<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-22047
GO2NET, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 91-1710182
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
999 Third Avenue, Suite 4700
Seattle, WA 98104
----------------------------------------
(Address of principal executive offices)
(206) 447-1595
----------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes X No
----- -----
As of August 13, 1997, there were 4,497,850 shares of the Registrant's common
stock outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION NUMBER
<S> <C>
ITEM 1: Financial Statements
Condensed Balance Sheets as of June 30, 1997
and September 30, 1996....................................................... 3
Condensed Statements of Operations for the three
months ended June 30, 1997, the three months ended
June 30, 1996, the nine months ended June 30, 1997
and the period from Inception (February 12, 1996)
through June 30, 1996........................................................ 4
Condensed Statements of Cash Flows for the nine
months ended June 30, 1997
and the period from Inception (February 12, 1996) through
June 30, 1996................................................................ 5
Notes to Financial Statements......................................................... 6
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 8
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings..................................................................... 12
ITEM 2: Changes in Securities................................................................. 12
ITEM 3: Defaults Upon Senior Securities....................................................... 12
ITEM 4: Submission of Matters to a Vote of Security Shareholders.............................. 12
ITEM 5: Other Information..................................................................... 12
ITEM 6: Exhibits and Reports on Form 8-K...................................................... 12
SIGNATURES............................................................................ 13
Exhibit 11 Calculation of Shares Used in Determining Net Loss Per Share.......................... 14
Exhibit 27 Financial Data Schedule............................................................... 15
</TABLE>
2
<PAGE> 3
GO2NET, INC.
<TABLE>
CONDENSED BALANCE SHEETS
<CAPTION>
June 30, September 30,
1997 1996
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................................... $12,202,759 $ 865,742
Prepaid expenses ............................................................. 157,134 8,216
Receivables .................................................................. 32,502 -
----------- ----------
Total current assets ................................................. 12,392,395 873,958
Property and equipment, net .................................................... 371,230 179,328
Other assets ................................................................... 147,070 12,955
Lease deposit .................................................................. 303,909 -
----------- ----------
Total assets ......................................................... $13,214,604 $1,066,241
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued expenses ............................................................. $ 261,850 $ 45,098
Short term borrowing ......................................................... 59,834 -
----------- ----------
Total current liabilities ............................................ 321,684 45,098
Shareholders' equity:
9% Cumulative Redeemable Convertible Preferred Stock,
$1.00 par value, authorized 1,000,000 shares; no shares
and 927,500 shares outstanding ............................................ - 1,505,000
Common stock, $0.01 par value, authorized 9,000,000 shares;
Outstanding 4,497,850 and 1,619,100 shares ................................ 14,530,224 13,900
Less 9% Cumulative Redeemable Convertible Preferred Stock
subscriptions receivable .................................................. - (80,000)
Accumulated deficit .......................................................... (1,637,304) (417,757)
----------- ----------
Total shareholders' equity ........................................... 12,892,920 1,021,143
----------- ----------
Total liabilities and shareholders' equity ........................... $13,214,604 $1,066,241
=========== ==========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 4
GO2NET, INC.
<TABLE>
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Three Months Nine Months Period from
Ended Ended Ended Inception Through
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -----------------
<S> <C> <C>
Revenue ............................................ $ 149,590 - $ 149,590 -
Cost of revenue ................................... 90,978 - 90,978 -
---------- ---------- ----------- ----------
Gross profit ...................................... 58,612 - 58,612 -
Operating expenses:
Advertising and marketing ....................... $ 16,118 $ 1,203 $ 38,274 $ 1,203
Product development .............................. 233,689 16,417 546,348 16,417
General and administrative ....................... 358,900 102,034 808,164 117,284
---------- ---------- ----------- ----------
Total operating expenses ...................... 608,707 119,654 1,392,786 134,904
Loss from operations ............................... (550,095) (119,654) (1,334,174) (134,094)
Interest income, net ............................... 106,426 4,093 114,627 4,093
---------- ---------- ----------- ----------
Net loss ........................................... $ (443,669) $ (115,561) $(1,219,547) $ (130,811)
========== ========== =========== ==========
Net loss per share ................................. $ (.11) $ (.04) $ (.39) $ (.05)
Common shares and common
equivalent shares used to calculate
net loss per share ................................. 4,017,850 2,638,350 3,106,695 2,638,350
</TABLE>
See notes to condensed financial statements.
4
<PAGE> 5
GO2NET, INC.
<TABLE>
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Period from
Ended Inception Through
June 30, 1997 June 30, 1996
------------- -----------------
<S> <C> <C>
Operating activities:
Net loss ................................................. $(1,219,547) $ (130,811)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization ............................ 71,192 705
Stock compensation ...................................... 28,000 -
Changes in working capital:
Prepaid expenses ......................................... (148,918) (8,216)
Receivables .............................................. (32,502) -
Other assets ............................................. (3,131) (1,408)
Lease deposit ............................................ (303,909) -
Accrued expenses ......................................... 216,752 17,479
----------- ----------
Net cash used in operating activities ...................... (1,392,063) (122,251)
Investing activities:
Acquisition of property and equipment .................... (249,523) (129,857)
Other assets ............................................. (144,556) (6,536)
----------- ----------
Net cash used in investing activities ...................... (394,079) (136,393)
Financing activities:
Other .................................................... (463) -
Issuance of Common Stock, net ........................... 12,983,788 13,750
Borrowing on Line of Credit .............................. 500,000 -
Payment on Line of Credit ................................ (500,000) -
Short term borrowing ..................................... 59,834 -
Proceeds from issuance of 9% Cumulative
Redeemable Convertible Preferred Stock ................ 80,000 1,350,000
----------- ----------
Net cash provided by financing activities .................. 13,123,159 1,363,750
Net increase in cash and cash
equivalents ................................................ 11,337,017 1,105,106
Cash and cash equivalents at beginning
of period .................................................. 865,742 -
----------- ----------
Cash and cash equivalents at end of period ................. $12,202,759 $1,105,106
=========== ==========
</TABLE>
See notes to condensed financial statements.
5
<PAGE> 6
GO2NET, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND BASIS OF PRESENTATION
go2net, Inc. is an interactive technology company that provides through
its Internet site <URL: http://www.go2net.com/>: MetaCrawler <URL:
http://www.metacrawler.com/>, a search/index guide that combines various
existing search/index guides into one guide (a "metasearch engine"); go2business
<URL: http://www.go2net.com/business/>, which offers proprietary articles,
portfolio tracking tools, company research and news relating to business and
finance; go2vision <URL: http://www.go2net.com/vision/>, a Java-based desktop
window that allows users to obtain stock quotes, sports scores and search the
World Wide Web while simultaneously accessing other Internet sites or running
other applications; and, since July 15, 1997, PlaySite <URL:
http://www.playsite.com/>, a Java-based multi-user games network. The Company
focuses on utilizing innovative technologies to deliver its content and to
enhance the attractiveness and utility of its product offerings.
The unaudited condensed financial statements included herein have been
prepared by the Company in accordance with generally accepted accounting
principles and reflect all adjustments, consisting only of normal recurring
adjustments, which in the opinion of management are necessary to fairly state
the Company's financial position, result of operations and cash flows for the
periods presented. These financial statements should be read in conjunction with
the Company's audited financial statements as included in the Company's
Registration Statement on Form S-1 which was declared effective by the
Securities and Exchange Commission on April 22, 1997 (Reg. No. 333-19051). The
results of operations for the period ended June 30, 1997 are not necessarily
indicative of the results to be expected for any subsequent quarter or for the
entire fiscal year ending September 30, 1997.
2. INITIAL PUBLIC OFFERING
In April 1997, the Company completed its initial public offering and
issued 1,600,000 shares of its common stock to the public at a price of $8.00
per share. The Company received approximately $11.1 million of cash, net of
underwriting discounts, commissions and other offering costs. On May 13, 1997,
pursuant to the exercise of an over-allotment option granted to the underwriters
of the Company's initial public offering, the Company issued an additional
240,000 shares of its common stock at a price of $8.00 per share. The Company
received an additional $1.7 million of cash, net of underwriting discounts and
commissions.
3. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Loss Per Share
Net loss per share is computed using the weighted average number of
shares of common stock and preferred stock outstanding during such period,
including shares of common stock issued after such period. Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, 9% Cumulative
Convertible Redeemable Preferred Stock and common stock issued by the Company at
prices below the assumed public offering price during the twelve-month period
prior to the proposed offering have been included in the calculation as if they
were outstanding for all periods prior to the closing of the initial public
offering, regardless of whether they are antidilutive (using the treasury stock
method at the public offering price of $8.00).
In February 1997, the Financial Standards Board issued Statement No.
128, "Earnings per Share" ("Statement 128"), which the Company will be required
to adopt for interim and annual periods beginning after December 15, 1997. At
that time, the Company will change the method currently used to compute net loss
per share and restate all prior periods. The impact of Statement 128 on the
calculation of the net loss per share is not expected to be material.
6
<PAGE> 7
Revenue Recognition
The Company derives its revenue from the sale of advertisements on
short-term contracts and barter transactions. Advertising revenues are
recognized ratably over the period in which the advertisements are displayed.
Deferred revenues result from billings in excess of recognized revenue relating
to contracts. Deferred revenue as of June 30, 1997 was not significant. Barter
transactions are recorded at the lower of the estimated fair value of services
received or the estimated fair value of the advertisements given. Barter revenue
and the related advertising is recorded based on impressions delivered and
received with the difference recorded as an advance or prepaid. As of June 30,
1997, the Company had a $42,400 prepaid related to barter agreements. From the
date of inception through June 30, 1997, the Company generated $149,590 in
revenues, of which $133,390 was the result of barter transactions.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The matters discussed in this report contain forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed below in
"Additional Factors that May Affect Future Results" as well as those discussed
in this section and elsewhere in this Report, and the risks discussed in the
"Risk Factors" section included in the Company's Registration Statement on Form
S-1 declared effective by the Securities and Exchange commission on April 22,
1997 (Registration No. 333-19051) and in the Prospectus contained therein.
OVERVIEW
The Company was incorporated on February 12, 1996 and is an interactive
technology company that provides through its Internet site <URL:
http://www.go2net.com/>: MetaCrawler <URL: http://www.metacrawler.com/>, a
search/index guide that combines various existing search/index guides into one
guide (a "metasearch engine"); go2business <URL:
http://www.go2net.com/business/>, which offers proprietary articles, portfolio
tracking tools, company research and news relating to business and finance;
go2vision <URL: http://www.go2net.com/vision/>, a Java-based desktop window that
allows users to obtain stock quotes, sports scores and search the World Wide Web
while simultaneously accessing other Internet sites or running other
applications; and, since July 15, 1997, PlaySite <URL:
http://www.playsite.com/>, a Java-based multi-user games network. The Company
focuses on utilizing innovative technologies to deliver its content and to
enhance the attractiveness and utility of its product offerings. As of June 30,
1997, substantially all of the Company's revenues were generated from non-cash
barter transactions.
On July 22, 1997 the Company announced that it had formed a multi-user
gaming network through its July 15, 1997 acquisition of PlaySite <URL:
http://www.playsite.com>, a Java-based multi-user games site, and certain gaming
infrastructure technology from Internet Games Corporation for $500,000 in cash
and 16,667 shares of the Company's common stock. PlaySite is based on a
proprietary, 100% Java, multi-user communication system and game-building
toolkit. Through PlaySite, the Company is focused on developing latency-tolerant
multi-user board, card, trivia, party, adventure and simulation games, as well
as chat, messaging and bulletin boards.
The Company has an extremely limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company
anticipates that advertising revenues from the Company's Internet site will
constitute substantially all of the Company's revenues, if any, during the
foreseeable future. Because the Company anticipates that its operations will
incur significant operating losses for the foreseeable future, the Company
believes that its success will depend upon its ability to obtain revenues from
advertising on its Internet site, which cannot be assured. The Company's ability
to generate revenues is subject to substantial uncertainty. The Company's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by start-up companies in general, and specifically with
respect to the new and rapidly evolving market for Internet products, content
and services. To address these risks, the Company must, among other things,
effectively establish, develop and maintain relationships with advertising
customers, advertising agencies and other third parties, provide original,
informative, entertaining and compelling content to Internet users, develop and
upgrade its technology, respond to competitive developments, attract new
qualified personnel and retain existing qualified personnel. There can be no
assurance that the Company will succeed in addressing such risks and the failure
to do so would have a material adverse effect on the Company's business,
financial condition and operating results. Additionally, the Company's lack of
an extensive operating history makes prediction of future operating results
difficult. Accordingly, there can be no assurance that the Company will be able
to generate significant revenues or that the Company will achieve, or maintain,
profitability or continue to generate revenues from operations in the future.
Since inception, the Company has incurred significant losses and, as of June 30,
1997, had an accumulated deficit of $1,637,304. The Company currently intends to
increase substantially its operating expenses in order to, among other things,
expand and improve its Internet operations, fund increased advertising and
marketing efforts, expand and improve its Internet user support capabilities and
develop new Internet technologies, applications and content. The Company expects
to continue to incur significant losses on a quarterly and annual basis for the
foreseeable future. To the extent such increases in operating expenses are not
offset by revenues, the Company will incur greater losses than anticipated.
8
<PAGE> 9
The Company's quarterly operating results may fluctuate significantly
as a result of a variety of factors, many of which are outside of the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include the level of use of the Internet, demand for 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 use of the Company's Internet sites, the amount and timing of capital
expenditures and other costs relating to the development, operation and
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 failures, general
economic conditions and economic conditions specific to the Internet and
Internet media. In seeking to effectively implement its operating strategy, the
Company may elect from time to time to make certain advertising and marketing or
acquisition decisions that could have a material adverse effect on the Company's
business, financial condition and operating results. The Company believes that
period to period comparisons of its operating results are not meaningful and
should not be relied upon for an indication of future performance. Due to all of
the foregoing factors, it is likely that in some future quarters, the Company's
operating results may be below the expectations of public market analysts and
stockholders. In such event, the price of the Company's Common Stock would
likely be materially adversely affected.
RESULTS OF OPERATIONS
REVENUES
The Company launched its Internet site on November 7, 1996 at which
time it was still in the process of evaluating the technical features of the
site. From the date of inception through June 30, 1997, the Company has
generated $16,200 in cash revenues and $133,390 in non-cash barter transactions,
all of which was recognized during the quarter ending June 30, 1997.
COSTS OF REVENUES
Since inception and through June 30, 1997, the Company has incurred
$90,978 in costs associated with barter transactions. Other costs incurred
during the period from inception to June 30, 1997 were recognized as product
development expenses. There can be no assurance that the Company will be able to
generate sufficient revenues, advertising or otherwise, to cover its costs of
revenues. The failure to generate sufficient revenues in order to cover its
costs of revenues will result in continued losses and will continue to have a
material adverse effect on the Company's business, financial condition and
operating results.
OPERATING EXPENSES
Advertising and Marketing. Advertising and marketing expenses consist
primarily of public relations, travel, and costs of marketing literature.
Advertising and marketing expenses incurred by the Company for the three months
ended June 30, 1996, the period from inception through June 30, 1996, the three
months ended June 30, 1997 and the nine months ended June 30, 1997 were $1,203,
$1,203, $16,118 and $38,274, respectively. The Company intends to significantly
increase its advertising and marketing expenses in future periods.
Product Development. Product development expenses consist of expenses
incurred by the Company's initial development and creation of its Internet
sites. Product development expenses include compensation and related expenses,
costs of computer hardware and software, and the cost of acquiring, designing,
developing and editing Internet content and developing Internet technologies.
All of the costs incurred to date in connection with the development of the
Company's Internet sites have been expensed. Product development expenses
incurred by the Company for the three months ended June 30, 1996, the period
from inception through June 30, 1996, the three months ended June 30, 1997, and
the nine months ended June 30, 1997 were $16,417, $16,417, $233,689 and
$546,348, respectively. The Company believes that significant investments in
enhancing its Internet sites will be necessary to be competitive. As a result,
the Company may continue to incur, or increase the level of, product development
expenses.
9
<PAGE> 10
General and Administrative. General and administrative expenses consist
primarily of compensation not otherwise attributable to development expenses,
rent expense, fees for professional services and other general corporate
purposes. General and administrative expenses incurred by the Company for the
three months ended June 30, 1996, the period from inception through June 30,
1996, the three months ended June 30, 1997 and the nine months ended June 30,
1997 were $102,034, $117,284, $358,900 and $808,164, respectively. The Company
expects general and administrative expenses to significantly increase in future
periods as a result of, among other things, the additional costs of being a
public company.
Interest Income. The increase in interest income is due to the funds
available for investment as a result of the Company's initial public offering.
Interest income for the three months ended June 30, 1996, the period from
inception through June 30, 1996, the three months ended June 30, 1997 and the
nine months ended June 30, 1997 were $4,093, $4,093, $106,426 and $114,627,
respectively.
Income Taxes. The Company has not recorded an income tax benefit
because it has incurred net operating losses since its inception. As of June 30,
1997, the Company had Federal net operating loss carry forwards of approximately
$1,500,000. The Federal net operating loss carry forwards will expire beginning
in 2011 if not utilized. Utilization of the net operating losses and credits may
be subject to a substantial annual limitation due to the ownership change
limitations provided in the Internal Revenue Code of 1986, as amended, and
similar state provisions.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's principal source of liquidity was
$12,202,759 in cash and cash equivalents derived primarily from the sale of the
Company's equity securities. The Company also has a $750,000 revolving line of
credit with a commercial bank which expires on November 15, 1997. All borrowings
under such line of credit accrue interest at such bank's prime annual lending
rate plus 1%. As of June 30,1997, the Company has no outstanding borrowings
under this line of credit. The Company has primarily financed its operations
through the sale of equity securities.
In April and May 1997, the Company completed its initial public
offering and issued 1,840,000 shares of its common stock to the public at a
price of $8.00 per share. The Company received approximately $12.8 million of
cash, net of underwriting discounts, commissions and other offering costs.
Capital expenditures were approximately $117,914, $129,857, $148,759
and $249,523 for the three months ended June 30, 1996, the period from inception
through June 30, 1996, the three months ended June 30, 1997, and the nine months
ended June 30, 1997, respectively. The Company has no material commitments for
capital expenditures other than approximately $120,000 relating to the purchase
of computer hardware and software. The Company anticipates a substantial
increase in its capital expenditures through the remainder of fiscal 1997
consistent with its anticipated growth.
The Company currently believes that available funds, cash flows
expected to be generated from operations, if any, and the existing line of
credit will be sufficient to fund its working capital and capital expenditures
requirements for at least the next twelve months. Thereafter, the Company may
need to raise additional funds. The Company's ability to grow will depend in
part on the Company's ability to expand and improve its Internet operations,
expand its advertising and marketing efforts, expand and improve its Internet
user support capabilities and develop new Internet content, technologies and
applications. In connection therewith, the Company may need to raise additional
capital in the foreseeable future from public or private equity or debt sources
in order to finance such possible growth. In addition, the Company may need to
raise additional funds in order to avail itself to unanticipated opportunities
(such as more rapid expansion, acquisitions of complementary businesses or the
development of new products or services), to react to unforeseen difficulties
(such as the loss of key personnel or the rejection by Internet users or
potential advertisers of the Company's Internet technologies, applications
and/or content) or to otherwise respond to unanticipated competitive pressures.
If additional funds are raised through the issuance of equity securities, then
the percentage ownership of the Company's then existing stockholders will be
reduced, stockholders may experience additional and significant dilution and
such equity securities may have rights, preferences or privileges senior to
those of the Company's Common Stock. There can be no assurance that
10
<PAGE> 11
additional financing will be available on terms acceptable to the Company or at
all. If adequate funds are not available or are not available on terms
acceptable to the Company, the Company may be unable to implement its business,
sales or marketing plan, respond to competitive forces or take advantage of
perceived business opportunities, which could have a material adverse effect in
the Company's business, financial condition and operating results.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company has an extremely limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company and its
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of development,
particularly companies in new and rapidly evolving markets. To address these
risks, the Company must, among other things, respond to competitive
developments, continue to attract, retain and motivate qualified persons and
continue to upgrade its technologies and commercialize products and services
incorporating such technologies. There can be no assurance that the Company will
be successful in addressing such risks. As of June 30, 1997, the Company had
generated only $16,208 in cash revenues, and there can be no assurance that the
Company will generate revenues in the future. The limited operating history of
the Company makes the prediction of future results of operations difficult or
impossible, and therefore there can be no assurance that the Company will
achieve revenue growth or profitability. The Company has incurred significant
net losses since inception and expects to continue to incur significant losses
on a quarterly and annual basis for the foreseeable future.
As a result of the Company's extremely limited operating history, the
Company does not have historical financial data for any significant period of
time on which to base planned operating expenses. The Company's expense levels
are based in part on its expectations as to future revenues and to a large
extent are fixed. Quarterly sales and operating results generally depend on
advertising revenues, which are difficult to forecast. The Company may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in relation to the Company's
expectations would have an immediate adverse impact on the Company's business,
results of operations and financial condition. In addition, the Company plans to
significantly increase its operating expenses to fund greater levels of research
and development, increase its sales and marketing operations, broaden its
customer support capabilities and establish brand identity and strategic
alliances. To the extent that such expenses precede or are not subsequently
followed by increased revenues, the Company's business, results of operations
and financial condition will be materially adversely affected.
The Company's operating results may fluctuate significantly in the
future as a result of a variety of factors, some of which are outside of the
Company's control. These factors include general economic conditions, specific
economic conditions in the Internet industry, usage of the Internet, demand for
Internet advertising, seasonal trends in advertising sales, the advertising
budgeting cycles of individual advertisers, capital expenditures and other costs
relating to the expansion of operations, the introduction of new products or
services by the Company or its competitors, the mix of services sold, the
channels through which those services are sold and pricing changes. As a
strategic response to a changing competitive environment, the Company may elect
from time to time to make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company believes
that period to period comparisons of its operating results are not meaningful
and should not be relied upon for an indication of future performance. The
Company also expects that, in the future, it may experience seasonality in its
business, with advertising revenues being somewhat lower during the summer and
year-end vacation and holiday periods, when usage of the Company's Interest site
and services may be expected to decline. Due to all of the foregoing factors, it
is likely that in some future quarter, the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the price of the Company's common stock would likely be materially adversely
affected.
The Company operates in a rapidly changing environment that involves a
number of risks and uncertainties, some of which are beyond the Company's
control. In addition to the factors discussed in this report, factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the "Risk Factors" section included in the Company's Registration
Statement on Form S-1 and the Prospectus contained therein.
11
<PAGE> 12
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings.
None.
ITEM 2: Changes in Securities
None.
ITEM 3: Defaults Upon Senior Securities
None.
ITEM 4: Submission of Matters to a Vote of Security Shareholders
None,
ITEM 5: Other Information.
None.
ITEM 6: Exhibits and Reports on Form 8-K
No reports on Form 8-K filed during the period
Exhibit 11 - Calculation of Shares Used in Determining Net
Loss Per Share
Exhibit 27 - Financial Data Schedule
12
<PAGE> 13
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 thereunto duly authorized.
GO2NET, INC.
Date: August 13, 1997
By: /s/ Russell C. Horowitz
-----------------------------------------
Russell C. Horowitz
President, Chief Executive Officer, Chief
Financial Officer and Director (Principal
Executive and Accounting Officer)
13
<PAGE> 1
EXHIBIT 11
go2net, Inc.
<TABLE>
Computation of Net Loss Per Share
<CAPTION>
Period from
Inception
Three Months Three Months Nine Months Through
Ended June 30, Ended June 30, Ended June 30, June 30,
1997 1996 1997 1996
-------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Net loss $ (443,669) $ (115,561) $(1,219,547) $ (130,811)
========== ========== =========== ==========
Weighted average common shares 4,017,850 1,505,011 2,933,684 1,486,186
Weighted average common shares, - 205,839 15,336 224,664
calculated using the treasury stock
method at the public offering price
of $8 per share, and treated as
outstanding for the periods presented
Weighted average number of common
shares assumed issued upon the
conversion of the 9% Cumulative,
Redeemable, Convertible Preferred
Stock, calculated using the treasury
stock method at the public offering - 927,500 157,675 927,500
price of $8 per share, and treated as
outstanding for the periods presented
through the date of conversion 4,017,850 2,638,350 3,106,695 2,638,350
========== ========== =========== ==========
Net loss per share $ (0.11) $ (0.04) $ (0.39) $ (.05)
========== ========== =========== ==========
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 12,202,759
<SECURITIES> 0
<RECEIVABLES> 32,502
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,392,395
<PP&E> 446,725
<DEPRECIATION> 75,495
<TOTAL-ASSETS> 13,214,604
<CURRENT-LIABILITIES> 321,684
<BONDS> 0
0
0
<COMMON> 14,530,224
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,214,604
<SALES> 149,590
<TOTAL-REVENUES> 149,590
<CGS> 90,978
<TOTAL-COSTS> 1,392,786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,219,547)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,219,547)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,219,547)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
