PROSPECTUS Filing Pursuant to Rule 424(b)(3)
Registration No. 333-63725
1,395,536 SHARES
GO2NET, INC.
COMMON STOCK
This Prospectus relates to the public offering, which is not being
underwritten, of up to 1,395,536 shares of Common Stock, par value $0.01 per
share (the "Shares"), of go2net, Inc. ("go2net" or the "Company"), which may be
offered from time to time by certain stockholders of the Company or by donees,
transferees, pledgees or other successors in interest that receive such shares
as a gift, partnership distribution or other non-sale related transfer (the
"Selling Stockholders"). The Company will receive no part of the proceeds of
such sales. Of the Shares being offered, (i) 1,238,037 Shares were originally
issued by the Company in connection with the Company's acquisition of Silicon
Investor, Inc., a Delaware corporation ("Silicon Investor"), by and through a
merger of a wholly-owned subsidiary of go2net, Silicon Acquisition Corp.
("SAC"), with and into Silicon Investor, and (ii) 157,499 Shares were originally
issued by the Company in connection with the Company's acquisition of Hypermart,
Inc., a Delaware corporation ("Hypermart"), by and through a merger of a
wholly-owned subsidiary of the Company, Hyper Acquisition Corp. ("HAC") with and
into Hypermart. The Shares were issued pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided for in Section 4(2) thereunder. The Shares are being
registered by the Company pursuant to the Agreement and Plan of Merger dated as
of April 22, 1998 (the "Silicon Agreement") by and among go2net, Silicon
Investor, SAC and certain shareholders of Silicon Investor and an Agreement and
Plan of Merger dated as of July 31, 1998 (the "Hypermart Agreement") by and
among go2net, Hypermart, HAC and the shareholders of Hypermart.
The Shares may be offered by the Selling Stockholders from time to time
in one or more transactions as described under "Plan of Distribution." To the
extent required, the number of shares to be sold, the name of the Selling
Stockholder(s), the purchase price, the name of any agent or broker-dealer, and
any applicable commissions, discounts or other items constituting a compensation
to such agent or broker-dealer with respect to a particular offering will be set
forth in a supplement or supplements to this Prospectus (each, a "Prospectus
Supplement"). The aggregate proceeds to the Selling Stockholder(s) from the sale
of the shares offered from time to time hereby will be the purchase price of the
shares sold less commissions, discounts and other compensation, if any, paid by
the Selling Stockholder(s) to any agent or broker-dealer. The price at which any
of the Shares may be sold, and the commissions, if any paid in connection with
any such sale, are unknown and may vary from transaction to transaction. The
Company will pay all expenses incident to the offering and sale of the Shares to
the public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes. See "Selling Stockholders" and "Plan of
Distribution."
The Company's Common Stock is listed on The Nasdaq National Market
under the symbol "GNET." On September 30, 1998, the last sale price of the
Company's Common Stock was $15.00 per share.
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THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 3
HEREOF.
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The Securities and Exchange Commission (the "Commission") may take the
view that, under certain circumstances, the Selling Stockholders and any
broker-dealers or agents that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Commissions, discounts or concessions received by any
such broker-dealer or agent may be deemed to be underwriting commissions under
the Securities Act. The Company and the Selling Stockholders have agreed to
certain indemnification arrangements. See "Plan of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS October 1, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048 and Chicago Regional Office, Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained by mail at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington,
D.C. 20549. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov. The Common Stock of the Company is listed on The Nasdaq
National Market, and such reports, proxy and information statements and other
information concerning the Company may be inspected at the offices of Nasdaq
Operations, 1735 K Street, NW, Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Shares offered hereby, reference
is hereby made to the Registration Statement. The Registration Statement may be
inspected at the public reference facilities maintained by the Commission at the
addresses set forth in the preceding paragraph. The Company has filed the
Registration Statement electronically with the Commission via the Commission's
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Company intends to distribute
to its stockholders annual reports containing audited financial statements and
will make available copies of quarterly reports for the first three quarters of
each fiscal year containing unaudited interim financial information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File
No. 0-22047) pursuant to the Exchange Act are hereby incorporated by reference
in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
September 30, 1997;
(2) The Company's definitive Proxy Statement dated January 28, 1998,
filed in connection with the Company's March 12, 1998 Annual
Meeting of Stockholders;
(3) The Company's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1997, March 31, 1998 and June 30, 1998;
(4) The Company's Current Reports on Form 8-K and 8-K/A, filed with the
Commission on July 6, 1998, August 13, 1998 and September 18, 1998;
and
(5) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, filed with the Commission on
April 10, 1997.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference into this Prospectus, to the extent required,
and to be a part of this Prospectus from the date of filing of such reports and
documents. Any statement contained in a document incorporated by reference into
this Prospectus shall be deemed to be modified 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 statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
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The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated by reference into this Prospectus (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be submitted in writing to Investor Relations, go2net, Inc., 999 Third
Avenue, Suite 4700, Seattle, Washington 98104 or by telephone at (206) 447-1595.
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THE COMPANY
go2net, Inc. (http://www.go2net.com) offers a network of technology and
community-driven Web sites focused on the following categories: personal
finance, search, commerce and games. go2net's properties include: Silicon
Investor (http://www.techstocks.com), the Web's leading financial discussion
site; StockSite (http://www.stocksite.com), which offers proprietary articles,
portfolio tracking tools, company research and news relating to business and
finance; MetaCrawler (http://www.metacrawler.com), a search/index guide that
combines various existing search/index guides into one service (a "metasearch
engine"); Hypermart (http://www.hypermart.net), the Web's leading provider of
free business hosting services; WebMarket (http://www.webmarket.com), a one-stop
comparison shopping service; and Playsite (http://www.playsite.com), a
Java-based multiplayer online games site. The Company's go2net Labs division
develops innovative technologies for use on the go2net sites and for licensing
to other Internet companies.
The Company is a Delaware corporation incorporated in February 1996.
The Company's principal executive offices are located at 999 Third Avenue, Suite
4700, Seattle, Washington 98104, and its telephone number is (206) 447- 1595.
RISK FACTORS
The following risk factors should be considered in conjunction with the
other information included and incorporated by reference in this Prospectus
before purchasing the Common Stock offered hereby. This Prospectus (including
the documents incorporated by reference herein) may include forward-looking
statements that involve risks and uncertainties. In addition to those risk
factors discussed elsewhere in this Prospectus, the Company identifies the
following risk factors which could affect the Company's actual results and cause
actual results to differ materially from those in the forward-looking
statements.
Limited Operating History; Accumulated Deficit; No Assurance of
Profitability. The Company was incorporated in February 1996 and for the nine
months ended June 30, 1998 generated $2,875,640 in revenues. The Company has a
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 sites will constitute a significant portion of the
Company's revenues during the foreseeable future. The Company believes that its
success will depend upon its ability to generate revenues from advertising and
subscription fees from its Internet sites, 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 emerging growth companies in general, and
specifically with respect to the new and rapidly evolving market for
Internet-based products 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, enter
into distribution relationships and strategic alliances to drive traffic to its
Websites, provide original and compelling products and services to Internet
users, develop and upgrade its technology, effectively 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 generate revenues from operations in the
future. Since inception, the Company has incurred significant losses and, as of
June 30,1998, had an accumulated deficit of $4,450,297. 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, products and services.
Unpredictability of Future Revenues; Potential Fluctuations in
Quarterly Operating Results. As a result of the Company's limited operating
history and the emerging nature of the Internet, including Internet-based
advertising, subscription services and electronic commerce, the Company is
unable to forecast its expenses and revenues accurately. The Company believes
that due primarily to the relatively brief time the Internet has been available
to the general public, there has not yet been developed, implemented and
demonstrated a commercially viable business model from which to successfully
operate any form of Internet-based product and/or service business. The
Company's current and future estimated expense levels are based largely on its
estimates of future revenues and may increase because many of its significant
operating expenses are either fixed, such as rent for office space, or subject
to likely increases. Few, if any, of the Company's operating expenses can be
quickly or easily reduced, such as the laying off of personnel, in a manner
which would not cause a material adverse effect to the Company's business,
financial condition and operating results.
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In addition, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected expenditures; and a shortfall in actual revenues
as compared to estimated revenues would have an immediate material adverse
effect on the Company's business, financial condition and operating results.
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. For example, the Company believes that advertising sales in traditional
media are generally lower in the first and third calendar quarters of each year
than in the second and fourth quarters and that advertising expenditures
fluctuate significantly with economic cycles. Depending on the extent to which
the Internet is accepted as an advertising medium, seasonality and cyclicality
in the level of advertising expenditures generally could become more pronounced
for Internet-based advertising. Seasonality and cyclicality in advertising
expenditures generally, or with respect to Internet-based advertising
specifically, could have a material adverse effect on the Company's business,
financial condition and operating results. Other 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 Internet sites, products 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 execute 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.
Dependence on Advertising Revenues; Risks Related to Sponsorships. The
Company expects to derive a significant portion of its revenues in the
foreseeable future from the sale of advertising on its Internet sites. For the
nine months ended June 30, 1998, the Company generated $2,875,640 in revenues,
of which approximately 67% of revenues were attributable to advertising. Many of
the Company's relationships with advertisers are terminable within a short
period of time. Consequently, the Company's advertising customers may move their
advertising to competing Internet sites, or from the Internet to traditional
media, quickly and at relatively low costs, thereby increasing the Company's
exposure to competing pressures and fluctuations in revenues and operating
results. In selling Internet-based advertising, the Company will likely depend
on advertising agencies, which exercise substantial control over the placement
of advertising for their clients. The Company's success will depend on its
ability to convince advertisers and advertising agencies of the benefits of
advertising on the Company's Internet sites, and on its ability to retain,
broaden and diversify its future base of advertising customers. In order to
generate significant advertising revenues, the Company will depend on the
development of a larger base of users of the Company's Internet sites possessing
demographic characteristics attractive to advertisers. If the Company is unable
to attract and retain paying advertising customers or is forced to offer lower
than anticipated advertising rates in order to attract and/or retain advertising
customers, the Company's business, financial condition and operating results
will be materially adversely affected and the Company may cease to be a
commercially viable enterprise.
The Company has recently entered into sponsorship arrangements with
third parties to provide sponsored services and placements on the Company's
Websites in addition to traditional banner advertising. In connection with these
arrangements, the Company may receive sponsorship fees as well as a portion of
transaction revenues received by such third party sponsors from users originated
through the Company's Websites, in return for minimum levels of user impressions
or "click throughs" to be provided by the Company. To the extent implemented,
these arrangements expose the Company to potentially significant financial
risks, including the risk that the Company fails to deliver required minimum
levels of user impressions or click throughs (in which case, these agreements
typically provide for adjustments to the fees payable thereunder or "make good"
periods) and that third party sponsors do not renew the agreements at the end of
their terms. Certain of these arrangements also require the Company to integrate
sponsors' content with the Company's services, which requires the dedication of
resources and significant programming and design efforts to accomplish. There
can be no assurance that the Company will be able to attract additional sponsors
or that it will be able to renew existing sponsorship arrangements when they
expire. In addition, the Company has granted exclusivity provisions to certain
of its sponsors, and may in the future grant additional exclusivity provisions.
Such exclusivity provisions may have the effect of preventing the Company, for
the duration of such exclusivity arrangements, from accepting advertising or
sponsorship arrangements within a particular subject matter in the Company's
Websites or across
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the Company's entire service. The inability of the Company to enter into further
sponsorships or advertising arrangements as a result of its exclusivity
arrangements could have a material adverse effect on the Company's business,
financial condition and operating results.
Uncertain Acceptance of the Internet as an Advertising Medium; Lack of
Measurement Standards. Use of the Internet by consumers is at a very early stage
of development and market acceptance of the Internet as a medium for
information, entertainment, commerce and advertising is subject to a high level
of uncertainty. The Company believes that its success depends upon its ability
to obtain significant revenues from its Internet operations, which will require
the development and acceptance of the Internet as an advertising medium. The
Company believes that most advertisers and advertising agencies have limited
experience with the Internet as an advertising medium and neither advertisers
nor advertising agencies have devoted a significant portion of their advertising
budgets to Internet-related advertising to date. In order for the Company to
generate advertising revenues, advertisers and advertising agencies must direct
a portion of their budgets to the Internet as a whole, and specifically to the
Company's Internet sites. There can be no assurance that advertisers or
advertising agencies will be persuaded, or able, to allocate or continue to
allocate portions of their budgets to Internet-based advertising, or if so
persuaded or able, that they will find Internet-based advertising to be more
effective than advertising in traditional media such as television, print or
radio, or in any event decide to advertise on the Company's Internet sites.
Moreover, there can be no assurance that the Internet advertising market will
develop as an attractive and sustainable medium, that the Company will achieve
market acceptance of its products or that the Company will be able to execute
its business strategy successfully.
Acceptance of the Internet among advertisers and advertising agencies
will also depend on the level of use of the Internet by consumers, which is
highly uncertain, and on the acceptance of the alternative new model of
conducting business and exchanging information presented by the Internet.
Advertisers and advertising agencies that have invested 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 Internetbased 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 and the
Company may cease to be a commercially viable enterprise.
Uncertain Acceptance of the Company's Internet Products and Services.
The Company's commercial viability depends in large part upon its ability to
develop and provide on the Internet original and compelling products and
services that will successfully attract and retain users with demographic
characteristics valuable to the various advertisers and advertising agencies the
Company is targeting and to charge users a subscription fee for access to
certain portions of such products and services, such as Silicon Investor. There
can be no assurance that the Company's products and services will be attractive
enough to a sufficient number of Internet users to generate advertising revenues
or to allow the charging of a subscription fee for certain portions thereof.
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 Internet sites
within the demographics desirable to advertisers and advertising agencies or
those users who are otherwise willing to pay to access certain portions of the
Company's products and services. Internet users can freely navigate and
instantly switch among a large number of Internet sites, many of which offer
competitive products and services, making it difficult for the Company to
distinguish its product offerings and attract users. In addition, many other
Internet sites offer very specific, highly targeted products and services that
may have greater appeal than the products and services offered on the Company's
Internet sites. In addition, users of the Internet who do not use the most
recent browser or operating platform software will have greater difficulty in
accessing and navigating the Company's Internet sites than would users who use
the most recent versions of such software. Such difficulty could cause Internet
users to cease using the Company's Internet sites. If the Company is unable to
develop original and compelling Internet-based products and services in a manner
that allows it to attract, retain and expand a loyal user base desirable to
advertisers and advertising agencies or Internet users who are willing to pay to
access certain portions of such Internet-based products and services, then the
Company will be unable to generate sufficient advertising or subscription
revenues, and its business, financial condition and operating results will be
materially adversely affected and the Company may cease to be a commercially
viable enterprise.
Competition. The Company competes with other Internet sites for the
time and attention of consumers and for advertising and subscription revenues.
Competition among Internet sites is intense and is expected to increase
significantly in the future. The Company's Internet sites compete against a
variety of companies that provide similar offerings through one or more media,
such as print, radio, television and the Internet. To compete successfully, the
Company must develop
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and deliver popular, original, entertaining, informative and compelling product
offerings to attract Internet users and to support advertising and subscription
fees. In the Company's areas of focus of search, games, discussion communities,
business and finance, free Web site hosting services and comparison shopping,
the Company competes with various companies and Internet sites, such as America
OnLine, Inc., c/net, Inc., Yahoo! Inc., Excite, Inc., Infoseek Corporation,
Lycos, Inc., Microsoft Corporation, Netscape Communications Corporation,
SportsLine USA, Inc., Wired Ventures, Inc., GeoCities Corporation and Xoom, Inc.
Many, if not all, of these competitors also offer a wider range of products and
services than does the Company, which products and services may be sufficiently
attractive to Internet users to attract users to their services and,
consequently, dissuade them from accessing the Company's Internet sites. If the
Company is unable to continue to attract a significant number of Internet users
to its Internet sites, the Company's business, financial condition and operating
results will be materially adversely affected and the Company may cease to be a
commercially viable enterprise.
Low Barriers to Entry. The market for Internet-based products and
services is relatively new, intensely competitive and rapidly evolving. There
are minimal barriers to entry, and current and new competitors can launch new
Internet sites at a relatively low cost within relatively short time periods. In
addition, the Company competes for the time and attention of Internet users with
thousands of non-profit Internet sites operated by, among other persons,
individuals, government and educational institutions. Existing and potential
competitors also include magazine and newspaper publishers, cable television
companies and start-up 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. Should the Company seek in
the future to attempt to expand the scope of its Internet sites and product
offerings, it will compete with a greater number of Internet sites and other
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 products
and services in the future. There can be no assurance that the Company's
Internet sites will compete successfully.
Competitive Factors. The Company believes that the competitive factors
attracting Internet users include, among others, the quality of presentation and
the relevance, timeliness, depth and breadth of information and services offered
by the Company. With respect to attracting advertisers and advertising agencies,
the Company believes that the competitive factors include, among others, the
number of users accessing the Company's Internet sites, the demographics of such
user base, the Company's ability to deliver focused and compelling advertising
and interactivity through its Internet sites and the overall cost effectiveness
and value of advertising offered by the Company. In addition, the success of the
Company's business strategy depends on the sale of future Internet advertising
at premium prices, based in part on the demographic characteristics of the
Company's Internet users. With respect to attracting subscription-based users in
the future, the Company believes that the competitive factors include, among
others, the quality, uniqueness and usefulness of the products and services
provided, the price charged for such products and services and the cost and
accessibility of similar products and services through the Internet or competing
media. Given the intense competition among Internet sites and other media, there
can be no assurance that the Company will be able to compete successfully with
respect to any of these factors.
Strength of Competitors. Many, if not all, of the Company's current and
potential competitors have significantly greater financial, editorial, technical
and marketing resources, longer operating histories, greater name recognition,
and greater experience than the Company; and also have established relationships
with more advertisers and advertising agencies. Many, if not all, of such
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive advertising and subscription price policies and devote
substantially more resources to developing Internetbased products and services
than the Company. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures faced by the Company will not materially adversely affect the
Company's business, financial condition and operating results. In addition, in
response to competitive pressures, the Company may make certain pricing,
business development and/or marketing decisions, or enter into acquisitions or
new ventures that could have a material adverse effect on the Company's
business, financial condition and operating results.
Uncertain Acceptance and Maintenance of the go2net Brand. The Company
believes that establishing and maintaining the go2net brand is a critical aspect
of its efforts to attract an Internet audience and that the importance of brand
recognition will increase due to the anticipated increase in the number of
Internet sites and the relatively low barriers to entry to providing
Internet-based products and services. Promoting the go2net brand name will
depend on the Company's ability to develop and deliver original and compelling
Internet-based products and services, which it cannot assure. If Internet users
do not perceive the Company's Internet sites to be of sufficient interest and
usefulness, the Company will be unsuccessful in promoting and maintaining its
brand. To the extent the Company chooses in the future
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to seek to expand the focus of its operations beyond providing its current
Internet sites, the Company risks diluting its brand, confusing users and
advertisers, and decreasing the attractiveness of its audience to advertisers.
In order to attract and retain Internet users and to promote and maintain the
go2net brand in response to competitive pressures, the Company may find it
necessary to increase its budget for developing its products and services or
otherwise to increase substantially its financial commitment to creating and
maintaining a distinct brand loyalty among users. If the Company is unable to
provide Internet-based products and services as described herein or otherwise
fails to promote and maintain the go2net brand, or the Company incurs
significant expenses in an attempt to improve its products and services or
promote and maintain its brand, the Company's business, financial condition and
operating results will be materially adversely affected and the Company may
cease to be a commercially viable enterprise.
Expansion of Operations and Managing Potential Growth. Since its
inception, the Company has grown rapidly and as of June 30, 1998 had 53
full-time employees and seven independent contractors. This growth has placed,
and is expected to continue to place, a significant strain on the Company's
management, physical and capital resources. It is expected that the Company will
need to hire additional key personnel in order to fully implement its business
strategy. No assurance can be given as to whether, when, if ever, and under what
terms the Company will be able to attract such new personnel. In order to manage
such growth successfully, the Company will be required to, among other things,
implement and manage its operational and financial systems on a timely basis and
to train, manage and expand its growing employee base. Further, 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 marketplace. There
can be no assurance that the Company's current personnel, systems, procedures
and quality and accounting controls will be adequate to support the Company's
future operations, that management will be able to identify, hire, train,
motivate or manage needed and qualified personnel, or that management will be
able to identify and exploit existing and potential opportunities. If the
Company is unable to effectively manage growth, the Company's business,
financial condition and operating results will be materially adversely affected.
Need for Additional Capital to Finance Growth and Capital Requirements.
The Company expects to seek to enhance and expand its Internet sites in order to
improve its competitive position and meet the increasing demands for quality
Internet-based products and services and competitive advertising and
subscription pricing. 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 technologies, products and services. 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-based products and services) or
to otherwise respond to unanticipated competitive pressures. If additional funds
are raised through the issuance of equity securities, the percentage ownership
of the Company's then existing stockholders would be reduced, stockholders may
experience additional and significant dilution and such equity securities may
have rights, preferences or privileges senior to those of the holders of Common
Stock. There can be no assurance that 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.
Dependence on Key Personnel. The Company's performance is substantially
dependent on the continued services of Russell C. Horowitz, John Keister and the
other members of its management team, as well as on the Company's ability to
retain and motivate its officers and key employees. Each of Messrs. Horowitz and
Keister has entered into employment agreements with the Company. The Company
maintains a $5,000,000 "key man" life insurance policy on the life of Mr.
Keister and a $10,000,000 "key man" life insurance policy on the life of Mr.
Horowitz. The Company's future success also depends on its continuing ability to
attract and retain highly qualified technical and managerial personnel. The
development of technologies, products and services for the Company's Internet
sites requires the services of highly skilled employees and independent
contractors. The number of such personnel available is extremely limited and
competition for such personnel among Internet and other companies is intense.
There can be no assurance that the Company will be able to retain its existing
employees and independent contractors or that it will be able to attract,
assimilate or retain sufficiently qualified personnel in the future. The
inability to attract and retain the necessary technical, managerial, design,
editorial, sales and marketing personnel could have a material adverse effect on
the Company's business, financial condition and operating results.
- 8 -
<PAGE>
Limited Experience in Sales and Marketing of Advertising. None of the
Company's senior management team has any significant experience in selling
advertising on the Internet or any other medium, and few members of the
Company's senior management team have any significant experience in the Internet
industry. Achieving acceptance by potential advertisers and advertising agencies
of the Company's Internet sites as a viable marketing forum will require the
Company to develop and maintain relationships with key advertisers and
advertising agencies, and there can be no assurance that any such relationships
will be developed, on a timely basis or at all.
Dependence on Third Parties for Internet Operations and Content
Development. The Company believes that the ability to advertise its Internet
sites on other Internet sites and the willingness of the owners and operators of
such sites to direct users to the Company's Internet sites through hypertext
links are critical to the success of the Company's Internet operations. Other
Internet sites, particularly search/index guides and other companies with
strategic ability to direct user traffic, significantly affect traffic to the
Company's Internet sites. There can be no assurance that the Company will
establish or maintain such arrangements in the future. In addition, the Company
relies on the cooperation of owners and operators of Internet sites and
search/index guides in connection with the operation of the MetaCrawler Service.
There can be no assurance that such cooperation will continue to be available on
terms acceptable to the Company or at all. The inability of the Company to
include third-party search/index guides in the MetaCrawler Service could result
in the decrease in use of the MetaCrawler Service, which would have a material,
adverse effect on the Company's business, financial condition and operating
results. The Company's ability to develop original and compelling Internet-based
products and services is also dependent on maintaining relationships with and
using products provided by third-party vendors. Developing and maintaining
satisfactory relationships with third parties could become more difficult and
more expensive as competition increases among Internet sites. If the Company is
unable to develop and maintain satisfactory, relationships with such third
parties on terms acceptable to the Company, 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. In these
efforts, the Company has relied, and will continue to rely substantially, on the
product and service development efforts of third parties. For example, the
Company relies on S&P Comstock, Dow Jones & Company. Inc., New York Stock
Exchange, Inc., The Nasdaq Stock Market, Inc., News Alert, Junglee, Edgar
Online, Reuters and Market Guide, Inc. to provide a significant portion of the
information included on the Company's Internet sites. There can be no assurance
the Company will maintain these relationships in the future. Any failure of
these third parties to provide this information to the Company could have a
material adverse effect on the Company's business, financial condition and
operating results.
Dependence on Continued Growth in the 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 infrastructure,
lack of timely development of enabling technologies or lack of 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 or insufficient availability of
telecommunications services to support the Internet also could result in slower
response times and could adversely affect use of the Internet generally and of
the Company's Internet sites in particular. If use of the Internet does not
continue to grow or grows more slowly than expected, or if the Internet
infrastructure does not effectively support growth that may occur, the Company's
business, financial condition and operating results would be materially
adversely affected.
Dependence on the MetaCrawler License. The Company and Netbot entered
into a License Agreement (the "MetaCrawler License Agreement") pursuant to which
Netbot, Inc. ("Netbot") has granted the Company an exclusive (subject to certain
limited exceptions), worldwide license to provide the MetaCrawler Service.
Netbot was acquired by Excite, Inc. in November 1997. As part of the MetaCrawler
License Agreement, the Company has the exclusive right to operate, modify and
reproduce the MetaCrawler Service (including, without limitation, the exclusive
right to use, modify and reproduce the name "MetaCrawler" and the MetaCrawler
URL in connection with the operation of the MetaCrawler Service). Netbot has
licensed the MetaCrawler Service and the other intellectual property rights
associated therewith from UW on an exclusive basis. The license has been granted
to the Company by Netbot on an exclusive basis, but Netbot has reserved the
right to use, modify, reproduce and license the MetaCrawler search engine for
any purpose other than the provision of the MetaCrawler Service and the license
is subject to the rights of UW to use, modify and
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<PAGE>
reproduce the MetaCrawler search engine and derivatives of the MetaCrawler site
to operate Internet sites for internal purposes within the UW domain and to use,
modify and reproduce any of the licensed technologies for research,
instructional and academic purposes. The search technology underlying the
MetaCrawler Service and the MetaCrawler trademark is licensed to or owned by
Netbot and sublicensed to the Company pursuant to the MetaCrawler License
Agreement. A substantial portion of the traffic to the Company's Internet sites
is currently derived from users of the MetaCrawler Service. Although the
MetaCrawler License Agreement may be terminated by Netbot only upon a material
default by the Company thereunder, the termination of the MetaCrawler License
Agreement could have a material adverse effect on the Company's business,
financial condition and operating results. Moreover, the termination of the
License Agreement between UW and Netbot relating to Netbot's license of the
MetaCrawler Service would result in the inability of the Company to continue to
provide the MetaCrawler Service under the MetaCrawler License Agreement, which
could have a material adverse effect on the Company's business, financial
condition and operating results. In addition, any failure by the Company to
continue to provide the MetaCrawler Service for any reason could have a material
adverse effect on the Company's business, financial condition and operating
results.
Risks of New Business Areas. The long-term success of the Company's
business strategy will depend to a significant extent on the Company's ability
to expand operations beyond solely relying on Internet-based advertising
revenues into areas such as subscription-based products and services and
electronic commerce, in addition to successfully developing new Internet sites
and enhancing existing ones. There can be no assurance that the Company will be
able to expand into such areas, develop and launch any new Internet sites or
enhance existing ones. In addition, expansion into new business areas and new
Internet sites may bring the Company into direct competition with new
competitors. Any expansion of product offerings or operations, or new Internet
sites developed and launched by the Company that are not favorably received by
Internet users could damage the Company's reputation or the go2net brand.
Expansion into new business areas or the development and launching of new
Internet sites will also require significant additional expenses and programming
and other resources and will strain the Company's management, financial and
operational resources. Furthermore, any expansion of business areas and the
developing and launching of new Internet sites, as well as the enhancement of
the Company's existing Internet sites, will necessarily rely on untested
business models. To date, the Company has generated limited revenues from
Internet-based advertising, and there can be no assurance that the Company will
be able to generate revenues from these sources in the future. The Company's
failure to expand its business operations or develop and launch new Internet
sites in a cost effective and timely manner could have a material adverse effect
on the Company's business, financial condition and operating results.
From time to time, the Company may entertain new business opportunities
and ventures in a broad range of areas. For example, the Company has acquired
Silicon Investor and Hypermart. Typically, such opportunities require extended
negotiations, the outcome of which cannot be predicted. If the Company were to
enter into such a venture, the Company could be required to invest a substantial
amount of capital, which could have a material adverse effect on the Company's
financial condition and its ability to implement its existing business strategy.
Such an investment could also result in large and prolonged operating losses for
the Company. Further, such negotiations or ventures could place additional,
substantial burdens on the Company's management personnel and its financial and
operational systems. There can be no assurance that such a venture would ever
achieve profitability, and a failure by the Company to recover the substantial
investment required to launch and operate such a venture would have a material
adverse effect on the Company's business, financial condition and operating
results.
Risks of Technological Change. The market for Internet-based 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-based products and services, 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
and operating results. In addition, new Internet-based products, 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 and operating results.
Capacity Constraints and System Disruptions. The satisfactory
performance, reliability and availability of the Company's Internet sites and
its computer network infrastructure are critical to attracting Internet users
and maintaining relationships with advertising customers. The Company's
Internet-based advertising revenues will be directly related to
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<PAGE>
the number of advertisement impressions delivered by the Company. 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 may experience periodic systems interruptions 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
computer network infrastructure. The Company's inability to add additional
computer software, hardware and bandwidth to accommodate increased use of 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 computer network infrastructure on a timely basis to meet increased
use. Any system interruptions or slower response times resulting from the
foregoing factors could have a material adverse effect on the Company's
business, financial condition and operating results. The Company is dependent on
third parties for uninterrupted Internet access. In addition, the Company is
dependent on various third parties for substantially all of its news and
information. Loss of such services from any one or more of such third parties
may have a material adverse effect on the Company's business, financial
condition and operating results. No assurance can be given as to whether, or on
what terms, the Company would be able to obtain such services from other third
parties in the event of the loss of any of such services.
The Company's Internet operations are vulnerable to interruption by
fire, earthquake, power loss, telecommunications failure and other events beyond
the Company's control. There can be no assurance that interruptions in service
will not materially adversely affect the Company's operations in the future.
While the Company carries business interruption insurance to compensate the
Company for losses that may occur, there can be no assurance that such insurance
will be sufficient to provide for all losses or damages incurred by the Company.
Liability for Internet Content; Government Regulations. As a publisher
and a distributor of content over the Internet, the Company 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. In addition, the Company could be exposed to
liability with respect to the content or unauthorized duplication of material
indexed in its search services. Although the Company carries 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 and operating results. Although there
are currently few laws and regulations directly applicable to the Internet, it
is possible that new laws and regulations will be adopted covering issues such
as, among other things, access, obscene or indecent communications and the
pricing, characteristics and quality of Internet products and services. As a
provider of Internet-based products and services, the Company is subject to the
provisions of existing and future federal and local legislation that could be
applied to the Company's operation. Such legislation 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 and operating results.
Liability for Information Retrieved From the Internet. Materials may be
printed from or downloaded into users' computers from the Internet-based
services provided by the Company or from the Internet access or information
providers with which the Company has a relationship. Given that materials may be
subsequently distributed to third parties, without the Company's knowledge or
consent, there is a potential that claims will be made against the Company for
defamation, negligence, copyright or trademark infringement or other theories
based on the nature and content of such materials. Such claims have been
brought, and successfully pressed, against Internet-based services in the past.
Although the Company carries 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 would have a
material adverse effect on the Company's business, financial condition and
operating results.
Security Risks. The Company has instituted certain security measures
designed to protect its Internet sites and other operations from unauthorized
use and access. Such measures cannot guarantee complete security, however, and 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 any 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.
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<PAGE>
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
parties will accept such contractual provisions as part of the Company's
agreements.
Dependence on Licensed Technology; Protection of Intellectual Property.
The Company is dependent upon obtaining existing technology related to its
operations. To the extent new technological developments are unavailable to the
Company on terms acceptable to it or if at all, the Company may be unable to
continue to execute its business plan and its business, financial condition and
operating results would be materially adversely affected. The success of the
Company is dependent upon its ability to protect and leverage the value, if any,
of its original Internet technologies, software, content and its trademarks,
trade names, service marks, domain names and other proprietary rights it either
currently has or may have in the future. The Company has filed service marks for
its logo and name, as well as for the names of each of its sites. In addition,
given the uncertain application of existing copyright and trademark laws to the
Internet, there can be no assurance that existing laws will provide adequate
protection for the Company's technologies, sites or domain names. Policing
unauthorized use of the Company's technologies, content and other intellectual
property rights entails significant expenses and could otherwise be difficult or
impossible to do given, among other things, the global nature of the Internet.
From time to time, the Company may be subject to legal proceedings and claims in
the ordinary course of business, including claims of alleged infringement of the
trademarks and other intellectual property of third parties by the Company or
its licensees. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources. The Company is
not currently aware of any legal proceedings or claims that the Company believes
will have, individually or in the aggregate, a material adverse effect on the
Company's business, financial condition and operating results.
Risks Associated with Potential Acquisitions and Investments. The
Company has, and may in the future, pursue acquisitions of companies,
technologies or assets that complement the Company's business. For example, the
Company has recently acquired Silicon Investor and Hypermart. There can be no
assurance that the Company will be able to identify additional suitable
acquisition candidates available for sale at reasonable prices, consummate any
acquisition or successfully integrate any acquired business into the Company's
operations. Acquisitions may result in the potentially dilutive issuance of
equity securities, the incurrence of additional debt, the write-off of
in-process research and development or software acquisition and development
costs, and the amortization of expenses related to goodwill and other intangible
assets, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Acquisitions would
involve numerous additional risks, including difficulties in the assimilation of
the operations, services, products and personnel of the acquired company, the
diversion of management's attention from other business concerns along with the
risks involved in entering markets in which the Company has little or no
experience. Problems with an acquired business could have a material adverse
effect on the performance of the Company as a whole. The Company has, and may in
the future, make investments in companies involved in the development of
technologies or services that are complementary or related to the Company's
operations.
The acquisitions of Silicon Investor and Hypermart involve a number of
risks which could adversely affect the Company's business, results of operations
and financial condition. For example, the assimilation of the operations of
Silicon Investor and Hypermart with the Company's operations will require, among
other things, the integration of Web sites and services, coordination of
research and development and sales and marketing efforts of the sites and
services. Also, the assumption of liabilities and costs associated with the
relocation of employees, as well as the distraction of the Company's management
from the day-to-day business of the Company could adversely affect the Company's
business or results of operations. There can be no assurance that any future
acquisition, if consummated, would not have a material adverse effect on the
Company's business, results of operations and financial condition.
Susceptibility to General Economic Conditions. The Company's business,
financial condition and operating results will be subject to fluctuations based
upon general economic conditions. If there were to be a general economic
downturn or a recession, however slight, then the Company expects that business
entities, including the Company's advertisers and potential advertisers, could
substantially and immediately reduce their advertising and marketing budgets. In
addition, the Company's ability to charge subscription fees for access to
certain portions of its Internet sites or to engage in commerce via the Internet
would be adversely affected, thereby resulting in a material adverse effect on
the Company's business, financial condition and operating results.
Volatility of Stock Price. The price of the Company's Common Stock has
been and may continue to be subject to wide fluctuations in response to a number
of events and factors such as quarterly variations in results of operations,
announcements of new technological innovations or new products and media
properties by the Company or its competitors, changes in financial estimates and
recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable to the
Company, and news relating to trends in the
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<PAGE>
Company's markets. In addition, the stock market in general, and the market
prices for Intemet-related companies in particular, have experienced extreme
volatility that often has been unrelated to the operating performance of such
companies. These broad market and industry fluctuations may adversely affect the
price of the Company's Common Stock, regardless of the Company's operating
performance.
Year 2000 Compliance. The "Year 2000" issue concerns the potential
exposures related to the automated generation of business and financial
misinformation resulting from the application of computer programs which have
been written using two digits, rather than four, to define the applicable year
of business transactions. The Company has completed its review of the potential
impact of year 2000 issues and does not anticipate any significant costs,
problems or uncertainties associated with becoming Year 2000 compliant. Failure
of the Company or its software providers to adequately address the Year 2000
issue could result in misstatement of reported financial information or
otherwise adversely affect the Company's business operations.
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<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All proceeds from the sale of the Shares will be for the account of the
Selling Stockholders, as described below. See "Selling Stockholders" and "Plan
of Distribution" described below.
SELLING STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
name of each of the Selling Stockholders, the number of Shares that each such
Selling Stockholder owns as of such date, the number of Shares owned by each
Selling Stockholder that may be offered for sale from time to time by this
Prospectus, and the number of Shares to be held by each such Selling Stockholder
assuming the sale of all of the Shares offered hereby. Except as indicated, none
of the Selling Stockholders has held any position or office (other than a
non-officer employment relationship) or had a material relationship with the
Company or any of its affiliates within the past three years other than as a
result of the ownership of the Company's Common Stock. The Company may amend or
supplement this Prospectus from time to time to update the disclosure set forth
herein.
<TABLE>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED(1)(2) SHARES WHICH OWNED AFTER
PRIOR TO OFFERING MAY BE SOLD OFFERING(1)(2)(3)
PURSUANT TO -------------------------
SELLING STOCKHOLDER NUMBER PERCENT THIS PROSPECTUS(2) NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
Former Silicon Investor Stockholders
James Lee Brock 3,967 * 3,967 - -
Barry Dryer 59,785 1.01% 59,785 - -
Brad Dryer 567,964 9.61 567,964 - -
Jeffrey Dryer 567,964 9.61 567,964 - -
Michael Gruber 1,195 * 1,195 - -
Ariel Poler 4,150 * 4.150 - -
VLG Investments 1996 29,585 * 29,585 - -
CNA Trust, TTEE FBO
Venture Law Group 401(k) Plan 3,697 * 3,697 - -
Former Hypermart Stockholders
Brian Atkins 54,334 * 54,334 - -
Allen Graber 53,646 * 53,646 - -
Michael McDermott 44,705 * 44,705 - -
Bruce Atkins and
Donna Atkins, jointly 4,814 * 4,814 - -
6 - 14 -
</TABLE>
<PAGE>
* Less than 1.0%.
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Exchange Act, and the information is
not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as
to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
within 60 days of the date of this Prospectus through the exercise of
any stock option or other right. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power (or shares
such powers with his or her spouse) with respect to the shares shown as
beneficially owned.
(2) Includes an aggregate of 92,849 shares of Common Stock beneficially
owned by the Selling Stockholders that have been deposited in escrow
pursuant to the Silicon Agreement to secure the respective
indemnification obligations of the Selling Stockholders thereunder (the
"Silicon Escrowed Shares"). Each Selling Stockholder which is a former
stockholder of Silicon Investor has deposited approximately 7.5% of his
shares in the escrow. The Silicon Escrowed Shares will be released from
escrow on June 23, 1999 only to the extent that no claims have been
made against the Silicon Escrowed Shares. The Silicon Escrowed Shares
may not be sold by the Selling Stockholders prior to June 23, 1999,
except as otherwise provided in the Escrow Agreement.
Also includes an aggregate of 15,748 shares of Common Stock
beneficially owned by the Selling Stockholders that have been deposited
in escrow pursuant to the Hypermart Agreement to secure the respective
indemnification obligations of the Selling Stockholders thereunder (the
"Hypermart Escrowed Shares"). Each Selling Stockholder which is a
former stockholder of Hypermart has deposited approximately 10% of his
shares in the escrow. The Hypermart Escrowed Shares will be released
from escrow on August 3, 1999 only to the extent that no claims have
been made against the Hypermart Escrowed Shares. The Hypermart Escrowed
Shares may not be sold by the Selling Stockholders prior to August 3,
1999, except as otherwise provided in the Escrow Agreement.
(3) Assumes that each Selling Stockholder will sell all of the Shares set
forth above under "Shares Which May Be Sold Pursuant to This
Prospectus". There can be no assurance that the Selling Stockholders
will sell all or any of the Shares offered hereunder.
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<PAGE>
PLAN OF DISTRIBUTION
The Shares covered by this Prospectus may be offered and sold from time
to time by the Selling Stockholders, including donees, transferees, pledgees or
other successors in interest that receive such Shares as a gift, partnership
distribution or other non-sale related transfer. The Selling Stockholders will
act independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Stockholders may sell the Shares being
offered hereby on The Nasdaq National Market, or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
at negotiated prices. The Shares may be sold by one or more of the following
means of distribution: (a) a block trade in which the broker-dealer so engaged
will attempt to sell Shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a
broker-dealer as principal and resale by such broker-dealer for its own account
pursuant to this Prospectus; (c) an over-the-counter distribution in accordance
with the rules of The Nasdaq National Market; (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (e)
in privately negotiated transactions. To the extent required, this Prospectus
may be amended and supplemented from time to time to describe a specific plan of
distribution. In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Company's Common Stock in the course of hedging the positions they assume with
Selling Stockholders. The Selling Stockholders may also sell the Company's
Common Stock short and redeliver the Shares to close out such short positions.
The Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of Shares offered hereby,
which Shares such broker-dealer or other financial institution may resell
pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). The Selling Stockholders may also pledge Shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged Shares pursuant to this
Prospectus (as supplemented or amended to reflect such transaction). In
addition, any Shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this Prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any such commissions, discounts or concessions may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company will
pay all expenses incident to the offering and sale of the Shares to the public
other than any commissions and discounts of underwriters, dealers or agents and
any transfer taxes.
In order to comply with the securities laws of certain states, if
applicable, the Shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Company has advised the Selling Stockholders that the
anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of Shares in the market and to the activities of the Selling Stockholders
and their affiliates. In addition, the Company will make copies of this
Prospectus available to the Selling Stockholders and has informed them of the
need for delivery of copies of this Prospectus to purchasers at or prior to the
time of any sale of the Shares offered hereby. The Selling Stockholders may
indemnify any broker-dealer that participates in transactions involving the sale
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
At the time a particular offer of Shares is made, if required, a
Prospectus Supplement will be distributed that will set forth the number of
Shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public. There can be no assurance that the Selling
Stockholders will sell all or any of the Shares.
The Company has agreed with certain of the Selling Stockholders to keep
the Registration Statement of which this Prospectus constitutes a part effective
until the earlier of June 23, 2001 and the date on which the Shares may be sold
in accordance with Rule 144(k). The Company intends to de-register any of the
Shares not sold by the Selling Stockholders
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<PAGE>
at the end of such period; however, it is anticipated that at such time any
unsold shares may be freely tradeable subject to compliance with Rule 144 of the
Securities Act.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon by
Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts,
counsel to the Company. Michael J. Riccio, Jr., a shareholder of Hutchins,
Wheeler & Dittmar, is a director of the Company and owns 15,000 shares of Common
Stock and options to purchase 25,000 shares of Common Stock.
EXPERTS
The financial statements of go2net, Inc. appearing in go2net Inc.'s
Annual Report (Form 10-K) for the year ended September 30, 1997 and the
consolidated supplemental financial statements of go2net, Inc. appearing in
go2net Inc.'s, Current Report on Form 8-K filed with the Commission on September
18, 1998, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon included therein and incorporated herein by
reference. Such financial statements and supplemental consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
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<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE BY THIS PROSPECTUS
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SHARES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE OF OR OFFER TO SELL THE SHARES 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 THE DATE HEREOF.
TABLE OF CONTENTS GO2NET, INC.
PAGE 1,395,536 SHARES
OF
Available Information......................... 2
Incorporation of Certain Documents COMMON STOCK
By Reference.............................. 2
The Company................................... 4 PROSPECTUS
Risk Factors.................................. 4
Use of Proceeds............................... 14 OCTOBER 1, 1998
Selling Stockholders.......................... 14
Plan of Distribution.......................... 16
Legal Matters................................. 17
Experts....................................... 17
