 1994.

During 1993, Wired USA Ltd. received two loans. The first loan of $50,000 earned
interest at the rate of 6% per annum and was payable to a relative of the
editor/publisher. The $50,000 loan was repaid in 1994 subsequent to the
formation of Wired Ventures, Ltd. The second loan of $275,000 earned interest at
the rate of 10% per annum and was payable to a partner of Wired USA Ltd. As part
of the formation of Wired Ventures, Ltd. in 1994, $184,676 of this loan was
converted to capital and the remaining principal of $90,324 was repaid.

(11) INDUSTRY SEGMENT AND GEOGRAPHIC AREA SEGMENT INFORMATION

The Company's major operations are in magazine production and distribution and
in the publication of online editorial material on the World Wide Web (comprised
of the operations of Hot

F-22
<PAGE> 88

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

Wired Ventures LLC and its predecessor entity). The Company's television
production and book publishing operations as of December 31, 1995 do not
represent significant operations.

Revenues, operating loss, identifiable assets, depreciation and amortization,
and capital expenditures pertaining to the major industries in which the Company
operates are presented below (in thousands):
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BROADCAST
PRINT ONLINE TELEVISION CONSOLIDATED
------ ------- -------- ----------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1996
Revenues........................................ $22,761 $ 2,348 $ -- $ 25,109
Operating loss.................................. (9,953) (32,163) (671) (42,787)
Identifiable assets............................. 8,865 9,122 284 18,271
Depreciation and amortization................... 620 847 8 1,475
Capital expenditures............................ 655 1,427 139 2,221
DECEMBER 31, 1995
Revenues........................................ $23,313 $ 1,942 $ -- $ 25,255
Operating loss.................................. (5,734) (2,199) -- (7,933)
Identifiable assets............................. 7,498 5,893 -- 13,218
Depreciation and amortization................... 336 134 -- 470
Capital expenditures............................ 788 721 -- 1,509
DECEMBER 31, 1994
Revenues........................................ $ 8,833 $ 348 $ -- $ 9,181
Operating loss.................................. (3,505) (32) -- (3,537)
Identifiable assets............................. 4,699 412 -- 5,111
Depreciation and amortization................... 72 15 -- 87
Capital expenditures............................ 544 144 -- 688
DECEMBER 31, 1993
Revenues........................................ $ 2,928 $ -- $ -- $ 2,928
Operating loss.................................. (1,024) -- -- (1,024)
Identifiable assets............................. 1,859 -- -- 1,859
Depreciation and amortization................... 18 -- -- 18
Capital expenditures............................ 53 -- -- 53
</TABLE>

- --------------------------------------------------------------------------------

Intersegment transactions have not been significant to date.

F-23
<PAGE> 89

WIRED VENTURES, INC.
(A DELAWARE CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS
UNAUDITED)

Revenues, operating loss, identifiable assets, depreciation and amortization,
and capital expenditures derived from foreign based operations are presented
below (in thousands):
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOREIGN BASED
OPERATIONS
-----------
<S> <C>
SEPTEMBER 30, 1996
Revenues....................................................................... $761
Operating loss................................................................. (2,816)
Identifiable assets............................................................ 869
Depreciation and amortization.................................................. 78
Capital expenditures........................................................... 88
DECEMBER 31, 1995
Revenues....................................................................... $988
Operating loss................................................................. (2,617)
Identifiable assets............................................................ 472
Depreciation and amortization.................................................. 61
Capital expenditures........................................................... 311
</TABLE>

- --------------------------------------------------------------------------------

There were no foreign based operations in 1993 and 1994.

F-24
<PAGE> 90

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the Company
has agreed to sell to each of the U.S. Underwriters named below, and each of
such U.S. Underwriters, for whom Goldman, Sachs & Co. and Robertson, Stephens &
Company LLC are acting as representatives, has severally agreed to purchase from
the Company, the respective number of shares of Common Stock set forth opposite
its name below:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
--------- ------------
<S> <C>
Goldman, Sachs & Co. ...............................................
Robertson, Stephens & Company LLC...................................
--------
Total..................................................... 3,800,000
--------
</TABLE>

- --------------------------------------------------------------------------------

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.

The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of 950,000 shares of Common Stock in an international offering outside the
United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International and Robertson, Stephens & Company LLC.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and

U-1
<PAGE> 91

(ii) cause any dealer to whom it may sell such shares at any concession to agree
to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.

The Company has granted the U.S. Underwriters an option, exercisable for 30 days
after the date of this Prospectus, to purchase up to an aggregate of 570,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
3,800,000 shares of Common Stock offered. The Company has granted the
International Underwriters a similar option exercisable up to an aggregate of
142,500 additional shares of Common Stock.

The Company and its stockholders have agreed, during the period beginning from
the date of this Prospectus and continuing to and including the date 180 days
after the date of this Prospectus, not to offer, sell, or otherwise dispose of
any securities of the Company (other than pursuant to employee stock option
plans existing, or on the conversion or exchange of convertible or exchangeable
securities outstanding, on the date of the Prospectus) that are substantially
similar to the shares of Common Stock or that are convertible or exchangeable
into securities that are substantially similar to the shares of Common Stock,
without the prior written consent of Goldman, Sachs & Co. See "Shares Eligible
for Future Sale."

The representatives of the Underwriters have informed the Company that they do
not expect sales to accounts over which the Underwriters exercise discretionary
authority to exceed five percent of the total number of shares of Common Stock
offered by them.

Prior to this offering, there has been no public market for the Common Stock.
The initial public offering price will be negotiated between the Company and the
representatives of the U.S. Underwriters and International Underwriters. Among
the factors to be considered in determining the initial public offering price of
the Common Stock, in addition to prevailing market conditions, will be the
Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.

The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "WWWW", subject to official notice of issuance.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.

U-2
<PAGE> 92

[PICTURE OF AWARD] [PICTURE OF AWARD]

WIRED MAGAZINE THE HOTWIRED NETWORK

WINNER OF THE WINNER OF THE
NATIONAL MAGAZINE NATIONAL INFORMATION
AWARDS FOR: INFRASTRUCTURE ARTS AND
ENTERTAINMENT AWARD
GENERAL EXCELLENCE, 1994

DESIGN, 1996

AWARDED BY THE
AMERICAN SOCIETY OF AWARDED JULY 12, 1995
MAGAZINE EDITORS WASHINGTON DC

1996 1996
BEST DIGITAL MAGAZINE BEST SITE OF THE YEAR
Digital Hollywood Awards Digital Hollywood Awards

1995 1995
BEST DIGITAL MAGAZINE BEST OF DIGITAL HOLLYWOOD
Digital Hollywood Awards Digital Hollywood Awards

EDITORIAL EXCELLENCE FLUX: ONE OF THE TOP 10 SITES
Folio Magazine Entertainment Weekly
Magazine
1993
START-UP OF THE YEAR AWARD 1994
Ad Week Magazine ONLINE MAGAZINE OF THE YEAR
Advertising Age Magazine

BEST IN MULTIMEDIA
Japanese Multimedia
Grand Prix

<PAGE> 93
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS

PAGE

Prospectus Summary 3
Risk Factors 6
The Company 17
Use of Proceeds 18
Dividend Policy 18
Dilution 19
Capitalization 20
Selected Consolidated Financial Data 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 22
Business 31
Management 48
Certain Transactions 55
Principal Stockholders 58
Description of Capital Stock 59
Shares Eligible for Future Sale 61
Legal Matters 62
Experts 62
Change in Accountants 62
Additional Information 63
Index to Consolidated Financial Statements F-1
Underwriting U-1

Through and including , 1996 (the 25th day after the date of this
Prospectus), all dealers effecting transactions in the Common Stock, whether or
not participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.

4,750,000 SHARES

WIRED VENTURES, INC.

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

[WIRED LOGO]

GOLDMAN, SACHS & CO.

ROBERTSON, STEPHENS & COMPANY

Representatives of the Underwriters
<PAGE> 94
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY THE SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF THE SHARES IN THE
UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT 1986 AND
THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1986 WITH RESPECT TO ANYTHING DONE
BY ANY PERSON IN RELATION TO THE SHARES, IN, FROM OR OTHERWISE INVOLVING THE
UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING". IN THE PROSPECTUS,
REFERENCES TO "DOLLARS", "U.S.$" AND "$" ARE TO UNITED STATES DOLLARS.

SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
4,750,000 SHARES

[WIRED LOGO]

WIRED VENTURES, INC.
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
- --------------------------------------------------------------------------------
Of the 4,750,000 shares of Common Stock offered, 950,000 shares are being
offered hereby in an international offering outside the United States and
3,800,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both offerings. See "Underwriting".

All of the shares of Common Stock offered hereby are being sold by Wired
Ventures, Inc.(the "Company"). Prior to the offerings, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $12.00 and $14.00 per share. For
factors to be considered in determining the initial public offering price, see
"Underwriting".

SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.

The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "WWWW", subject to official notice of issuance.

THIS INTERNATIONAL PROSPECTUS IS INTENDED FOR USE ONLY IN CONNECTION WITH OFFERS
AND SALES OF COMMON STOCK OUTSIDE THE UNITED STATES AND IS NOT TO BE SENT OR
GIVEN TO ANY PERSON WITHIN THE UNITED STATES. THE COMMON STOCK OFFERED HEREBY IS
NOT BEING REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 FOR THE PURPOSE OF
SALES OUTSIDE THE UNITED STATES.

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting".

(2) Before deducting estimated expenses of $1,300,000 payable by the
Company.

(3) The Company has granted the Underwriters an option for 30 days to
purchase up to an additional 712,500 shares at the initial public
offering price per share, less the underwriting discount, to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to Company
will be $ , $ , and $ , respectively. See
"Underwriting".

The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York on or about October , 1996, against payment therefor in immediately
available funds.

GOLDMAN SACHS INTERNATIONAL ROBERTSON, STEPHENS & COMPANY

The date of this Prospectus is , 1996.
<PAGE> 95

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the Company
has agreed to sell to each of the International Underwriters named below, and
each of such International Underwriters, for whom Goldman Sachs International
and Robertson, Stephens & Company LLC are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
--------- ------------
<S> <C>
Goldman Sachs International.....................................
Robertson, Stephens & Company LLC...............................
-------
Total................................................. 950,000
-------
</TABLE>

- --------------------------------------------------------------------------------

Under the terms and conditions of the Underwriting Agreement, the International
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The International Underwriters propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.

The Company has entered into an underwriting agreement (the "U.S. Underwriting
Agreement") with the underwriters of the U.S. offering (the "U.S. Underwriters")
providing for the concurrent offer and sale of 3,800,000 shares of Common Stock
in a U.S. offering in the United States. The offering price and aggregate
underwriting discounts and commissions per share for the two offerings are
identical. The closing of the offering made hereby is a condition to the closing
of the U.S. offering, and vice versa. The representatives of the U.S.
Underwriters are Goldman, Sachs & Co. and Robertson, Stephens & Company LLC.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters has agreed that, as a part of the distribution of the shares
offered hereby and subject to certain exceptions, it will offer, sell or deliver
the shares of Common Stock, directly or indirectly, only in the United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction (the "United
States") and to U.S. persons, which term shall mean, for purposes of this
paragraph: (a) any individual who is a resident of the United States or (b) any
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters named herein has agreed pursuant to the Agreement
Between that, as a part of the distribution of the shares offered as a part of
the international offering, and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.

U-1
<PAGE> 96

The Company has granted the International Underwriters an option, exercisable
for 30 days after the date of this Prospectus, to purchase up to an aggregate of
142,500 additional shares of Common Stock solely to cover over-allotments, if
any. If the International Underwriters exercise their over-allotment option, the
International Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
950,000 shares of Common Stock offered. The Company has granted the U.S.
Underwriters a similar option to purchase up to an aggregate of 570,000
additional shares of Common Stock.

Each International Underwriter has also agreed that (a) it has not offered or
sold, and will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares of debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act 1985 of Great Britain, (b) it has complied, and
will comply with, all applicable provisions of the Financial Services Act of
1986 of Great Britain with respect to anything done by it in relation to the
shares of Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person who is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.

Buyers of shares of Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practice of the country
of purchase in addition to the initial public offering price.

Prior to this offering, there has been no public market for the Common Stock.
The initial public offering price will be negotiated between the Company and the
representatives of the U.S. Underwriters and the International Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Common Stock, in addition to prevailing market conditions, will be
the Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.

The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "WWWW", subject to official notice of issuance.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.

U-2
<PAGE> 97
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS
PAGE

4,750,000 SHARES

WIRED VENTURES, INC.

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

[WIRED LOGO]

GOLDMAN, SACHS INTERNATIONAL

ROBERTSON, STEPHENS & COMPANY

Representatives of the Underwriters
<PAGE> 98

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the shares of Common Stock being registered. All the amounts shown are
estimates except for the SEC registration fee, the NASD filing fee and the
Nasdaq National Market application fee.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
SEC Registration fee...................................... $ 28,254
NASD filing fee........................................... 8,694
Nasdaq National Market application fee.................... 17,500
Blue Sky qualification fee and expenses................... 7,500
Printing and engraving expenses........................... 200,000
Legal fees and expenses................................... 300,000
Accounting fees and expenses.............................. 350,000
Transfer agent and registrar fees......................... 10,000
Directors and officers insurance premium.................. 250,000
Miscellaneous............................................. 128,052
----------
Total........................................... $1,300,000
----------
</TABLE>

- --------------------------------------------------------------------------------

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law authorizes a court to award
or a corporation's Board of Directors to grant indemnification to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Registrant's Restated
Certificate and Restated Bylaws provide for mandatory indemnification of its
directors and permissive indemnification of officers, employees and other agents
to the maximum extent permitted by the Delaware General Corporation Law. The
Registrant has entered into indemnification agreements with its directors and
officers, a form of which is attached as Exhibit 10.1 hereto and incorporated
herein by reference. The indemnification agreements provide the Registrant's
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law. The Company is also in the process of
obtaining directors and officers insurance to insure its directors and officers
against certain liabilities under the Securities Laws.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since its incorporation in March 1996, the Registrant has sold and issued the
following unregistered securities:

(a) On May 28, 1996, the Company issued 30,500,000 shares of its Series
A Preferred Stock to the equity owners of Wired Holdings Inc., Wired USA
Ltd., Wired Ventures, Ltd. and HotWired Ventures LLC, including Louis
Rossetto, Jane Metcalfe, Advance Magazine Publishers, Inc., Jackson Living
Trust dtd July 19, 1992, Nicholas Negroponte, H. William Jesse, Jr.,
Lawrence Wilkinson, Andrew Anker, Rex Ishibashi and Jeffrey Simon in
exchange for their interests therein.

(b) On May 28, 1996, the Company issued one share of Common Stock to
each of Jane Metcalfe and Louis Rossetto for $10.00 in cash per share.

(c) On May 28, 1996, the Company issued 1,250,000 shares of its Series B
Preferred Stock to 10 investors, including Advance Magazine Publishers,
Inc., for $10.00 in cash per share.

(d) On September 25, 1996, the Company issued one share of Common Stock
to each of Louis Rossetto and Jane Metcalfe for $5.00 in cash per share.

II-1
<PAGE> 99

All of such shares of Preferred Stock and Common Stock were subject to, but do
not reflect, a one-for-two reverse stock split to be effected in October 1996.

The securities described in the transaction described in paragraph (a) above
were exempt from registration under the Securities Act by virtue of Section
3(a)(10) thereunder in that they were issued in exchange for bona fide
outstanding securities and the terms and conditions of such issuance and
exchange were approved, after a hearing upon the fairness of such terms and
conditions upon which all persons to whom the Registrant proposed to issue
securities in such exchange had the right to appear, by the California
Commissioner of Corporations.
The sale and issuance of securities in the transactions described in paragraphs
(b) and (c) were deemed to be exempt from registration under the Securities Act
by virtue of Section 4(2) or Regulation D promulgated thereunder as transactions
not involving a public offering. The purchasers in each case represented their
intention to acquire the securities for investment only and not with a view to
the distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. All recipients either received
adequate information about the Registrant or had access, through employment or
other relationships, to such information.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ ---------------------
<C> <S>
1.1a* Form of Underwriting Agreement (U.S. Version)
1.1b* Form of Underwriting Agreement (International Version)
2.1* Form of Exchange Agreement, dated as of May 28, 1996, among the
Registrant and the holders of its Series A Preferred Stock
3.1* Amended and Restated Certificate of Incorporation of the Registrant
3.2* Bylaws of the Registrant
3.3* Amended and Restated Certificate of Incorporation to be effective upon
completion of the offering
4.1 Reference is made to Exhibits 3.1 through 3.3
4.2* Specimen stock certificate
4.3* Form of Investor Rights Agreement, dated May 28, 1996, among the
Registrant and certain of its stockholders
5.1* Opinion of Cooley Godward LLP
10.1* Form of Indemnification Agreement between the Registrant and each of
its executive officers and directors
10.2* 1996 Equity Incentive Plan, together with forms of agreements to be
used thereunder
10.3* 1996 Non-Employee Director Stock Option Plan, together with form of
agreement to be used thereunder
10.4a* Letter of Agreement, Loan Note and Related Guaranty, dated as of July
22, 1995, among the Registrant, Wired World LLC, Wired New York, Wired
UK, Guardian Media Group, Karadean Limited, Guardian Magazines Limited
and Guardian Newspapers Limited
10.4b* Agreement, Substitution Loan Note and Substitution Guaranty, dated as
of June 28, 1996, among the Registrant, Wired World LLC, Wired New
York, Wired UK, Guardian Media Group, Karadean Limited, Guardian
Magazines Limited and Guardian Newspapers Limited
10.5+* License Agreement, dated as of May 30, 1994, between the Registrant and
Dohosha Publishing Co., Ltd.
10.6+* Letter of Intent, dated as of April 5, 1996, between HotWired Ventures
LLC and Inktomi Corporation
</TABLE>

II-2
<PAGE> 100

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ ---------------------
<C> <S>
10.7+* Agreement, dated as of November 5, 1992, as amended on August 2, 1994,
April 11, 1995, and May 22, 1996, between the Registrant and
International Circulation Distributors - The Hearst Corporation
10.8+* Master Agreement for Neodata Services, dated as of June 20, 1994,
between the Registrant and Neodata Services, Inc.
10.9* Real Property Lease, dated as of May 20, 1994, between the Registrant
and 500 Third Street Associates
10.10* Real Property Lease, dated as of November 15, 1995, between the
Registrant and GORR Partners, LLC
10.11+* Letter Agreement, dated as of June 14, 1996, between the Registrant and
MSNBC Cable Channel, L.L.C.
10.12* Employment Agreement, dated as of October 12, 1995, between HotWired
Ventures LLC and Jeffrey Simon, as supplemented by Letter Agreement,
dated June 20, 1996, between the Registrant and Jeffrey Simon
10.13* Real Property Lease, dated as of June 21, 1996, between HotWired, Inc.
and GORR Partners, LLC
11.1 Statement re: Computation of Pro Forma Net Loss Per Share
16.1* Letter from Coopers & Lybrand LLC
21.1* Subsidiaries of the Registrant
23.1 Report on Financial Statement Schedule and Consent of Independent
Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to Page II-5.
27.1 Financial Data Schedule
</TABLE>

- --------------------------------------------------------------------------------

* Previously filed as an exhibit to the Registration Statement.

+ Confidential treatment requested.

(b) FINANCIAL STATEMENT SCHEDULES.

Schedule II -- Valuation and Qualifying Accounts -- Page S-1.

All other schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions described in Item 14 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 Act and will
be governed by the final adjudication of such issue.

II-3
<PAGE> 101

The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Act, the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of the
registration statement as of the time it was declared effective, and (2) for the
purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus 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.

II-4
<PAGE> 102

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Amendment No. 2 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City and County of
San Francisco, State of California,
on the 21st day of October, 1996.

WIRED VENTURES, INC.

By: Louis Rossetto*

- ---------------------------------------------
Louis Rossetto
Chief Executive Officer and Chair
of the Board
(Principal Executive Officer)

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Louis
Rossetto and Jeff Simon as his true and lawful attorney-in-fact and agent, each
acting alone, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this Registration Statement
on Form S-1, and to any registration statement filed under Rule 462 under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
-------- --- ----
<S> <C> <C>
Louis Rossetto* Chief Executive October 21, 1996
- -------------------------------------- Officer and Chair of
Louis Rossetto the Board (Principal
Executive Officer)
/s/ Jeffrey Simon Chief Financial October 21, 1996
- -------------------------------------- Officer and Secretary
Jeffrey Simon (Principal Financial
and Accounting
Officer)
Jane Metcalfe* President and Director October 21, 1996
- --------------------------------------
Jane Metcalfe
H. William Jesse, Jr.* Director October 21, 1996
- --------------------------------------
H. William Jesse, Jr.
Lawrence Director October 21, 1996
Wilkinson*
- --------------------------------------
Lawrence Wilkinson
/s/ Scott Director October 21, 1996
Sassa
- --------------------------------------
Scott Sassa
*By: /s/ Jeffrey Simon
- --------------------------------------
Jeffrey Simon, Attorney-in-Fact
</TABLE>

- --------------------------------------------------------------------------------

II-5
<PAGE> 103

SCHEDULE II

WIRED VENTURES, INC.

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CHARGED TO END
ACCOUNT DESCRIPTION OF PERIOD OPERATIONS DEDUCTIONS OF PERIOD
----------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Magazine advertising
Allowance for doubtful accounts.... $ -- $ 168 $ 22 $ 146
Newsstand and single copy
Allowance for newsstand returns.... -- 767 367 400
-------------------------------------------------------
$ -- $ 935 $ 389 $ 546
-------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Magazine advertising
Allowance for doubtful accounts.... $ 146 $ 482 $ 165 $ 463
Online advertising
Allowance for doubtful accounts.... -- 15 -- 15
Newsstand and single copy
Allowance for newsstand returns.... 400 1,480 336 1,544
-------------------------------------------------------
$ 546 $1,977 $ 501 $2,022
-------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
Magazine advertising
Allowance for doubtful accounts.... $ 463 $ 304 $ -- $ 767
Online advertising
Allowance for doubtful accounts.... 15 8 -- 23
Newsstand and single copy
Allowance for newsstand returns.... 1,544 2,030 1,800 1,774
-------------------------------------------------------
$2,022 $2,342 $1,800 $2,564
-------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1996
Magazine advertising
Allowance for doubtful accounts.... $ 767 $ 184 $ 306 $ 645
Online advertising
Allowance for doubtful accounts.... 23 7 7 23
Newsstand and single copy
Allowance for doubtful accounts.... 1,774 3,727 3,623 1,878
-------------------------------------------------------
$2,564 $3,918 $3,936 $2,546
-------------------------------------------------------
</TABLE>

S-1
<PAGE> 104

EXHIBIT INDEX
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- --------------------- ----------
<C> <S> <C>
1.1a* Form of Underwriting Agreement (U.S. Version)
1.1b* Form of Underwriting Agreement (International Version)
2.1* Form of Exchange Agreement, dated as of May 28, 1996, among
the Registrant and the holders of its Series A Preferred Stock
3.1* Amended and Restated Certificate of Incorporation of the
Registrant
3.2* Bylaws of the Registrant
3.3* Amended and Restated Certificate of Incorporation to be
effective upon completion of the offering
4.1 Reference is made to Exhibits 3.1 through 3.3
4.2* Specimen stock certificate
4.3* Form of Investor Rights Agreement, dated May 28, 1996, among
the Registrant and certain of its stockholders
5.1* Opinion of Cooley Godward LLP
10.1* Form of Indemnification Agreement between the Registrant and
each of its executive officers and directors
10.2* 1996 Equity Incentive Plan, together with forms of agreements
to be used thereunder
10.3* 1996 Non-Employee Director Stock Option Plan, together with
form of agreement to be used thereunder
10.4a* Letter of Agreement, Loan Note and Related Guaranty, dated as
of July 22, 1995, among the Registrant, Wired World LLC, Wired
New York, Wired UK, Guardian Media Group, Karadean Limited,
Guardian Magazines Limited and Guardian Newspapers Limited
10.4b* Agreement, Substitution Loan Note and Substitution Guaranty,
dated as of June 28, 1996, among the Registrant, Wired World
LLC, Wired New York, Wired UK, Guardian Media Group, Karadean
Limited, Guardian Magazines Limited and Guardian Newspapers
Limited
10.5+* License Agreement, dated as of May 30, 1994, between the
Registrant and Dohosha Publishing Co., Ltd.
10.6+* Letter of Intent, dated as of April 5, 1996, between HotWired
Ventures LLC and Inktomi Corporation
10.7+* Agreement, dated as of November 5, 1992, as amended on August
2, 1994, April 11, 1995, and May 22, 1996, between the
Registrant and International Circulation Distributors - The
Hearst Corporation
10.8+* Master Agreement for Neodata Services, dated as of June 20,
1994, between the Registrant and Neodata Services, Inc.
10.9* Real Property Lease, dated as of May 20, 1994, between the
Registrant and 500 Third Street Associates
10.10* Real Property Lease, dated as of November 15, 1995, between
HotWired, Inc. and GORR Partners, LLC
10.11+* Letter Agreement, dated as of June 14, 1996, between the
Registrant and MSNBC Cable Channel, L.L.C.
</TABLE>

<PAGE> 105

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- --------------------- ----------
<C> <S> <C>
10.12* Employment Agreement, dated as of October 12, 1995, between
HotWired Ventures LLC and Jeffrey Simon, as supplemented by
Letter Agreement dated June 20, 1996, between Registrant and
Jeffrey Simon
10.13* Real Property Lease, dated as of June 21, 1996, between the
Registrant and GORR Partners, LLC
11.1 Statement re: Computation of Pro Forma Net Loss Per Share
16.1* Letter from Coopers & Lybrand LLC
21.1* Subsidiaries of the Registrant
23.1 Report on Financial Statement Schedule and Consent of
Independent Auditors
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1
24.1 Power of Attorney. Reference is made to Page II-5
27.1 Financial Data Schedule
</TABLE>

- ---------------

* Previously filed as an exhibit to the Registration Statement.

+ Confidential treatment requested.

<PAGE> 1

EXHIBIT 11.1

WIRED VENTURES, INC. STATEMENT RE: COMPUTATION OF PRO FORMA NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------- ----------------
<S> <C> <C>
Pro forma net loss....................... $ (6,505) $ (42,038)
-----------------------------------------
Weighted average number of preferred
shares outstanding(1).................. 14,312 13,938
Shares and options issued subject to SAB
No. 83:
Preferred stock issuances(1)........... 2,283 2,283
Stock option grants(2)................. 802 802
-----------------------------------------
3,085 3,085
-----------------------------------------
Shares used in computing pro forma net
loss per share......................... 17,397 17,023
-----------------------------------------
Pro forma net loss per share............. $ (0.37) $ (2.47)
-----------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
(1) Using if-converted method.

(2) Using treasury-stock method.

<PAGE> 1

EXHIBIT 23.1

REPORT ON FINANCIAL STATEMENT SCHEDULE AND

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Wired Ventures, Inc.

The audits referred to in our report dated October 18, 1996, included the
related consolidated financial statement schedule for each of the years in the
three-year period ended December 31, 1995 and the nine-month period ended
September 30, 1996, included in the Registration Statement. This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this consolidated financial
statement schedule based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data" and
"Experts" in the Prospectus.

KPMG PEAT MARWICK LLP

San Francisco, California

October 20, 1996

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<MULTIPLIER> 1,000

</TABLE>