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As filed with the Securities and Exchange Commission on July 15, 1998.
Registration No. 333-56633
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CNET, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3696170
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 CHESTNUT STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 395-7800
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Halsey M. Minor
Chairman of the Board, President and Chief Executive Officer
150 Chestnut Street
San Francisco, California 94111
(415) 395-7800
(Name, address, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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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 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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CNET, INC.
113,354 SHARES
COMMON STOCK
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This Prospectus relates to an offering of up to 113,354 shares (the
"Shares") of common stock, par value $.0001 per share (the "Common Stock"),
of CNET, Inc., a Delaware corporation (the "Company"), issued pursuant to
that certain Agreement and Plan of Merger, dated as of May 7, 1998, by and
among the Company, CNET Acquisition Corp., U.Vision Inc. and the stockholders
of U.Vision Inc. (the stockholders of U.Vision Inc. are referred to herein
collectively as the "Selling Shareholders").
The Shares being registered are being offered for the account of the
Selling Shareholders. See "Selling Shareholders." The Company will not
receive any proceeds from the sale of the Shares offered hereby. The Shares
may be offered in transactions on the Nasdaq National Market, in negotiated
transactions, or through a combination of such methods of distribution, at
prices relating to the prevailing market prices or at negotiated prices. See
"Plan of Distribution."
Since inception, the Company has incurred significant losses and, as of
March 31, 1998, had an accumulated deficit of $59.7 million. The Company
anticipates that it will incur quarterly and annual losses in the future. See
"Risk Factors."
The Common Stock is quoted on the Nasdaq National Market under the
symbol "CNWK." On July 10, 1998, the last sale price of the Common Stock, as
reported on the Nasdaq National Market, was $53.125 per share.
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SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
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.
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No dealer, salesman, or any other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such
other information and representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. 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. This
Prospectus does not constitute an offer to sell, or a solicitation of any
offer to buy, any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell, or a
solicitation of any offer to buy, such securities in any circumstances in
which such offer or solicitation is unlawful.
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The date of this Prospectus is July 15, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements, information
statements, and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements, information statements, and
other information filed by the Company with the Commission pursuant to the
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549-1004, at its Northeast
Regional Office located at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at its West Regional Office located at 5670 Wilshire Blvd.,
Los Angeles, California 90036. Copies of such material may be obtained from
the Public Reference Section of the Commission located at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains
a Web site that contains reports, proxy statements, information statements
and other information regarding the Company. The Commission's Web site
address is http://www.sec.gov. The Company is a publicly held corporation
and its Common Stock is traded on the Nasdaq National Market under the symbol
"CNWK." Reports, proxy statements, information statements, and other
information can also be inspected at the offices of the Nasdaq National
Market, 1735 K Street, N.W., Washington, D.C. 20549.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as it
may determine to furnish or as may be required by law.
The Company has filed with the Commission a Registration Statement on
Form S-3 (referred to herein, together with all exhibits, as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Shares offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement. Certain parts of the Registration Statement have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement which can be
inspected at the public reference rooms at the offices of the Commission.
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DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to such documents,
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates). Requests should be directed
to:
CNET, Inc.
150 Chestnut Street
San Francisco, California 94111
Telephone: (415) 395-7800
Attention: Douglas N. Woodrum, Chief Financial Officer
The Company's (i) Annual Report on Form 10-K, which contains audited
financial statements for the fiscal year ended December 31, 1997, (ii)
Quarterly Report on Form 10-Q, which contains unaudited financial statements
for the fiscal quarter ended March 31, 1998, (iii) reports on Form 8-K dated
May 22, 1998 and June 15, 1998, (iv) all reports filed pursuant to Section
13(a) or 15(d) of the Exchange Act since the filing of such Form 10-Q and the
effective date of this Registration Statement on Form S-3, and (v) a
description of the Common Stock contained in the Company's registration
statement on Form SB-1, dated July 8, 1996 (Commission File Number
333-4752-LA) and the Company's registration statement on Form 8-A, dated June
17, 1996, including any amendment or reports filed for the purpose of
updating such description, are hereby incorporated by reference into this
Prospectus.
All documents filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering relating
to this Prospectus will be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement incorporated or deemed to be incorporated by reference herein
will be deemed to be modified, replaced, or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded will be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
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THE COMPANY
CERTAIN INFORMATION IN THIS PROSPECTUS MAY CONTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT
ARE "FORWARD-LOOKING STATEMENTS" FOR PURPOSES OF THESE PROVISIONS, INCLUDING
ANY PROJECTIONS OF EARNINGS, REVENUES OR OTHER FINANCIAL ITEMS, ANY
STATEMENTS OF THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS,
ANY STATEMENTS CONCERNING PROPOSED NEW PRODUCTS OR SERVICES, ANY STATEMENTS
REGARDING FUTURE ECONOMIC CONDITIONS OR PERFORMANCE, AND ANY STATEMENT OF
ASSUMPTIONS UNDERLYING ANY OF THE FOREGOING. IN SOME CASES, FORWARD-LOOKING
STATEMENTS CAN BE IDENTIFIED BY THE USE OF TERMINOLOGY SUCH AS "MAY," "WILL,"
"EXPECTS," "BELIEVES", "PLANS," "ANTICIPATES," "ESTIMATES," "POTENTIAL," OR
"CONTINUE," OR THE NEGATIVE THEREOF OR OTHER COMPARABLE TERMINOLOGY.
ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN ITS
FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH
EXPECTATIONS OR ANY OF ITS FORWARD-LOOKING STATEMENTS WILL PROVE TO BE
CORRECT, AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED OR
ASSUMED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS. THE COMPANY'S FUTURE
FINANCIAL CONDITION AND RESULTS, AS WELL AS ANY FORWARD-LOOKING STATEMENTS,
ARE SUBJECT TO INHERENT RISKS AND UNCERTAINTIES, SOME OF WHICH ARE SUMMARIZED
IN THE SECTION TITLED "RISK FACTORS" BEGINNING ON PAGE 6.
CNET: The Computer Network is a media company focused on providing original
Internet content and television programming relating to information technology
and the Internet. The Company also operates SNAP!, a free online service that
aggregates Internet content and offers Internet directory and searching
capabilities.
The Company's technology publishing division is comprised of the following
eight technology-focused Internet sites: CNET.COM, NEWS.COM, GAMECENTER.COM,
SHAREWARE.COM, SEARCH.COM, BUILDER.COM, DOWNLOAD.COM AND COMPUTERS.COM. The
Company seeks to use its editorial, technical, and programming expertise to
create compelling content to engage technology-oriented consumers and attract
advertisers wishing to reach this audience. The Company believes that its
strategy of combining Internet and television-based programming enhances its
ability to promote the CNET brand, improves its ability to create high quality
content, and provides the Company with a source of competitive advantage and
differentiation. The Company is focused on leveraging its market position, the
awareness of its brand amonG consumers and its relationship with advertisers to
create new Internet sites and services related to information technology and the
Internet, and to capitalize on new business opportunities such as Internet-based
electronic commerce. Based on the volume of traffic on its Internet sites and
the size of its television audience, the Company believes that it has
established a leadership position in its targeted content market. Nevertheless,
because of the substantial expenses incurred by the Company in developing,
operating and promoting its Internet sites, the Company has incurred significant
operating losses and net losses. As of March 31, 1998, the Company had an
accumulated deficit of $59.7 million. For the fiscal year ended December 31,
1997, the Company reported a net loss of $24.7 million, and for the fiscal
quarter ended March 31, 1998, the Company reported a net loss of $5.7 million.
The Company anticipates that it will incur quarterly and annual losses in the
future.
SNAP! is a free online service built for the Internet consisting of two
complementary components - a robust Web site that provides a comprehensive
overview of the Internet organized by channel, and the SNAP! Starter Kit, a
CD-ROM designed to help new users learn how to use the Internet and get
online easily. The SNAP! Web site is organized into sixteen channels, which
are regularly infused with editorial content, news, headlines, and
customizable data from a range of well recognized brands on the Web. SNAP!
also features its own directory of Web sites for fast, efficient and
high-quality searches. The site is designed to make searching the Web easy
by organizing leading search engines into a consistent and powerful user
experience. As part of its distribution strategy for SNAP!, CNET builds
customized, co-branded versions of the service for Internet service
providers, computer hardware manufacturers, telecommunication companies and
others, helping them offer their customers a compelling Internet experience
and maintain a relationship with their customers online. Since the service
was first announced in June 1997, SNAP! has signed distribution agreements
with more than 35 companies, including 20 Internet service providers.
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Revenues attributable to the Company's Internet operations were $26.7
million for the year ended December 31, 1997 and were $8.9 million and $4.5
million for the three months ended March 31, 1998 and 1997, respectively.
Internet revenues for CNET Online were $8.0 million and $4.5 million for the
three months ended March 31, 1998 and 1997, respectively. Internet revenues for
Snap! were $906,000 for the three months ended March 31, 1998. Snap! commenced
operations in September 1997, and thus did not generate revenues for the three
month period ended March 31, 1997. Internet revenues consist primarily of
revenues derived from the sale of advertisements on pages delivered to users of
the Company's Internet sites. The delivery of an advertisement is recognized by
the Company as an "impression." Advertising revenues are derived principally
from arrangements with the Company's advertising customers that provide for a
guaranteed number of impressions. Advertising rates vary depending primarily on
the particular Internet site on which advertisements are placed, the total
number of impressions purchased and the length of the advertiser's commitment.
Advertising revenues are recognized in the period in which the advertisements
are delivered. The Company's ability to sustain or increase revenues for
Internet advertising will depend on numerous factors, which include, but are not
limited to, the Company's ability to increase its inventory of delivered
Internet pages on which advertisements can be displayed and its ability to
maintain or increase its advertising rates.
The increase in revenues for CNET Online of $3.5 million from the first
quarter of 1997 to the first quarter of 1998 was attributable to increased
pages delivered and increased advertisements sold on each of its sites.
Average daily pages delivered on the Company's CNET Online sites during 1997
approximated 4.3 million pages and during the first quarter of 1998
approximated 6.5 million pages, an increase of 103% as compared to 3.2
million average daily pages during the first quarter of 1997. In addition,
Internet revenues include non-advertising revenues of $1.0 million and
$703,000 for the three months ended March 31, 1998 and 1997, respectively.
Non-advertising revenues include fees earned from Company sponsored trade
shows, electronic commerce revenues, content licensing revenues, technology
licensing and consulting.
A portion of the Company's Internet revenues were derived from barter
transactions whereby the Company delivered advertisements on its Internet sites
in exchange for advertisements on the Internet sites of other companies. Barter
transactions accounted for $709,000 and $24,000 for the three months ended
March 31, 1998 and 1997, respectively.
The Company produces four television series. CNET CENTRAL launched in
April 1995 and is a half-hour magazine format program devoted to exploring the
world of information technology and the Internet. THE NEW EDGE launched in July
1996 and is a half-hour magazine format program showcasing technological
breakthroughs and how they will change our lives. THE WEB also launched in July
1996 and is a one hour program showing viewers the hottest Web sites and
technologies and includes interviews with industry leaders. Based on Nielsen
ratings, CNET CENTRAL, THE NEW EDGE and THE WEB reached an average of 1.1
million viewers during the fourth quarter of 1997. TV.COM is a syndicated
program, which launched in September 1996 and showcases for a broadcast audience
the world of the Internet and digital technologies. CNET's television shows are
produced by the Company and, with the exception of TV.COM, are carried
nationally on the USA Network and the Sci-Fi Channel, both of which are owned by
USA Networks. TV.COM is produced in conjunction with Trans World International
("TWI"), and is syndicated into over 115 markets nationally. During the fourth
quarter of 1997, TV.COM achieved an average weekly audience of approximately
800,000 viewers. Additionally, CNET television has been licensed to
broadcasters in Japan, Taiwan, Singapore, Panama, Canada, Spain, Sweden and
Argentina.
Television revenues were $6.9 million for the year ended December 31, 1997
and were $1.8 million for each of the three month periods ended March 31, 1998
and 1997, respectively. Pursuant to an amended agreement, effective July 1,
1996, between the Company and USA Networks, USA Networks licensed the right to
carry the DIGITAL DOMAIN on its networks for an initial one-year term for a fee
equal to the cost of production of those programs up to a maximum of $5.2
million. In January 1997, USA Networks agreed to extend the agreement for an
additional year beginning July 1, 1997 and revenues are again limited to the
costs of producing such programs, subject to a maximum amount of $5.5 million.
In June 1998, the agreement was extended for an additional year, ending June 30,
1999, and the maximum revenues during such year will be $5.9 million.
During 1997, television operations accounted for 21% of total revenues
and Internet operations accounted for 79% of total revenues. Television
operations accounted for 16% and 28% of total revenues and Internet
operations
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accounted for 84% and 72% of total revenues for the three month ended March
31, 1998 and 1997, respectively. The Company expects to experience
fluctuations in television and Internet revenues in the future that may be
dependent on many factors, including demand for the Company's Internet sites
and television programming, and the Company's ability to develop, market and
introduce new and enhanced Internet content and television programming.
RECENT DEVELOPMENTS. On June 9, 1998, the Company announced an agreement
with National Broadcasting Company, Inc. ("NBC") under which the Company and an
affiliate of NBC have formed a joint venture to operate the Company's SNAP!
Internet portal service. The transaction closed on June 30, 1998. NBC acquired
an initial interest of 19% in the joint venture and received an option to
increase its ownership percentage to 60%. Also on June 30, 1998, NBC purchased
812,800 shares of the Company's common stock for an aggregate purchase price of
$26.2 million.
The Company is a Delaware corporation and was formed in 1992. The
Company's principal executive offices are located at 150 Chestnut Street, San
Francisco, California 94111, and its telephone number is (415) 395-7800.
RISK FACTORS
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES.
The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the television programming industry and in the
relatively new and rapidly evolving market for Internet products, content and
services. To address these risks, the Company must, among other things,
effectively develop new relationships and maintain existing relationships with
its advertising customers, their advertising agencies and other third parties,
provide original and compelling content to Internet users and television
viewers, develop and upgrade its technology, respond to competitive developments
and attract, retain and motivate qualified personnel. There can be no assurance
that the Company will succeed in addressing such risks and the failure to do so
could have a material adverse effect on the Company's business, financial
condition or operating results. Additionally, the limited operating history of
the Company makes the prediction of future operating results difficult or
impossible, and there can be no assurance that the Company's revenues will
increase or even continue at their current level or that the Company will
achieve or maintain profitability or generate cash from operations in future
periods. Since inception, the Company has incurred significant losses and, as of
March 31, 1998, had an accumulated deficit of $59.7 million. The Company may
continue to incur losses in the future.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.
The Company's quarterly operating results may fluctuate significantly in
the future as a result of a variety of factors, many of which are outside the
Company's control. Factors that may adversely affect the Company's quarterly
operating results attributable to its Internet operations include the level of
use of the Internet, demand for Internet advertising, seasonal trends in both
Internet use and advertising placements, the addition or loss of advertisers,
advertising budgeting cycles of individual advertisers, the level of traffic on
the Company's Internet sites, the amount and timing of capital expenditures and
other costs relating to the expansion of the Company's Internet operations, the
introduction of new sites and services by the Company or its competitors, price
competition or pricing changes in the industry, technical difficulties or system
downtime, general economic conditions and economic conditions specific to the
Internet and Internet media. Quarterly operating results attributable to the
Company's television operations are generally dependent on the costs incurred by
the Company in producing its television programming. If the cost of producing
television programs for USA Networks exceeds the maximum licensing fee payable
by USA Networks, or if production costs for TV.COM exceed distribution revenues,
the Company could incur a gross deficit with respect to its television
operations. Further, the size and demographic characteristics of the Company's
television viewing audience may be adversely affected by the popularity of
competing television programs, including special events, the time slots chosen
for the Company's programs by the cable network carrying such programs and the
popularity of programs immediately preceding the Company's
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programs. As a result of the Company's strategy to cross market its
television and Internet operations, the Company believes that any decrease in
the number of viewers of its television programs will have a negative effect
on the usage of its Internet sites. Accordingly, a decrease in viewership of
the Company's television programs could have a material adverse effect on the
Company's business, financial condition or operating results.
Due to all of the foregoing factors, it is likely that the Company's
operating results may fall below the expectations of the Company, securities
analysts or investors in some future quarter. In such event, the trading price
of the Company's Common Stock would likely be materially adversely affected.
UNCERTAIN ACCEPTANCE OF THE COMPANY'S INTERNET CONTENT.
The Company's future success depends upon its ability to deliver original
and compelling Internet content and services in order to attract and retain
users. There can be no assurance that the Company's content and services will be
attractive to a sufficient number of Internet users to generate advertising
revenues. There also can be no assurance that the Company will be able to
anticipate, monitor and successfully respond to rapidly changing consumer tastes
and preferences so as to attract a sufficient number of users to its sites.
Internet users can freely navigate and instantly switch among a large number of
Internet sites, many of which offer competing content and services, making it
difficult for the Company to distinguish its content and services and to attract
users. In addition, many other Internet sites offer very specific, highly
targeted content that could have greater appeal than the Company's sites to
particular subsets of the Company's target audience. If the Company is unable to
develop Internet content and services that allow it to attract, retain and
expand a loyal user base possessing demographic characteristics attractive to
advertisers, the Company will be unable to generate advertising revenues, and
its business, financial condition and operating results will be materially
adversely affected.
UNCERTAIN ACCEPTANCE OF THE COMPANY'S TELEVISION PROGRAMMING.
There can be no assurance that the Company's television programming will be
accepted by television broadcasters, cable networks or their viewers. The
successful development and production of television programming is subject to
numerous uncertainties, including the ability to anticipate and successfully
respond to rapidly changing consumer tastes and preferences, obtain favorable
distribution rights, fund new program development and attract and retain
qualified producers, writers, technical personnel and television hosts. If the
Company is unable to develop television programming that allows it to attract,
retain and expand a loyal television audience, the Company will be unable to
achieve its strategic objectives, and its business, financial condition and
operating results will be materially adversely affected.
COMPETITION.
Competition among content providers is intense and is expected to increase
significantly in the future. The Company's Internet and television operations
compete against a variety of firms that provide content through one or more
media, such as print, broadcast, cable television and the Internet. As with any
other content provider, the Company competes generally with other content
providers for the time and attention of consumers and for advertising revenues.
To compete successfully, the Company must provide sufficiently compelling and
popular Internet content and television programming to attract Internet users
and television viewers and to support advertising intended to reach such users
and viewers. Within the content niche of information technology and the
Internet, the Company competes in particular with the publishers of
computer-oriented magazines, such as Ziff-Davis Publishing Company,
International Data Group and CMP Publications, and with television companies
that offer computer-related programming, such as the Cable News Network, the
Discovery Channel, Jones Computer Network, Mind Extension University and MSNBC,
a joint venture between Microsoft Corporation and General Electric's NBC
Television Network. Each of these competitors also offers one or more Internet
sites with content designed to complement its magazines or television
programming.
In the market for Internet content, the Company competes with other
Internet content and service providers, including Web directories, search
engines, shareware archives, sites that offer original editorial content,
commercial online services and sites maintained by Internet service providers.
These competitors include Excite,
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Inc., Infoseek Corporation, Lycos, Inc., Microsoft Corporation, Netscape
Communications Corporation, Time Warner, Inc., PointCast Incorporated,
SOFTBANK Corporation, Starwave Corporation and Yahoo! Inc., as well as
America Online, Inc., CompuServe, Inc. and Prodigy Services Co. The market
for Internet content and services is new, intensely competitive and rapidly
evolving. There are minimal barriers to entry, and current and new
competitors can launch new sites at relatively low cost. In addition, the
Company competes for the time and attention of Internet users with thousands
of non-profit Internet sites operated by individuals, government and
educational institutions. Existing and potential competitors also include
magazine and newspaper publishers, cable television companies and startup
ventures attracted to the Internet market. Accordingly, the Company expects
competition to persist and intensify and the number of competitors to
increase significantly in the future. As the Company expands the scope of its
Internet content and services, it will compete directly with a greater number
of Internet sites and other media companies. Because the operations and
strategic plans of existing and future competitors are undergoing rapid
change, it is extremely difficult for the Company to anticipate which
companies are likely to offer competitive services in the future. There can
be no assurance that the Company's Internet operations will compete
successfully.
With respect to its television operations, the Company competes directly
with established broadcast and cable television networks and with other
distributors and producers of programming about information technology and the
Internet. The Company also faces potential competition from a wide range of
existing broadcast and cable television companies, and from joint ventures
between television companies and computer-oriented magazine publishers or
computer hardware or software vendors, any of which could produce television
programming that competes directly with the Company's television programming.
For example, Ziff-Davis launched a 24 hour cable television network.
MANAGING POTENTIAL GROWTH.
The Company has rapidly and significantly expanded its operations and
anticipates that further expansion of its operations may be required in order
to address potential market opportunities. This rapid growth has placed, and
is expected to continue to place, a significant strain on the Company's
management, operational and financial resources. From January 1, 1997 to
December 31, 1997, the Company grew from 372 to 581 employees. The increase
in the number of employees and the Company's market diversification and
product development activities have resulted in increased responsibility for
the Company's management. The Company's management will be required to
successfully maintain relationships with various advertising customers,
advertising agencies, other Internet sites and services, Internet service
providers and other third parties and to maintain control over the strategic
direction of the Company in a rapidly changing environment. There can be no
assurance that the Company's current personnel, systems, procedures and
controls will be adequate to support the Company's future operations, that
management will be able to identify, hire, train, motivate or manage required
personnel or that management will be able to successfully identify and
exploit existing and potential market opportunities. If the Company is unable
to manage growth effectively, the Company's business, financial condition and
operating results will be materially adversely affected.
The launch of Snap! in 1997 represented a significant expansion of the
Company's business and has required a substantial investment of capital and
additional, substantial burdens on the Company's management personnel and its
financial and operational systems. Through March 31, 1998, the Company incurred
a total of approximately $16.6 million in operating losses in connection with
the SNAP! service. The expenditures required in connection with Snap!
significantly increased the Company's operating loss during 1997 and could
result in large and prolonged operating losses for the Company in the future.
There can be no assurance that the Snap! service will achieve market acceptance
or reach profitability, and a failure by the Company to recover the substantial
investment required could have a material adverse effect on the Company's
business, financial condition and operating results.
DEPENDENCE ON ADVERTISING REVENUES; CUSTOMER CONCENTRATION.
The Company's revenues through December 31, 1997 were derived primarily
from the sale of advertising on its Internet sites and from advertising and
license fees from producing its television programs. Most of the
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Company's advertising contracts can be terminated by the customer at any time
on very short notice. Consequently, the Company's advertising customers may
move their advertising to competing Internet sites or from the Internet to
traditional media, quickly and at low cost, thereby increasing the Company's
exposure to competitive pressures and fluctuations in net revenues and
operating results. In selling Internet advertising, the Company also depends
to a significant extent on advertising agencies, which exercise substantial
control over the placement of advertising for the Company's existing and
potential advertising customers. If the Company loses advertising customers,
fails to attract new customers or is forced to reduce advertising rates in
order to retain or attract customers, the Company's business, financial
condition and operating results will be materially adversely affected.
UNCERTAIN ACCEPTANCE OF THE INTERNET AS AN ADVERTISING MEDIUM.
The Company's Internet advertising customers have only limited experience
with the Internet as an advertising medium and neither such customers nor their
advertising agencies have devoted a significant portion of their advertising
budgets to Internet-based advertising in the past. A significant portion of the
Company's potential customers have no experience with the Internet as an
advertising medium and have not devoted any significant portion of their
advertising budgets to Internet-based advertising in the past. In order for the
Company to generate advertising revenues, advertisers and advertising agencies
must direct a significant portion of their budgets to the Internet and,
specifically, to the Company's Internet sites. There can be no assurance that
advertisers or advertising agencies will be persuaded to allocate or continue to
allocate significant portions of their budgets to Internet-based advertising,
or, if so persuaded, that they will find Internet-based advertising to be more
effective than advertising in traditional media such as print, broadcast and
cable television, or in any event decide to advertise or continue to advertise
on the Company's Internet sites. Acceptance of the Internet among advertisers
and advertising agencies will also depend to a large extent on the level of use
of the Internet by consumers, which is highly uncertain, and on the acceptance
of new methods of conducting business and exchanging information. Advertisers
and advertising agencies that have invested substantial resources in traditional
methods of advertising may be reluctant to modify their media buying behavior or
their systems and infrastructure to use Internet-based advertising. Furthermore,
no standards to measure the effectiveness of Internet-based advertising have yet
gained widespread acceptance, and there can be no assurance that such standards
will be adopted or adopted broadly enough to support widespread acceptance of
Internet-based advertising. If Internet-based advertising is not widely accepted
by advertisers and advertising agencies, the Company's business, financial
condition and operating results will be materially adversely affected.
UNCERTAIN ACCEPTANCE AND MAINTENANCE OF BRANDS.
Promotion of the CNET and Snap! brands will depend largely on the Company's
success in providing high quality Internet and television programming, which
cannot be assured. If consumers do not perceive the Company's existing Internet
and television content to be of high quality, or if the Company introduces new
Internet sites or television programs or enters into new business ventures that
are not favorably received by consumers, the Company will be unsuccessful in
promoting and maintaining its brands. Any expansion of the focus of the
Company's operations beyond providing Internet and television content related to
information technology and the Internet, including the expansion represented by
the launch of Snap!, creates a risk of diluting the Company's brands, confusing
consumers and decreasing the attractiveness of its audience to advertisers.
Furthermore, in order to attract and retain Internet users and television
viewers, and to promote and maintain the CNET and Snap! brands in response to
competitive pressures, the Company may find it necessary to increase its budgets
for Internet content and television programming or otherwise to increase
substantially its financial commitment to creating and maintaining a distinct
brand loyalty among consumers. If the Company is unable to provide high quality
content or otherwise fails to promote and maintain its brands, or if the Company
incurs excessive expenses in an attempt to improve its content or promote and
maintain its brands, the Company's business, financial condition and operating
results will be materially adversely affected.
There can be no assurance that any of the Company's recently developed
Internet sites or television programming will achieve market acceptance. The
Company's newly launched Internet sites could also divert users from the
Company's pre-existing sites and bring the Company into direct competition with
new competitors. In addition, any new Internet site or television program
launched by the Company that is not favorably received by
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consumers could damage the Company's reputation or its brands. Any effort by
the Company to launch new Internet sites or television programs will require
significant additional expenses and programming and editorial resources and
will strain the Company's management, financial and operational resources. A
failure by the Company to achieve and maintain market acceptance of existing
sites and television programs or an inability to generate revenues from new
sites or television programs sufficient to offset the associated costs could
have a material adverse effect on the Company's business, financial condition
or operating results.
DEPENDENCE ON KEY PERSONNEL.
The Company's performance is substantially dependent on the continued
services of Halsey M. Minor, Shelby W. Bonnie and the other members of its
senior management team, as well as on the Company's ability to retain and
motivate its other officers and key employees. The Company does not have "key
person" life insurance policies on any of its officers or other employees. The
Company's future success also depends on its continuing ability to attract and
retain highly qualified personnel. The production of content for the Internet
and television requires highly skilled writers and editors and personnel with
sophisticated technical expertise, and the number of such personnel available is
extremely limited. Competition for such personnel among companies with
operations involving computer technology, the Internet and television production
is intense, and there can be no assurance that the Company will be able to
retain its existing employees or that it will be able to attract, assimilate or
retain sufficiently qualified personnel in the future. In particular, the
Company has encountered difficulties in attracting qualified software developers
for its Internet sites and related technologies, and there can be no assurance
that the Company will be able to attract and retain such developers. The
inability to attract and retain the necessary technical, managerial, editorial
and sales personnel could have a material adverse effect on the Company's
business, financial condition or operating results.
RISKS OF TELEVISION DISTRIBUTION; DEPENDENCE ON USA NETWORKS.
The Company's television programming is currently carried primarily on the
USA Network and the Sci-Fi Channel, both of which are owned by USA Networks,
pursuant to an agreement between the Company and USA Networks, which expires on
June 30, 1999. There can be no assurance that the Company will be able to
obtain distribution for its television programming after June 30, 1999.
RISKS OF TECHNOLOGICAL CHANGE.
The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require that the Company continually improve the
performance, features and reliability of its Internet content, particularly in
response to competitive offerings. There can be no assurance that the Company
will be successful in responding quickly, cost effectively and sufficiently to
these developments. In addition, the widespread adoption of new Internet
technologies or standards could require substantial expenditures by the Company
to modify or adapt its Internet sites and services and could fundamentally
affect the character, viability and frequency of Internet-based advertising,
either of which could have a material adverse effect on the Company's business,
financial condition or operating results. New Internet services or enhancements
offered by the Company may contain design flaws or other defects that could
require costly modifications or result in a loss of consumer confidence, either
of which could have a material adverse effect on the Company's business,
financial condition or operating results. In addition, failure of any equipment
or software used by the Company to operate properly with regard to the Year 2000
and thereafter could require the Company to incur unanticipated expenses to
remedy any problems, which could have a material adverse effect on the Company's
business results of operations or financial condition.
DEPENDENCE ON THIRD PARTIES FOR INTERNET OPERATIONS.
The Company relies on the cooperation of owners and operators of other
Internet sites in connection with the operation of its Snap! service, which
aggregates content from a range of providers, as well as its software
downloading sites and its SEARCH.COM site. There can be no assurance that such
cooperation will be available
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on acceptable commercial terms or at all. The Company's ability to develop
original and compelling Internet content is also dependent on maintaining
relationships with and using products provided by third party vendors of
Internet development tools and technologies, such as Macromedia's Shockwave,
Microsoft's ActiveX, Progressive Networks' RealAudio and Sun Microsystems'
Java. The Company's ability to advertise on other Internet sites and the
willingness of the owners of such sites to direct users to the Company's
Internet sites through hypertext links are also critical to the success of
the Company's Internet operations. Other Internet sites, particularly search
engines, directories and other navigational tools managed by Internet service
providers and Web browser companies, significantly affect traffic to the
Company's technology sites. Developing and maintaining satisfactory
relationships with third parties could become more difficult and more
expensive as competition increases among Internet content providers. If the
Company is unable to develop and maintain satisfactory relationships with
such third parties on acceptable commercial terms, or if the Company's
competitors are better able to leverage such relationships, the Company's
business, financial condition and operating results will be materially
adversely affected.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS AND INVESTMENTS.
From time to time, the Company entertains new business opportunities and
ventures in a broad range of areas. Any decision by the Company to pursue a
significant business expansion or new business opportunity would likely require
a substantial investment of capital, which could have a material adverse effect
on the Company's financial condition and its ability to implement its existing
business strategy. Such an investment could also result in large and prolonged
operating losses for the Company. Further, the pursuit of expansion or new
business opportunities would place additional, substantial burdens on the
Company's management personnel and its financial and operational systems. There
can be no assurance that any new Internet site or service or other new business
venture would be developed in a cost effective or timely manner or would achieve
market acceptance. Any such venture that is not favorably received by consumers
could damage the Company's reputation or the CNET and Snap! brands. There can be
no assurance that any significant business expansion or new business opportunity
would ever be profitable, and a failure by the Company to recover the
substantial investment required could have a material adverse effect on the
Company's business, financial condition and operating results.
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; RISKS OF INFRINGEMENT.
The Company's success and ability to compete is dependent in part on the
protection of its original content for the Internet and television and on the
goodwill associated with its trademarks, trade names, service marks and other
proprietary rights. The Company relies on copyright laws to protect the original
content that it develops for the Internet and television, including its
editorial features and the various databases of information that are maintained
by the Company and made available through its Internet sites. In addition, the
Company relies on federal trademark laws to provide additional protection for
the appearance of its Internet sites. A substantial amount of uncertainty exists
concerning the application of copyright and trademark laws to the Internet, and
there can be no assurance that existing laws will provide adequate protection
for the Company's original content or its Internet domain names. In addition,
because copyright laws do not prohibit independent development of similar
content, there can be no assurance that copyright laws will provide any
competitive advantage to the Company.
The Company owns two Federal trademark registrations for the name "CNET"
for use in connection with certain software applications and consulting services
that it acquired by assignment. The Company has filed applications to register
a number of its trademarks and service marks, including the name "CNET" and the
related logo and the names CNET.COM, SHAREWARE.COM, SEARCH.COM and DOWNLOAD.COM,
but no federal registrations have been granted for such names or marks. The
Company also asserts common law protection on certain names and marks that it
has used in connection with its business activities. Two third parties objected
to the Company's application to register the service mark "c|net: the computer
network," and, in connection with one of these objections, the Company agreed
not to use such mark for any real estate or insurance related services. The
Company is also a defendant in pending litigation concerning its use of the name
"Snap! Online". There can be no assurance that the Company will be able to
secure registration for any of its marks. The Company has also invested
significant resources in purchasing Internet domain names for existing and
potential Internet sites from the registered owners of such names. There is a
substantial degree of uncertainty concerning the application of federal
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trademark law to the protection of Internet domain names, and there can be no
assurance that the Company will be entitled to use such domain names.
The Company relies on trade secret and copyright laws to protect the
proprietary technologies that it has developed to manage and improve its
Internet sites and advertising services, but there can be no assurance that such
laws will provide sufficient protection to the Company, that others will not
develop technologies that are similar or superior to the Company's, or that
third parties will not copy or otherwise obtain and use the Company's
technologies without authorization. The Company has filed patent applications
with respect to certain of its software systems, methods and related
technologies, but there can be no assurance that such applications will be
granted or that any future patents will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide a competitive
advantage for the Company. In addition, the Company relies on certain technology
licensed from third parties, and may be required to license additional
technology in the future, for use in managing its Internet sites and providing
related services to users and advertising customers. The Company's ability to
generate revenues from Internet commerce may also depend on data encryption and
authentication technologies that the Company may be required to license from
third parties. There can be no assurance that these third party technology
licenses will be available or will continue to be available to the Company on
acceptable commercial terms or at all. The inability to enter into and maintain
any of these technology licenses could have a material adverse effect on the
Company's business, financial condition or operating results.
Policing unauthorized use of the Company's proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford the Company little or
no effective protection of its intellectual property. In addition, there can be
no assurance that third parties will not bring claims of copyright or trademark
infringement against the Company or claim that the Company's use of certain
technologies violates a patent. The Company anticipates an increase in patent
infringement claims involving Internet-related technologies as the number of
products and competitors in this market grows and as related patents are issued.
Further, there can be no assurance that third parties will not claim that the
Company has misappropriated their creative ideas or formats or otherwise
infringed upon their proprietary rights in connection with its Internet content
or television programming. Any claims of infringement, with or without merit,
could be time consuming to defend, result in costly litigation, divert
management attention, require the Company to enter into costly royalty or
licensing arrangements or prevent the Company from using important technologies
or methods, any of which could have a material adverse effect on the Company's
business, financial condition or operating results.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTY.
Although there are currently few laws and regulations directly applicable
to the Internet, a range of new laws and regulations have been proposed, and
could be adopted, covering issues such as privacy, copyrights, obscene or
indecent communications and the pricing, characteristics and quality of Internet
products and services. During 1996, Congress enacted the Communications Decency
Act (the "CDA"), which, among other things, purported to impose criminal
penalties on anyone that distributes "obscene" or "indecent" material over the
Internet. A number of states have adopted or proposed similar legislation.
Although certain provisions of the CDA have been held to be unconstitutional,
the manner in which the CDA and similar existing or future federal and state
laws will ultimately be interpreted and enforced and their effect on the
Company's operations cannot yet be fully determined, such laws could subject the
Company to substantial liability. For example, the Company does not and cannot
practically screen the contents of the various Internet sites that are indexed
or accessible through the Company's directories and search engines. Restrictive
laws or regulations could also dampen the growth of the Internet generally and
decrease the acceptance of the Internet as an advertising medium, and could,
thereby, have a material adverse effect on the Company's business, financial
condition or operating results. Application to the Internet of existing laws and
regulations governing issues such as property ownership, libel and personal
privacy is also subject to substantial uncertainty.
The television industry is subject to extensive regulation at the federal,
state and local levels. In addition, legislative and regulatory proposals under
consideration by Congress and federal agencies may materially affect the
industry and the Company's ability to obtain distribution for its television
programming.
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There can be no assurance that current or new government laws and
regulations, or the application of existing laws and regulations, will not
subject the Company to significant liabilities, significantly dampen growth in
Internet usage, prevent the Company from obtaining distribution for its
television programming, prevent the Company from offering certain Internet
content or services or otherwise cause a material adverse effect on the
Company's business, financial condition or operating results.
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET.
Rapid growth in the use of and interest in the Internet is a recent
phenomenon, and there can be no assurance that acceptance and use of the
Internet will continue to develop or that a sufficient base of users will emerge
to support the Company's business. Revenues from the Company's Internet
operations will depend largely on the widespread acceptance and use of the
Internet as a source of information and entertainment and as a vehicle for
commerce in goods and services. The Internet may not be accepted as a viable
commercial medium for a number of reasons, including potentially inadequate
development of the necessary network infrastructure, timely development of
enabling technologies or commercial support for Internet-based advertising. To
the extent that the Internet continues to experience an increase in users, an
increase in frequency of use or an increase in the bandwidth requirements of
users, there can be no assurance that the Internet infrastructure will be able
to support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased government regulation. Changes in the pricing or
quality of, or insufficient availability of, telecommunications services to
support the Internet also could result in higher prices to end users or slower
response times and could adversely affect use of the Internet generally and of
the Company's Internet sites in particular. If use of the Internet does not
continue to grow or grows more slowly than expected, or if the Internet
infrastructure does not effectively support growth that may occur, the Company's
business, financial condition and operating results would be materially
adversely affected.
CAPACITY CONSTRAINTS AND SYSTEM DISRUPTIONS.
The satisfactory performance, reliability and availability of the Company's
Internet sites and its network infrastructure are critical to attracting
Internet users and maintaining relationships with advertising customers. The
Company's Internet advertising revenues are directly related to the number of
advertisements delivered by the Company to users. System interruptions that
result in the unavailability of the Company's Internet sites or slower response
times for users would reduce the number of advertisements delivered and reduce
the attractiveness of the Company's Internet sites to users and advertisers. The
Company has experienced periodic system interruptions in the past and believes
that such interruptions will continue to occur from time to time in the future.
Additionally, any substantial increase in traffic on the Company's Internet
sites may require the Company to expand and adapt its network infrastructure.
The Company's inability to add additional software and hardware to accommodate
increased traffic on its Internet sites may cause unanticipated system
disruptions and result in slower response times. There can be no assurance that
the Company will be able to expand its network infrastructure on a timely basis
to meet increased demand. Any increase in system interruptions or slower
response times resulting from the foregoing factors could have a material
adverse effect on the Company's business, financial condition or operating
results.
The Company's Internet and television operations are vulnerable to
interruption by fire, earthquake, power loss, telecommunications failure and
other events beyond the Company's control. All of the Company's servers and
television production equipment is currently located in San Francisco,
California, an area that is susceptible to earthquakes. Since launching its
first Internet site in June 1995, the Company has experienced system downtime
for limited periods of up to a few hours due to power loss and
telecommunications failures, and there can be no assurance that interruptions in
service will not materially adversely affect the Company's operations in the
future. The Company does not carry sufficient business interruption insurance to
compensate the Company for losses that may occur, and any losses or damages
incurred by the Company could have a material adverse effect on its business,
financial condition or operating results.
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LIABILITY FOR INTERNET AND TELEVISION CONTENT.
As a publisher and a distributor of content over the Internet and
television, the Company also faces potential liability for defamation,
negligence, copyright, patent or trademark infringement and other claims based
on the nature and content of the materials that it publishes or distributes.
Such claims have been brought, and sometimes successfully pressed, against
online services. In addition, the Company could be exposed to liability with
respect to material indexed in its Virtual Software Library or its various
search services. Although the Company carries general liability insurance, the
Company's insurance may not cover potential claims of this type or may not be
adequate to indemnify the Company for all liability that may be imposed. Any
imposition of liability that is not covered by insurance or is in excess of
insurance coverage could have a material adverse effect on the Company's
business, financial condition or operating results.
SECURITY RISKS.
A party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the Company's
Internet operations. The Company may be required to expend significant capital
and resources to protect against the threat of such security breaches or to
alleviate problems caused by such breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, particularly as a means of conducting commercial
transactions. To the extent that activities of the Company or third party
contractors involve the storage and transmission of proprietary information,
such as computer software or credit card numbers, security breaches could expose
the Company to a risk of loss or litigation and possible liability. There can be
no assurance that contractual provisions attempting to limit the Company's
liability in such areas will be successful or enforceable, or that other parties
will accept such contractual provisions as part of the Company's agreements.
DEPENDENCE ON LICENSED TECHNOLOGY.
The Company relies on certain technology licensed from third parties, and
there can be no assurance that these third party technology licenses will be
available or will continue to be available to the Company on acceptable
commercial terms or at all.
RECENT DEVELOPMENTS
On June 9, 1998, the Company announced an agreement with National
Broadcasting Company, Inc. ("NBC") under which the Company and an affiliate of
NBC have formed a joint venture to operate the Company's SNAP! Internet portal
service. The transaction closed on June 30, 1998. NBC acquired an initial
interest of 19% in the joint venture and received an option to increase its
ownership percentage to 60%. Also on June 30, 1998, NBC purchased 812,800 shares
of the Company's common stock for an aggregate purchase price of $26.2 million.
SELLING SHAREHOLDERS
The table below sets forth information with respect to the beneficial
ownership of the Company's Common Stock by the Selling Shareholders immediately
prior to this offering and as adjusted to reflect the sale of shares of Common
Stock pursuant to the offering. All information with respect to the beneficial
ownership has been furnished by the respective Selling Shareholders.
Percentages are based on the 15,477,292 shares of Common Stock outstanding on
May 31, 1998.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
---------------------------------------- ------------------------
Number of Percent of Shares to Number of Percent of
Name of Beneficial Owner Shares Class be Sold Shares Class
- ------------------------ --------- --------- --------- --------- ----------
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<S> <C> <C> <C> <C> <C>
Tonny Yu 269,758 1.74% 53,952 215,806 1.39%
Nora Yeung 269,758 1.74% 53,952 215,806 1.39%
VLG Investments 1998 5,450 .04% 5,450 0 0%
</TABLE>
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PLAN OF DISTRIBUTION
The sale of the Shares offered hereby may be effected from time to time
directly or by one or more broker-dealers or agents in one or more
transactions on the Nasdaq National Market, in negotiated transactions, or
through a combination of such methods of distribution, at prices related to
prevailing market prices or at negotiated prices.
In the event one or more broker-dealers or agents agree to sell the
Shares, they may do so by purchasing the Shares as principals or by selling
the Shares as agent for the Selling Shareholders. Any such broker-dealers
may receive compensation in the form of discounts, concessions, or
commissions from the Selling Shareholders or the purchasers of the Shares for
which such broker-dealer may act as agent or to whom they sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess
of customary compensation).
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage
in market-making activities with respect to the Company's Common Stock for
the applicable period under Regulation M of the Exchange Act prior to the
commencement of such distribution. In addition and without limiting the
foregoing, the Selling Shareholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M, which provisions may limit the timing of
purchases and sales of the Shares by the Selling Shareholders. All of the
foregoing may affect the marketability of the Shares.
In order to comply with certain states' securities laws, if applicable,
the Common Stock will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In certain states, the Common Stock may not
be sold unless the Common Stock has been registered or qualified for sale in
such state or an exemption from registration or qualification is available
and is complied with.
USE OF PROCEEDS
The Company will not receive any proceeds from the offering.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Hughes & Luce, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
INDEMNIFICATION
The Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws provide that officers and directors who are made
a party to or are threatened to be made a party to or is otherwise involved
in any action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was an officer or a director of the Company or is or was serving
at the request of the Company as a director or an officer of another entity
shall be indemnified and held harmless by the Company to the fullest extent
authorized by the Delaware General Corporation Law ("DGCL") against all
expense, liability, and loss reasonably incurred or suffered by such person
in connection therewith. The right to indemnification includes the right to
be paid by the Company for expenses incurred in defending any such proceeding
in advance of its final disposition. Officers and directors are not entitled
to indemnification if such persons did not meet the applicable standard of
conduct set forth in the DGCL for officers and directors.
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DGCL Section 145 provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Company) by reason of the
fact that he is or was a director, officer, agent or employee of the Company
or who serves or served at the Company's request as a director, officer,
agent, employee, partner or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding. The power to indemnify applies (a) if such person is successful
on the merits or otherwise in defense of any action, suit or proceeding, or
(b) if such person acted in good faith and in a manner he reasonably believed
to be in the best interest, or not opposed to the best interest, of the
Company and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The power to indemnify
applies to actions brought by or in the right of the Company as well, but
only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and
not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct in the
performance of his duties to the Company, unless the court believes that in
light of all the circumstances indemnification should apply.
The indemnification provisions contained in the Company's Certificate of
Incorporation are not exclusive of any other rights to which a person may be
entitled by law, agreement, vote of stockholders or disinterested directors
or otherwise. In addition, the Company maintains insurance on behalf of its
directors and executive officers insuring them against any liability asserted
against them in their capacities as directors or officers or arising out of
such status.
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
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PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration fee $11,079
Accounting fees and expenses 2,500*
Legal fees and expenses 5,000*
Miscellaneous expenses 5,000*
--------
Total: $23,579
- ------------
* Estimated
All of the above expenses will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws provide that officers and directors who are made
a party to or are threatened to be made a party to or is otherwise involved
in any action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was an officer or a director of the Company or is or was serving
at the request of the Company as a director or an officer of another entity
shall be indemnified and held harmless by the Company to the fullest extent
authorized by the Delaware General Corporation Law ("DGCL") against all
expense, liability, and loss reasonably incurred or suffered by such person
in connection therewith. The right to indemnification includes the right to
be paid by the Company for expenses incurred in defending any such proceeding
in advance of its final disposition. Officers and directors are not entitled
to indemnification if such persons did not meet the applicable standard of
conduct set forth in the DGCL for officers and directors.
DGCL Section 145 provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Company) by reason of the
fact that he is or was a director, officer, agent or employee of the Company
or who serves or served at the Company's request as a director, officer,
agent, employee, partner or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding. The power to indemnify applies (a) if such person is successful
on the merits or otherwise in defense of any action, suit or proceeding, or
(b) if such person acted in good faith and in a manner he reasonably believed
to be in the best interest, or not opposed to the best interest, of the
Company and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The power to indemnify
applies to actions brought by or in the right of the Company as well, but
only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and
not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct in the
performance of his duties to the Company, unless the court believes that in
light of all the circumstances indemnification should apply.
The indemnification provisions contained in the Company's Certificate of
Incorporation are not exclusive of any other rights to which a person may be
entitled by law, agreement, vote of stockholders or disinterested directors
or otherwise. In addition, the Company maintains insurance on behalf of its
directors and executive officers insuring them against any liability asserted
against them in their capacities as directors or officers or arising out of
such status.
ITEM 16. EXHIBITS.
The Exhibits to this Registration Statement are listed in the Index to
Exhibits on page II-6 of this Registration Statement, which Index is
incorporated herein by reference.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in the
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) and 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California,
on July 15, 1998.
CNET, INC.
By: *
--------------------------------
Shelby W. Bonnie,
Executive Vice President, Chief Operating
Officer and Secretary
By: /s/ Douglas N. Woodrum
--------------------------------
Douglas N. Woodrum,
Executive Vice President, Chief Financial
Officer and Chief Accounting Officer
Pursuant to the requirements of the Securities Act, this 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>
* Chairman of the Board, President July 15, 1998
- ----------------------- and Chief Executive Officer
Halsey M. Minor
* Director, Executive Vice President, July 15, 1998
- ----------------------- Chief Operating Officer and Secretary
Shelby W. Bonnie
/s/ Douglas N. Woodrum Director, Executive Vice President and July 15, 1998
- ----------------------- Chief Financial Officer
Douglas N. Woodrum
* Director July 15, 1998
- -----------------------
William D. Savoy
* Director July 15, 1998
- -----------------------
Eric Robison
* Director July 15, 1998
- -----------------------
Douglas Hamilton
* Director July 15, 1998
- -----------------------
Mitchell Kertzman
* Director July 15, 1998
- -----------------------
John C. Colligan
* By: /s/ Douglas N. Woodrum
------------------------------
Douglas N. Woodrum,
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Shelby W. Bonnie and Douglas N. Woodrum his or her true and lawful
attorney-in-fact and agent with full power of substitution and
resubstitution, for him or her and in his or her name, place, and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby grants to such
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, 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, this Registration
Statement or amendment thereto has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Halsey M. Minor Chairman of the Board, President June 11, 1998
- ----------------------- and Chief Executive Officer
Halsey M. Minor
/s/ Shelby W. Bonnie Director, Executive Vice President, June 11, 1998
- ----------------------- Chief Operating Officer and Secretary
Shelby W. Bonnie
/s/ Douglas N. Woodrum Director, Executive Vice President and June 11, 1998
- ----------------------- Chief Financial Officer
Douglas N. Woodrum
/s/ William D. Savoy Director June 11, 1998
- -----------------------
William D. Savoy
/s/ Eric Robison Director June 11, 1998
- -----------------------
Eric Robison
/s/ Douglas Hamilton Director June 11, 1998
- -----------------------
Douglas Hamilton
/s/ Mitchell Kertzman Director June 11, 1998
- -----------------------
Mitchell Kertzman
/s/ John C. Colligan Director June 11, 1998
- -----------------------
John C. Colligan
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- -------- -----------------------
<S> <C>
5.1 Opinion of Hughes & Luce, L.L.P.
23.1 Consent of Hughes & Luce, L.L.P. (included in Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP
24.1 Power of Attorney (included in Part II of this Registration Statement)
</TABLE>
II-5
<PAGE>
EXHIBITS 5.1 AND 23.1
[Hughes & Luce, L.L.P. Letterhead]
June 11, 1998
CNET, Inc.
150 Chestnut Street
San Francisco, California 94111
Ladies and Gentlemen:
We have acted as counsel to CNET, Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act"), of 113,354 shares (the "Shares") of
the Company's common stock, par value $.0001 per share, issued pursuant to
that certain Agreement and Plan of Merger dated as of March 7, 1998 by and
among the Company, CNET Acquisition Corp., U.Vision Inc. and the stockholders
of U.Vision Inc. (the "Agreement"), as described in the Registration
Statement of the Company on Form S-3 (the "Registration Statement") filed
with the Securities and Exchange Commission.
In rendering this opinion, we have examined and relied upon executed
originals, counterparts, or copies of such documents, records, and
certificates (including certificates of public officials and officers of the
Company) as we considered necessary or appropriate for enabling us to express
the opinions set forth herein. In all such examinations, we have assumed the
authenticity and completeness of all documents submitted to us as originals
and the conformity to originals and completeness of all documents submitted
to us as photostatic, conformed, notarized, or certified copies.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized and are validly issued, fully paid and nonassessable.
This opinion may be filed as an exhibit to the Registration Statement.
We also consent to the reference to this firm as having passed on the
validity of such Shares under the caption "Legal Matters" in the prospectus
that constitutes a part of the Registration Statement. In giving this
consent, we do not admit that we are included in the category of persons
whose consent is required under Section 7 of the Securities Act or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
HUGHES & LUCE, L.L.P.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the registration
statement.
KPMG PEAT MARWICK LLP
San Francisco, California
July 14, 1998
