<PAGE>
As filed with the Securities and Exchange Commission on June 11, 1998.
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
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
------------------------------- -------------------
(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)
--------------
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)
--------------
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: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.0001 par value 113,354 $33.13(2) $3,755,419(2) $1,108
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated pursuant to Rule 457(c) of the Securities Act of 1933, as
amended, based upon the average of the high and low prices per share of the
common stock of CNET, Inc. on June 8, 1998, as reported by the Nasdaq
National Market.
--------------------------------
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.
================================================================================
<PAGE>
CNET, INC.
113,354 SHARES
COMMON STOCK
--------------------------------
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 June 8, 1998, the last sale price of the Common Stock, as reported
on the Nasdaq National Market, was $33.00 per share.
--------------------------------
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.
--------------------------------
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.
--------------------------------
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.
--------------------------------
The date of this Prospectus is June 11, 1998.
<PAGE>
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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<PAGE>
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) report on Form 8-K dated
May 22, 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.
-3-
<PAGE>
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,
1998, 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.
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
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<PAGE>
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 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.
-5-
<PAGE>
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 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
-6-
<PAGE>
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, 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.
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<PAGE>
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 has 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 development expenses and 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 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,
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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 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.
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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 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
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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
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
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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.
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
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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.
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.
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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 NBC will form a
joint venture to operate the Company's Snap! Internet portal service ("Snap!").
NBC will acquire an initial interest of 19% in the joint venture and will
receive an option to increase its ownership percentage to 60%. NBC also agreed
to purchase 812,800 shares of the Company's common stock for an aggregate
purchase price of approximately $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>
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
- ------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Tonny Yu 269,576 1.74% 53,915 215,661 1.39%
Nora Yeung 269,939 1.74% 53,988 215,951 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.
<TABLE>
<S> <C>
Registration fee $ 1,108
Accounting fees and expenses 2,500*
Legal fees and expenses 5,000*
Miscellaneous expenses 5,000*
-------
Total: $13,608
_______________
* Estimated
</TABLE>
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
II-2
<PAGE>
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-3
<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 June 11, 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>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, President June 11, 1998
- ----------------------- and Chief Executive Officer
Halsey M. Minor
* 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
* Director June 11, 1998
- -----------------------
William D. Savoy
* Director June 11, 1998
- -----------------------
Mitchell Kertzman
</TABLE>
* By: /s/ Douglas N. Woodrum
---------------------------
Douglas N. Woodrum,
Attorney-in-Fact
II-4
<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>
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/ Mitchell Kertzman Director June 11, 1998
- ----------------------
Mitchell Kertzman
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
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-6
<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 May 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
June 11, 1998
