<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
October 6, 1999 (July 23, 1999)
CNET, Inc.
----------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-20939 13-3696170
-------- ------- ----------
(STATE OR OTHER (COMMISSION FILE (IRS EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
150 Chestnut Street, San Francisco, California 94111
----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(415) 395-7800
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective July 23, 1999, CNET, Inc. (the "Registrant" or the "Company"),
acquired GDT S.A., a Swiss Societe Anonyme ("GDT"), for approximately $50
million in cash and stock. In connection with the acquisition, the Registrant
issued 429,185 shares of its common stock, having a value of approximately $20
million to certain shareholders of GDT. The number of shares issued was based
upon the average closing price of the Registrant's common stock on the Nasdaq
National Market, as reported in the West Coast Edition of the Wall Street
Journal for the five trading days immediately prior to July 23, 1999. In
addition, the Registrant paid the shareholders of GDT $30 million in cash
consideration. The purchase price was agreed upon by negotiation among the
parties. GDT is an Internet provider of technology product information that has
developed a database of product images, descriptions, and specifications. The
assets acquired include real property on which GDT's offices are located, in a
building partially leased by GDT to a commercial tenant. Part of this building
was leased by GDT to a commercial tenant. The Registrant intends to continue
these same uses. For more information with respect to the terms of the GDT
acquisition, reference is made to the Stock Purchase Agreement filed as Exhibit
2.1 to the Report on Form 8-K filed on August 6, 1999, which is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
<TABLE>
<S> <C>
Independent Auditor's Report....................................... 3
Balance Sheets as of December 31, 1998 and 1997.................... 4
Statement of Operations for the Years Ended
December 31, 1998 and 1997........................................ 5
Statement of Cash Flows for the Years Ended
December 31, 1998 and 1997........................................ 6
Notes to Financial Statements...................................... 7
(b) Proforma Financial Information.
Unaudited Pro Forma Condensed Combined
Statements of Operations for the Year Ended
December 31, 1998................................................ 19
Unaudited Pro Forma Condensed Combined
Balance Sheets................................................... 20
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements.................................... 21
</TABLE>
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
GDT S.A.
We have audited the accompanying balance sheets of GDT S.A. as of December 31,
1998 and 1997, and the related statements of operations and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America and Switzerland. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GDT S.A. as of December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the years in the two-year period ended December 31, 1998, in conformity with
generally accepted accounting principles in Switzerland.
Generally accepted accounting principles in Switzerland vary in certain
significant respects from generally accepted accounting principles in the United
States. The application of generally accepted accounting principles in the
United States would have affected net income (loss) for the years ended December
31, 1998 and 1997 and shareholders' deficit as of December 31, 1998 and 1997 to
the extent summarized in Note 14 to the financial statements.
KPMG Fides Peat
/s/ MARIO CASTELNUOVO /s/ WILLIAM D. LANEVILE
Lausanne, Switzerland
September 24, 1999
3
<PAGE> 4
GDT S.A.
Balance Sheets
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 9,633 253
Trade accounts receivable 155,289 --
Prepaid expenses 23,605 5,776
Other current assets 6,588 7,002
---------- ----------
Total current assets 195,115 13,031
Property, plant and equipment, net 1,712,512 1,547,101
Capitalized organization, research and development costs, net 470,773 --
Other long-term assets 13,143 12,980
---------- ----------
Total assets 2,391,543 1,573,112
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term borrowings 239,081 371,960
Trade accounts payable 177,230 38,674
Accrued expenses and other current liabilities 215,241 146,874
Current portion of long-term debt 27,000 27,000
Deferred income 144,544 --
Lease obligations, current 34,069 --
Due to related parties 297,524 105,723
---------- ----------
Total current liabilities 1,134,689 690,231
Long-term debt payable to banks 1,473,000 1,417,470
Lease obligations, long-term 54,516 --
---------- ----------
Total liabilities 2,662,205 2,107,701
========== ==========
SHAREHOLDERS' DEFICIT:
Common Shares, CHF 1,000 nominative value per share:
300 shares authorized, issued and outstanding
at December 31, 1998 and 1997 300,000 300,000
Required reserve 500 500
Accumulated deficit (571,162) (835,089)
---------- ----------
Total shareholders' deficit (270,662) (534,589)
---------- ----------
Commitments and contingencies
Total liabilities and shareholders' deficit 2,391,543 1,573,112
========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
GDT S.A.
Statements of Operations
Years ended December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Sales of services 43,536 --
Consulting revenues 71,518 --
---------- ----------
Total operating revenues 115,054 --
---------- ----------
Personnel costs 520,158 278,776
General and administrative 261,428 83,499
Consulting services 89,059 --
Depreciation and amortization 90,949 55,201
---------- ----------
Operating loss (846,540) (417,476)
---------- ----------
Other income (expense):
Gain on sale of treasury shares 1,051,578 --
Financial expenses (111,366) (108,919)
Building revenues, net 21,405 125,839
Capital contribution -- 108,720
Other 148,850 25,226
---------- ----------
Total other income, net 1,110,467 150,866
---------- ----------
Net income (loss) 263,927 (266,610)
========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
GDT S.A.
Statements of Cash Flows
Years ended December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 263,927 (266,610)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation of fixed assets 77,498 55,201
Amortization of capitalized development costs 13,451 --
Gain on sale of treasury shares (1,051,578) --
Gain on sale of acquired assets, net -- (36,618)
Capital contribution -- (108,720)
Capitalized development costs (484,224) --
Increase (decrease) in cash resulting from changes in:
Prepaid and other current assets (17,415) 16,959
Trade accounts payable 138,556 3,901
Trade accounts receivable (155,289) --
Accruals and other liabilities 301,496 146,874
------------ ------------
Net cash used in operating activities (913,578) (189,013)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (242,909) (69,819)
Change in other long-term assets, net (163) (12,980)
------------ ------------
Net cash used in investing activities (243,072) (82,799)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from related parties 191,801 105,723
Repayment of long-term debt -- (151,261)
Proceeds from long-term debt 55,530 --
Change in short-term borrowings (132,879) 208,883
Contribution of capital 108,720
Purchase of treasury shares (140,000) --
Issuance of treasury shares 1,191,578 --
------------ ------------
Net cash provided by financing activities 1,166,030 272,065
------------ ------------
Net increase in cash and cash equivalents 9,380 253
Cash and cash equivalents:
Beginning of period 253 --
------------ ------------
End of period 9,633 253
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest 111,366 108,919
Income taxes -- --
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
1. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
GDT S.A. (the Company or GDT) is established in Switzerland and has
developed a database of product images, descriptions, and
specifications and is an Internet provider of technology product
information.
PRINCIPLES OF ACCOUNTING
The accompanying financial statements have been prepared in
accordance with the Swiss Code of Obligations and the Swiss
Accounting and Reporting Recommendations Committee guidelines (Swiss
GAAP). There are significant differences between these principles and
accounting principles generally accepted in the United States (US
GAAP). The impacts of these significant differences are discussed in
Note 14.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include liquid investments with original
maturity dates of three months or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation. Fixed assets under capital leases are stated at the
present value of minimum lease payments. Depreciation is charged on a
straight-line basis over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Buildings and improvements 40 years
Furniture and equipment 8 years
Personal computers and purchased computer software 3 to 4 years
</TABLE>
INCOME TAXES
The Company files tax returns in the Canton of Vaud, Switzerland.
Income taxes are calculated based on taxable income of the period and
are accrued in the same period as the revenues and expenses to which
they relate.
7
<PAGE> 8
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred income taxes are determined using the liability method
whereby deferred income tax is recognized on temporary differences.
Temporary differences between the carrying values of assets or
liabilities used for tax purposes and those used for financial
reporting purposes arise in one period and reverse in one or more
subsequent periods. Management believes that the realization of any
tax benefits is uncertain, and, therefore, deferred tax assets are
not recognized.
RESEARCH AND DEVELOPMENT
During 1998, certain research and development costs have been
capitalized, and are being amortized over a period of three years.
These capitalized costs, amounting to CHF 484,224 have been included
in the 1998 statement of operations as a reduction of personnel and
general and administrative costs. Development costs incurred in 1997
have been included in the statement of operations.
CURRENCY TRANSLATION AND TRANSACTIONS
The reporting and functional currency for the financial statements of
the Company is the Swiss franc (CHF). Foreign-currency denominated
assets and liabilities are included in the financial statements by
translating the assets and liabilities into the reporting currency at
the exchange rates applicable at the end of the reporting period. The
statements of operations and cash flows are translated at the average
exchange rates during the year. Currency translation and transaction
gains or losses arising from transactions in currencies other than
the functional currency are included in the statement of operations.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is
determined using the weighted average cost method.
REVENUE RECOGNITION
License revenue is recognized at the time of contract signing.
Maintenance contract revenue is deferred, and recognized ratably over
the coverage period. Consulting revenue is recognized at the time
services are delivered and when no contractual terms remain
unsatisfied. License and maintenance contract revenues are recorded
under "Sales of services" on the statements of operations.
TREASURY STOCK TRANSACTIONS
The Company records the results of purchases and sales of its own
stock directly in the statement of operations.
8
<PAGE> 9
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, as well as disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results may differ from those estimates.
3. TRADE ACCOUNTS RECEIVABLE
The Company has experienced no losses on trade accounts receivable.
4. TRANSACTIONS AND BALANCES WITH RELATED PARTIES
Amounts due to related parties consist of short-term financing
arrangements with members of executive management. As of December 31,
1998, the interest rates on these related party borrowings were 6%.
Interest expense incurred on borrowings from related parties for the
year ended December 31, 1998 was CHF 11,709. Loans during 1997 were
interest free.
Certain members of executive management also serve on the Board of
Directors. Compensation for their services is included currently in
the statement of operations in the same period as service.
9
<PAGE> 10
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
5. OTHER CURRENT ASSETS
Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Inventories 1,444 3,000
Other current assets 5,144 4,002
-------- -------
Total other current assets 6,588 7,002
======== =======
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
Land 228,900 228,900
Building and improvements 1,736,670 1,736,670
Furniture and equipment 48,469 48,469
Computer hardware and software 265,339 22,430
------------ -----------
Property, plant and equipment, at cost 2,279,378 2,036,469
------------ -----------
Less: accumulated depreciation and amortization (566,866) (489,368)
------------ -----------
Total property, plant and equipment, net 1,712,512 1,547,101
============ ===========
</TABLE>
Assets under capital lease of CHF 80,686 and CHF 0 at December 31,
1998 and 1997, respectively, are included in "Computer hardware and
software". Amortization expense of leased assets of CHF 8,145 is
included the 1998 statement of operations under "Depreciation and
amortization".
10
<PAGE> 11
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
7. LONG-TERM AND OTHER DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
First mortgage, Cantonal Bank of Vaud, 5%,
Due in 2098 1,200,000 1,176,970
Second mortgage, Cantonal Bank of Vaud, 6%,
Due in 2018 300,000 267,500
----------- -----------
Total long-term debt 1,500,000 1,444,470
=========== ===========
</TABLE>
Maturities of long-term debt outstanding at December 31, 1998 for the
next five years and thereafter are as follows:
<TABLE>
<S> <C>
1999 27,000
2000 27,000
2001 27,000
2002 27,000
2003 27,000
Thereafter 1,365,000
-----------
Total long-term debt 1,500,000
Less current portion (27,000)
-----------
Non-current long-term debt 1,473,000
===========
</TABLE>
Short-term borrowings as of December 31, 1998 and 1997 are comprised
primarily of short-term loans against lines of credit, generally
maturing in less than three months. These short-term loans were used
to finance the Company's operations and had interest rates of between
7.0% and 7.25% At December 31, 1998 and 1997, the Company had fully
utilized these borrowing facilities.
11
<PAGE> 12
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
8. SHAREHOLDERS' DEFICIT
COMMON SHARES
The Board of Directors of the Company has authorized the issuance of
300 shares of common stock, nominal value of CHF 1,000 per share.
During 1998, the Company purchased 140 shares from existing
shareholders for a total purchase price of CHF140,000, and
immediately resold them to new shareholders. The net gain on this
related party transaction of CHF 1,051,578 is recorded in the 1998
statement of operations.
9. CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Required Accumulated
Shares Reserve Deficit Total
<S> <C> <C> <C> <C>
Balance at January 1, 1997 300,000 500 (568,479) (267,979)
Net loss -- -- (266,610) (266,610)
------------ ------------ ------------ ------------
Balance at December 31, 1997 300,000 500 (835,089) (534,589)
Net income -- -- 263,927 263,927
------------ ------------ ------------ ------------
Balance at December 31, 1998 300,000 500 (571,162) (270,662)
============ ============ ============ ============
</TABLE>
12
<PAGE> 13
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
10. BENEFIT PLANS
The Company contributes to a pension plan for the benefit of its
employees. This plan is maintained by an insurance company, and
provides for benefit payments in the event of covered individual
death, or invalidity.
Company payments to the plan are determined and funded annually based
upon the terms of the plan. Contributions under this plan amounted to
CHF 16,809 and CHF 13,241, in 1998 and 1997, respectively.
11. INCOME AND OTHER TAXES
The Company has incurred net operating losses during the previous two
years, and as a result has paid no income taxes. In light of the
uncertainty surrounding future profitability, the Company has not
recorded any assets related to the tax benefit of these losses.
At December 31, 1998, the Company had cumulative net operating loss
carry forwards for Swiss federal income tax purposes in Switzerland
amounting to CHF 39,535. These cumulative net operating loss carry
forwards expire between 2001 and 2002.
The Company is subject to a capital tax, and various other non-income
taxes. These are recognized as incurred, and are included in other
non-operating expenses in the statement of operations.
12. NON OPERATING INCOME (EXPENSE)
The Company's principal tangible asset is the building where its
offices are located. The company leases 60% of the building to
tenants at a monthly rate of CHF 6,445. Revenues, and expenses
directly related to the leased space are recorded net in the
statement of operations under "Building revenues, net". As the
Company expands, it expects to fully use the building. The Company
does not consider itself to be in the business of real estate.
13
<PAGE> 14
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
12. NON OPERATING INCOME (EXPENSE) (CONTINUED)
During 1997, one of the principal shareholders made a capital
contribution of CHF 108,720, for which he received no additional
shares. This amount is included in the 1997 statement of operations
under "Capital contribution".
During 1997, the Company received physical assets from a related
party in lieu of rent payments. Due to the uncertainty surrounding
their marketability, they were recorded in the balance sheet at no
cost. These assets were subsequently sold, realizing gains of CHF
151,375 and CHF 36,618 in 1998 and 1997, respectively, which are
included in the statements of operations under the caption "Other".
13. COMMITMENTS AND CONTINGENCIES
CAPITAL LEASES
The Company leases certain of its equipment under capital leases. The
future minimum lease payments under capital leases are as follows at
December 31, 1998:
<TABLE>
<S> <C>
Within one year 34,608
Within two years 30,275
Within three years 25,319
------
Total 90,202
------
Less amount representing interest (1,617)
88,585
======
</TABLE>
Amortization of assets under capital leases in included in
"Depreciation and amortization" in the statement of operations.
LEGAL
The Company's management is not aware of any legal proceedings
against it incidental to its normal course of business.
14
<PAGE> 15
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
14. SWISS GAAP TO U.S. GAAP RECONCILIATION
The audited financial statements have been prepared and are presented
in accordance with Swiss GAAP, which differs in certain significant
respects from generally accepted accounting principles in the United
States (U.S. GAAP).
The following is a summary of significant adjustments to net income
(loss) and shareholders' deficit for GDT S.A. that would be required
if U.S. GAAP were applied instead of Swiss GAAP:
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Net income (loss) as reported in the
statements of operations under Swiss GAAP 263,927 (266,610)
Adjustments to conform with U.S. GAAP:
Treasury stock transactions (1,051,578) --
Deferred revenues (29,056) --
Gain on non-monetary transaction (151,375) 151,375
Capitalized organization, research and development costs (470,773) --
Capital contribution -- (108,720)
---------- --------
Net loss under U.S. GAAP (1,136,105) (223,955)
========== ========
</TABLE>
15
<PAGE> 16
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
14. SWISS GAAP TO U.S. GAAP RECONCILIATION (CONTINUED)
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Shareholders' deficit as reported in the balance sheets
under Swiss GAAP (270,662) (534,589)
Adjustments to conform with U.S. GAAP:
Gain on non-monetary transaction 151,375
Capitalized organization, research, and development costs (470,773) --
Deferred revenues (29,056) --
-------- --------
Shareholders' deficit in accordance with U.S. GAAP (770,491) (383,214)
======== ========
</TABLE>
TREASURY STOCK TRANSACTIONS
Under Swiss GAAP, companies are allowed to record the results of
purchases and sales of their own stock directly in the statement of
operations. Under U.S. GAAP, treasury stock purchases are to be
recorded at cost and are shown as a deduction from shareholder's
equity. Sales of treasury stock are recorded directly in the
statement of shareholder's equity and any gains or losses are
recorded in additional paid-in capital.
DEFERRED REVENUES
Sales of licenses are allowed to be recorded as revenue under Swiss
GAAP at the moment of commitment by the purchaser. Under US GAAP,
these revenues are to be recognized over the license period. In the
case of licenses, revenue would be recognized over the license
period, generally twelve months.
16
<PAGE> 17
GDT S.A.
Notes to Financial Statements
December 31, 1998 and 1997
(stated in Swiss Francs)
- --------------------------------------------------------------------------------
14. SWISS GAAP TO U.S. GAAP RECONCILIATION (CONTINUED)
CAPITAL CONTRIBUTIONS
Under Swiss GAAP, contributions by shareholders may be recorded
directly in the statement of operations. Under US GAAP, capital
contributions are to be recorded in the statement of shareholders'
equity.
CAPITALIZED ORGANIZATION, RESEARCH AND DEVELOPMENT COSTS
Under Swiss GAAP, certain organization, research and development
costs are allowed to be capitalized, and amortized over their
expected useful lives. Under US GAAP, these costs are expensed as
incurred.
NON-MONETARY TRANSACTIONS
Under Swiss GAAP, gains on non-monetary transactions are recorded
when realized. Under US GAAP, exchanges on non-monetary assets are
recorded at their fair values, based on the most readily determinable
asset valuations.
COMPREHENSIVE INCOME (LOSS)
The Company has no significant items of comprehensive income (loss),
and consequently, comprehensive income (loss) is the same as net
income (loss) for all periods presented.
17
<PAGE> 18
CNET AND GDT S.A. -- UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements,
including the notes thereto, give effect to the July 23, 1999 acquisition of GDT
S.A. ("GDT") by CNET for approximately $50 million in cash and stock in a
transaction accounted for as a purchase. In connection with the acquisition,
CNET paid $30 million in cash and issued 429,185 shares of its common stock,
having a value of approximately $20 million, to the shareholders of GDT. The
condensed combined financial statements are based on and are qualified in their
entirely by reference to, and should be read in conjunction with, the
consolidated financial statements of CNET, as previously filed, and GDT,
included herein.
The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1998 gives effect to the acquisition of GDT as if it had
occurred on January 1, 1998. The unaudited pro forma condensed combined balance
sheet as of December 31, 1998 give effect to the acquisition of GDT as if the
acquisition had occurred on that date.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred had the acquisition been consummated at January 1,
1998, nor is it necessarily indicative of future operating results or financial
position.
18
<PAGE> 19
CNET AND GDT
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CNET GDT Pro Forma Pro Forma
Adjustments Combined
<S> <C> <C> <C> <C>
Revenues
Internet Revenue 49,374,195 59,425 49,433,620
Television 7,057,885 7,057,885
----------- --------- -----------
Total operating revenue 56,432,080 59,425 56,491,505
----------- --------- -----------
Cost of revenue
Internet 23,291,215 23,291,215
Television 6,741,133 0 6,741,133
----------- --------- -----------
Total cost of revenue 30,032,348 0 30,032,348
Gross Profit (Deficit) 26,399,732 59,425 26,459,157
----------- --------- -----------
Operating expenses
Sales and marketing 14,530,355 0 14,530,355
Development 3,454,387 700,830 4,155,217
General and administrative 6,806,886 288,935 16,853,000 (e) 23,948,821
Unusual items (921,839) (921,839)
----------- --------- ----------- -----------
Total operating expenses 23,869,789 989,765 16,853,000 41,712,554
----------- --------- ----------- -----------
Operating income (loss) 2,529,943 (930,340) (16,853,000) (15,253,397)
----------- --------- ----------- -----------
Other income (expenses)
Equity losses (11,795,944) (11,795,944)
Gain on sale of equity investment 10,450,342 10,450,342
Interest income (expense), net 1,415,616 (76,954) 1,338,662
Other 13,046 13,046
----------- --------- -----------
Total other income, net 70,014 (63,908) 6,106
----------- --------- -----------
Net income (loss) 2,599,957 (994,248) (16,853,000) (15,247,291)
=========== ========= =========== ===========
Basic net income (loss) per share 0.08 (0.47)
Diluted net income (loss) per share 0.07 (0.47)
Shares used in calculating basic per share data 31,932,530 429,185 32,361,715
Shares used in calculating diluted per share data 34,852,938 429,185 32,361,715
</TABLE>
19
<PAGE> 20
CNET AND GDT
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
CNET GDT Pro Forma Pro Forma
Adjustments Combined
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents 51,533,655 6,986 (30,000,000) (a) 21,540,641
Trade accounts receivable 15,074,639 112,616 15,187,255
Accounts receivable, related party 1,710,745 0 1,710,745
Other current assets 1,704,765 21,896 1,726,661
Restricted cash 945,330 0 945,330
----------- --------- -----------
Total current assets 70,969,134 141,498 71,110,632
----------- --------- -----------
Property, plant, and equipment, net 15,325,512 1,241,914 16,567,426
Other long-term assets 2,059,806 9,531 50,559,000 (b) 52,628,337
----------- --------- ----------- -----------
Total assets 88,354,452 1,392,943 20,559,000 110,306,395
=========== ========= =========== ===========
Liabilities and stockholders' equity
Current liabilities
Trade accounts payable 3,476,654 128,527 3,605,181
Accrued and other liabilities 6,592,819 455,371 7,048,190
Current portion of long-term debt 1,112,512 44,287 1,156,799
Due to related parties 0 215,764 215,764
----------- --------- -----------
Total current liabilities 11,181,985 843,949 12,025,934
----------- --------- -----------
Long-term debt 569,245 1,107,754 1,676,999
----------- --------- -----------
Total liabilities 11,751,230 1,951,703 13,702,933
----------- --------- -----------
Stockholders' equity
Common stock 3,412 217,923 (217,923) (c) 3,455
43 (d)
Additional paid in capital 127,770,245 20,000,197 (d) 147,770,442
Accumulated deficit (51,170,435) (776,683) 776,683 (c) (51,170,435)
----------- --------- ----------- -----------
Total shareholders' equity 76,603,222 (558,760) 20,559,000 96,603,462
----------- --------- ----------- -----------
Total liabilities and shareholders' equity 88,354,452 1,392,943 20,559,000 110,306,395
=========== ========= =========== ===========
</TABLE>
20
<PAGE> 21
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1998 gives effect to the acquisition of GDT as if it had
occurred on January 1, 1998. The unaudited pro forma condensed combined balance
sheet as of December 31, 1998 gives effect to the acquisition of GDT as if the
acquisition had occurred on that date. The condensed combined financial
statements, including the notes thereto, should be read in conjunction with the
consolidated financial statements of CNET, as previously filed, and GDT,
included herein.
The GDT financial statements have been converted to US GAAP and certain
reclassifications have been made to conform to CNET's account classifications.
The balance sheet has been converted using a rate of 1.38 Swiss francs to 1.0 US
Dollar as of December 31, 1998. The income statement has been converted from
Swiss francs to US Dollars at an average rate of 1.45 Swiss franc to 1.0 US
Dollar for the year ended December 31, 1998.
(2) Pro Forma Adjustments
(a) Reflects the cash paid by CNET for the acquisition of GDT.
(b) Reflects $50.559 million of the purchase price that is allocated to
goodwill, which will be amortized over 3 years.
The purchase price was allocated based on the estimated fair value of the
acquired assets and liabilities. The allocation is as follows (in thousands):
<TABLE>
<S> <C>
Assets Acquired
Cash $ 7
Accounts receivable, net 113
Property, plant, and equipment 1,242
Other assets 31
Liabilities Assumed (1,952)
-------
Net Liabilities Assumed 559
Purchase Price 50,000
-------
Goodwill 50,559
</TABLE>
(c) Reflects the elimination of GDT common stock and accumulated deficit.
(d) Reflects the 429,185 shares of CNET's common stock issued for the
acquisition of GDT.
(e) Reflects one year amortization of goodwill.
(3) Pro Forma Loss Per Share
The pro forma basic and diluted net loss per share calculation assumes that
the 429,185 shares of CNET's common stock issued in the acquisition were
outstanding for the entire year.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 6, 1999 CNET, INC.
By: /s/ DOUGLAS N. WOODRUM
-------------------------------------
Douglas N. Woodrum
Chief Financial Officer
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
23.1 Consent of KPMG Fides Peat
</TABLE>
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
GDT SA:
We consent to incorporation by reference in the registration statement on Forms
S-8 (File Nos. 333-07667, 333-34491, 333-67325 and 333-78247) and Forms S-3
(File Nos. 333-46203, 333-56633, 333-73023, 333-77065, 333-77757, 333-78585 and
333-85513) of CNET, Inc. of our report dated September 24, 1999, relating to
balance sheets of GDT S.A. as of December 31, 1998 and 1997, and the related
statements of operations, and cash flows for each of the years in the two-year
period ended December 31, 1998, which report appears in the Form 8-K of CNET,
Inc. dated October 6, 1999.
KPMG Fides Peat
/s/ MARIO CASTELNUOVO /s/ WILLIAM D LANEVILLE
- ---------------------- -----------------------
Lausanne, Switzerland
October 5, 1999
