As filed with the Securities and Exchange Commission on September 3, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
GO2NET, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1710182
(State or Other Jurisdiction of incorporation (I.R. S. Employer
or organization) Identification No.)
999 Third Avenue, Suite 4700
Seattle, Washington 98104
(206) 447-1595
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
Russell C. Horowitz
Chief Executive Officer
Go2Net, Inc.
999 Third Avenue, Suite 4700
Seattle, Washington 98104
(206) 447-1595
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copy to:
Francis J. Feeney, Jr., Esq.
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
(617) 951-6600
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest investment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of Amount to be Registered Proposed Maximum Offering Proposed Maximum Amount of
Securities to be (1) Price per Share (2) Aggregate Offering Price Registration Fee
Registered (2)
<S> <C> <C> <C>
common stock, par value 686,900 shares $ 60.2815 $ 41,407,363.00 $ 11,512.00
$.01
</TABLE>
(1) The shares of common stock set forth in the Calculation of Registration
Fee Table, and which may be offered pursuant to this Registration
Statement, includes, pursuant to Rule 416 of the Securities Act such
additional number of shares of the Registrant's common stock that may
become issuable as a result of any stock splits, stock dividends or other
similar events.
(2) Estimated solely for the purpose of computing the registration fee, based
upon the average of the bid and ask prices of the Company's common stock
as reported on The Nasdaq National Stock Market on August 30, 1999 in
accordance with Rule 457 under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED ____________________
686,900 Shares of Common Stock
GO2NET, INC.
You should consider carefully the risk factors beginning on page 2 of
this prospectus before purchasing any of the shares of Go2Net common stock
offered by this prospectus.
The selling shareholders identified on page 15 of this prospectus are
offering these shares of common stock. For additional information on the methods
of sale, you should refer to the section entitled "Plan of Distribution" on page
14. We will not receive any portion of the proceeds from the sale of these
shares. This offering is not being underwritten. The selling shareholders may
offer the shares registered pursuant to this prospectus, or Go2Net shares, from
time to time through public or private transactions, on or off the United States
exchanges, at prevailing market prices, or at privately negotiated prices.
The Go2Net shares were issued pursuant to the exemption from the
registration requirements set forth in Section 4(2) of the Securities Act of
1933, as amended. Go2Net's common stock is listed on The Nasdaq National Stock
Market under the ticker symbol "GNET." On September 2, 1999, the closing price
of one share of Go2Net common stock on The Nasdaq National Stock Market was
$63.25 per share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The Date of this Prospectus Is __________, 1999
<PAGE>
THE COMPANY
Go2Net, Inc. offers through the World Wide Web a network of branded,
technology and community-driven Websites. Our properties available through the
Go2Net Network include:
o Go2Net Personal (www.go2net.com),which provides users with a
comprehensive Internet start page offering customizable news,
discussion and portfolio information as well as direct access
to Go2Net's own finance, search and directory, free Web
hosting, shopping, auction and multiplayer games sites;
o MetaCrawler (www.metacrawler.com) and Dogpile
(www.dogpile.com), metasearch services that combine various
existing search/index guides into one service;
o Silicon Investor (www.siliconinvestor.com), the Web's premier
financial discussion community which also offers proprietary
articles, portfolio tracking tools, company research, charting
and analytics and business and finance news;
o HyperMart (www.hypermart.net) and Virtual Avenue
(www.virtualave.net), the Web's leading providers of free
business hosting services;
o Authorize.net (www.authorize.net), the Internet's leading
payment authorization system for online businesses;
o Haggle Online (www.haggle.com), a provider of Web based
person to person auction services;
o WebMarket (www.webmarket.com), a one-step comparison shopping
service;
o Web21 (www.100hot.com), a leading directory of the Web's most
popular sites; and
o Playsite (www.playsite.com), a Java-based multiplayer games
site.
The Go2Net Labs division develops innovative technologies to enhance
the features and functionality of our sites and for licensing to other Internet
companies. We focus on utilizing innovative technologies to deliver our content
and to enhance the attractiveness and utility of our product offerings.
Go2Net was incorporated in February, 1996, under the laws of the state
of Delaware. Our principal executive offices are located at 999 Third Avenue,
Suite 4700, Seattle, Washington 98104 and our telephone number is (206)
447-1595. As used in this prospectus, the terms "we," "us," "our," and "Go2Net"
refer to Go2Net, Inc., a Delaware corporation, and its wholly owned
subsidiaries.
FORWARD-LOOKING INFORMATION
This prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 including, in particular, the statements about
Go2Net's plans, strategies, prospects under the heading "Risk Factors." Although
we believe that our plans, intentions and expectations reflected in or suggested
by such forward-looking statements are reasonable, we can give no assurance that
such plans, intentions or expectations will be achieved. Important factors that
could cause actual results to differ materially from the forward-looking
statements we make in this prospectus are set forth below and elsewhere in this
prospectus.
<PAGE>
RISK FACTORS
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO EVALUATE US
We have a limited operating history upon which an evaluation of our
prospects can be based. We anticipate that advertising revenues from Internet
sites will constitute a majority of our revenues during the foreseeable future.
We believe that our success will depend upon our ability to generate revenues
from advertising and subscription fees from our Internet sites, which cannot be
assured. Our ability to generate revenues is subject to substantial uncertainty.
Our prospects must be considered in light of the risks, expenses, difficulties
and uncertainties frequently encountered by emerging growth companies in new and
rapidly evolving markets for Internet based products and services. Our success
will depend on our ability to:
o effectively establish, develop and maintain relationships
with advertising customers, advertising agencies and
other third parties;
o enter into distribution relationships and strategic alliances
to drive traffic to our Websites;
o provide original and compelling products and services to
Internet users;
o develop and upgrade our technology;
o effectively respond to competitive developments;
o continue to develop and extend the Go2Net brand;
o effectively generate revenues through sponsored services and
placements;
o attract new qualified personnel; and
o retain existing qualified personnel.
We may not succeed in addressing these risks.
WE ANTICIPATE INCREASED OPERATING EXPENSES AND MAY EXPERIENCE LOSSES
Since inception, we have incurred significant losses on an annual basis
and, as of June 30, 1999, had an accumulated deficit of $164,545,103. Our lack
of an extensive operating history makes prediction of future operating results
difficult. We believe that a comparison of our quarterly reports is not
meaningful. As a result, you should not rely on the results for any period as an
indication of our future performance. Accordingly, although we reported pro
forma income for the quarter ended June 30, 1999, there can be no assurance that
we will generate significant revenues or that we will sustain this level of
profitability in the future. We currently intend to increase substantially our
operating expenses in order to expand and improve our Internet operations, fund
increased advertising and marketing efforts, expand and improve our Internet
user support capabilities and develop new Internet technologies, products and
services. As a result, we may experience significant losses on a quarterly and
annual basis.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE BECAUSE OF A NUMBER OF FACTORS,
MANY OF WHICH ARE OUTSIDE OF OUR CONTROL
Our quarterly operating results may fluctuate significantly as a result
of a variety of factors, many of which are outside of our control. These factors
include but are not limited to:
o the demand for Internet advertising;
o the level of usage of the Internet;
o the level of user traffic on our Websites;
<PAGE>
o seasonal trends and budgeting cycles in advertising sales;
o incurrence of costs relating to the development, operation and
expansion of our Internet operations;
o introduction of new products and services by us and our
competitors;
o costs incurred with respect to acquisitions;
o price competition or pricing changes in the industry;
o technical difficulties or system failures; and
o general economic conditions and economic conditions specific
to the Internet and Internet media.
We may from time to time make pricing, service or marketing decisions
that may adversely affect our profitability in a given quarterly or annual
period.
We derive the majority of our revenues from the sale of advertisements
under short-term contracts, which are difficult to forecast accurately. Our
expense levels are based in part on expectations of future revenue and, to a
large extent, are fixed. We may be unable to adjust spending quickly enough to
compensate for any unexpected revenue shortfall. Accordingly, the cancellation
or deferral of advertising or sponsorship contracts could have a material
adverse effect on our financial results. Our operating expenses are likely to
increase significantly over the near term and, to the extent that our expenses
increase but our revenues do not, our business, operating results, and financial
condition may be materially and adversely affected.
Our advertising revenue is also subject to seasonal fluctuations.
Historically, advertisers spend less in the first and third calendar quarters
and user traffic on our online media properties has historically been lower
during the summer and during year-end vacation and holiday periods.
OUR SUCCESS DEPENDS ON OUR ABILITY TO MAINTAIN ADVERTISING REVENUES
We derive a significant portion of our revenues from the sale of
advertising on our Internet sites. We will not be able to maintain or increase
our advertising revenues in the future if our advertising customers move their
advertising to competing Internet sites or to traditional forms of media.
Additionally, in selling Internet-based advertising, we depend in part on
advertising agencies, which exercise substantial control over the placement of
advertising for their clients. Our success will depend on our ability to retain,
broaden and diversify our future base of advertising customers. In order to
generate significant advertising revenues, we will depend on the development of
a larger base of users of our Internet sites having demographic characteristics
attractive to advertisers. If we are unable to retain paying advertising
customers or we are forced to offer lower than anticipated advertising rates in
order to retain advertising customers or to attract new advertising customers,
our business, financial condition and operating results will be adversely
affected, and we may cease to be a commercially viable enterprise.
WE ARE UNABLE TO FORECAST OUR EXPENSES AND REVENUES ACCURATELY
As a result of our limited operating history and the emerging nature of
the Internet, including Internet-based advertising, subscription services and
electronic commerce, we are unable to forecast our expenses and revenues
accurately. Our current and future estimated expense levels are based largely on
our estimates of future revenues and may increase because many of our
significant operating expenses are either fixed, such as rent for office space,
or subject to likely increases. Few, if any, of our operating expenses can be
quickly or easily reduced in a manner which would not cause a material adverse
effect to our business, financial condition and operating results. In addition,
we 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 our
business, financial condition and operating results.
<PAGE>
OUR ARRANGEMENTS WITH ADVERTISERS AND SPONSORS MAY EXPOSE US TO SIGNIFICANT
FINANCIAL RISKS
We enter into advertising arrangements with third parties to provide
services on our Websites which involve a unique rate structure. Specifically, we
receive sponsorship fees and, under certain circumstances, a portion of
transaction revenues received by third party sponsors from users originated
through our Websites, in return for minimum levels of user impressions or user
requests for additional information made by clicking on the promotional
hyperlink or advertisement. To the extent implemented, these arrangements expose
us to potentially significant financial risks, including the risk that we fail
to deliver required minimum levels of user impressions (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. Some of these arrangements also require us to
integrate advertisers' or sponsors' content with our services, which requires
the dedication of resources and significant programming and design efforts to
accomplish. We cannot assure you that we will be able to attract additional
advertisers or sponsors or that we will be able to renew existing advertising
arrangements when they expire. In addition, we have granted exclusivity
provisions to some of our sponsors and may in the future grant additional
exclusivity provisions. These exclusivity provisions may have the effect of
preventing us, for the duration of the exclusivity arrangements, from accepting
advertising or sponsorship arrangements within a particular subject matter in
our Websites or across our entire service. Our inability to enter into further
sponsorships or advertising arrangements as a result of our exclusivity
arrangements could have a material adverse impact our business, financial
condition and operating results.
WE DEPEND ON THE CONTINUED GROWTH OF THE INTERNET AS AN ADVERTISING MEDIUM
Use of the Internet by consumers is at an early stage of development
and market acceptance of the Internet as a medium for information,
entertainment, commerce and advertising is subject to a level of uncertainty. We
believe that our success depends upon our ability to obtain significant revenues
from our Internet operations, which will require the continued acceptance of the
Internet as an advertising medium. We believe that most advertisers and
advertising agencies have limited experience with the Internet as an advertising
medium and most advertisers and advertising agencies have not devoted a
significant portion of their advertising budgets to Internet-related advertising
to date. In order for us to continue to generate advertising revenues,
advertisers and advertising agencies must direct more of their budgets to the
Internet as a whole, and specifically to our Internet sites. We cannot assure
you that advertisers or advertising agencies will continue to allocate larger
portions of their budgets to Internet-based advertising or that they will find
Internet-based advertising to be more effective than advertising in traditional
media such as television, print or radio. Advertisers may determine that banner
advertising, which comprises the majority of our revenues, is not an effective
advertising medium. We may not be able to effectively transition to any other
forms of Web-based advertising, should such other forms prove more popular.
Advertising filter software programs have become available that limit or remove
banner advertising from Web pages viewed by an Internet user. Such software, if
generally adopted by users, may have a materially adverse effect upon the
viability of advertising on the Internet. Our advertising customers may not
accept the internal and third-party measurements of impressions received by
advertisements on Go2Net online media properties and such measurements may
contain errors. We rely primarily on our internal advertising sales force for
domestic advertising sales, which involves additional risks and uncertainties,
including risks associated with the recruitment, retention, management,
training, and motivation of sales personnel. As a result of these factors, we
may not be able to sustain or increase current advertising sales levels. Failure
to do so will have a material adverse effect on our business, operating results,
and financial position.
WE DEPEND ON CONTINUED GROWTH IN E-COMMERCE AND INTERNET INFRASTRUCTURE
DEVELOPMENT
Use of the Internet by businesses and consumers as a medium for
electronic commerce is at an early stage of development and is subject to a
level of uncertainty. We depend on the growing use and acceptance of the
Internet as an effective medium of commerce by merchants and customers. The use
of and interest in the Internet is a relatively recent development. We cannot be
certain that acceptance and use of the Internet will continue to develop as a
medium for commerce or that a sufficiently broad base of merchants and consumers
will adopt, and continue to use, the Internet as a medium of commerce.
The emergence of the Internet as a commercial marketplace may occur
more slowly than anticipated for a number of reasons, including potentially
inadequate development of the necessary network infrastructure or delayed
development of enabling technologies and performance improvements. If the number
of Internet users or their use of Internet resources continues to grow, it may
overwhelm the existing Internet infrastructure. Delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity could also have a detrimental effect. These factors could
result in slower response times or adversely affect usage of the Internet,
resulting in lower numbers of e-commerce transactions and lower demand for our
services.
<PAGE>
WE ARE EXPOSED TO E-COMMERCE SECURITY RISKS
A requirement of the continued growth of e-commerce is the secure
transmission of confidential information over public networks. We rely on public
key cryptography and digital certificate technology to provide the security and
authentication necessary for secure transmission of confidential information.
Various regulatory and export restrictions may prohibit us from using the
strongest and most secure cryptographic protection available and thereby expose
us to a risk of data interception. A party who is able to circumvent our
security measures could misappropriate proprietary information or interrupt our
operations.
Any such compromise or elimination of our security could reduce demand for our
services.
We may be required to expend significant capital and other resources to
protect against such security breaches or to address problems caused by such
breaches. Concerns over the security of the Internet and other online
transactions and the privacy of users may also inhibit the growth of the
Internet and other online services generally, and the Web in particular,
especially as a means of conducting commercial transactions. Because certain of
our activities involve the storage and transmission of proprietary information,
such as credit card numbers, security breaches could damage our reputation and
expose us to a risk of loss or litigation and possible liability. Our security
measures may not prevent security breaches, and failure to prevent such security
breaches may disrupt our operations.
THE MARKET FOR OUR PRODUCTS AND SERVICES IS UNCERTAIN
The market for our products and services is new and evolving, and
therefore, it is difficult to predict whether the Internet will develop the
necessary infrastructure. Market demand and acceptance of newly released
products and services is highly uncertain. Our future success depends upon our
ability to develop and provide on the Internet original and compelling products
and services that will continue to attract and retain users with demographic
characteristics valuable to the various advertisers and advertising agencies we
target and to charge users a subscription fee for access to specific portions of
our products and services. We cannot assure you that our 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 our
products and services. There also can be no assurance that we will be able to
anticipate, monitor and successfully respond to rapidly changing consumer tastes
and preferences so as to attract a growing number of users to our Internet sites
with characteristics desirable to advertisers and advertising agencies or those
users who are otherwise willing to pay to access specific portions of our
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 us to distinguish our 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 our Internet sites. If we are unable to develop
original and compelling Internet-based products and services, we will be unable
to generate sufficient advertising or subscription revenues, and our business,
financial condition and operating results will be adversely affected.
THE MARKET FOR OUR PRODUCTS AND SERVICES HAS A LOW BARRIER OF 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, we compete for the
time and attention of Internet users with thousands of non-profit Internet sites
operated by individuals, government and educational institutions. Existing and
potential competitors also include magazine and newspaper publishers, cable
television companies and start-up ventures attracted to the Internet market. As
a result, we expect competition to persist and intensify and the number of
competitors to increase significantly in the future. As we attempt to expand the
scope of our Internet sites and product offerings, we 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 us to anticipate which companies are likely to
offer competitive products and services in the future.
There can be no assurance that our Internet sites will compete successfully.
MARKET CONSOLIDATION IS CREATING MORE FORMIDABLE COMPETITORS
In the recent past, there have been a number of significant
acquisitions and strategic plans announced among and between many of our
competitors, including:
o The Walt Disney Company acquiring a significant interest in
Infoseek;
<PAGE>
o AOL acquiring Netscape;
o Yahoo! acquiring GeoCities Corporation and Broadcast.com;
o @HomeNetworks, a provider of high speed internet access
serving the cable television infrastructure and
the largest stockholder of which is AT&T, acquiring Excite;
o NBC announcing that it intends to merge its Internet assets
with XOOM.com, Inc. and Snap.com, a subsidiary of
CNET; and
o CMGI, Inc. acquiring AltaVista from Compaq.
The effect of these completed and pending acquisitions and strategic
plans on Go2Net cannot be predicted with certainty, but all of these competitors
are aligned with companies that are significantly larger or more well
established than Go2Net. In particular, many of them are television broadcasters
having substantial marketing resources and capabilities to assist our
competitors. As a result, each of them will have access to significantly greater
financial, marketing and, in some cases, technical resources than Go2Net.
RECENT ALLIANCES MAY MAKE IT MORE DIFFICULT TO ACCESS OUR PRODUCTS AND MEDIA
PROPERTIES
The recent acquisitions and alliances discussed above will result in
greater competition as more users of the Internet consolidate on fewer services
that incorporate search and retrieval features. In addition, providers of
software and other Internet products and services are incorporating search and
retrieval features into their offerings. For example, Web browsers offered by
Netscape and Microsoft increasingly incorporate prominent search buttons that
direct search traffic to competing services. These features could make it more
difficult for Internet users to find and use our products and services. Netscape
has an agreement with Excite under which Excite is the most prominent
navigational service within the Netcenter Website. In the future, Netscape,
Microsoft and other browser suppliers may also more tightly integrate products
and services similar to ours into their browsers or their browsers' pre-set home
pages. Any of these companies could take actions that would make it more
difficult for consumers to find and use Go2Net services. Microsoft recently
announced that it will feature and promote Internet search services provided by
Alta Vista and signed a long term partnership with LookSmart to provide
directory services in the Microsoft Network and other Microsoft online
properties. Such search services may be tightly integrated into future versions
of the Microsoft operating system, the Internet Explorer browser, and other
software applications, and Microsoft may promote such services within the
Microsoft Network or through other Microsoft affiliated end-user services such
as MSNBC or WebTV Networks. Each of these situations creates a potential
competitive advantage over ours because their Internet navigational offerings
may be more conveniently accessed by users.
OUR COMPETITORS HAVE GREATER RESOURCES THAN WE DO
Many, if not all, of our competitors have significantly greater
resources than we do. In particular, our competitors have greater financial,
editorial, technical and marketing resources, longer operating histories,
greater name recognition, and greater experience than we do. Additionally, our
competitors have established relationships with more advertisers and advertising
agencies. And they are able to undertake more extensive marketing campaigns,
adopt more aggressive advertising and subscription price policies and devote
substantially more resources to developing Internet-based products and services
than we are. There can be no assurance that we will be able to compete
successfully against current or future competitors or that competitive pressures
faced by us will not materially adversely affect our business, financial
condition and operating results.
INCREASED COMPETITION MAY EXERT DOWNWARD PRICING PRESSURE ON ADVERTISING
CONTRACTS
We compete with online services, other Website operators and
advertising networks, as well as traditional offline media such as television,
radio and print for a share of advertisers' total advertising budgets. We
believe that the number of companies selling Web-based advertising and the
available inventory of advertising space has recently increased substantially.
Accordingly, we may face increased pricing pressure for the sale of
advertisements, which could reduce our advertising revenues. In addition, our
sales may be adversely affected to the extent that our competitors offer
superior advertising services that better target users or provide better
reporting of advertising results.
<PAGE>
WE MUST DEVELOP AND MAINTAIN A "BRAND IDENTITY" FOR OUR PRODUCTS
We believe that maintaining and building the Go2Net brand is a critical
aspect of our efforts to attract an Internet audience. In addition, we believe
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 our continued ability to develop and deliver original
and compelling Internet- based products and services. If Internet users do not
continue to perceive our Internet sites to be of sufficient interest and
usefulness, we will be unsuccessful in promoting and maintaining our brand. If
we expand the focus of our operations beyond providing our current Internet
sites, we risk diluting our brand, confusing users and advertisers, and
decreasing the attractiveness of our audience to advertisers. In order to
respond to competitive pressures, we may find it necessary to increase our
budget for developing our products and services or otherwise to increase
substantially our financial commitment to creating and maintaining a distinct
brand loyalty among users. If we are unable to provide Internet-based products
and services or otherwise fail to promote and maintain the Go2Net brand, or we
incur significant expenses in an attempt to improve our products and services or
promote and maintain our brand, our business, financial condition and operating
results will be adversely affected.
THE INTERNET IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGES, AND WE MUST ADAPT
QUICKLY TO THESE CHANGES TO COMPETE EFFECTIVELY
The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. For example, to the
extent that higher bandwidth Internet access becomes more widely available, we
may be required to make significant changes to the design and content of our
products and media properties. Failure to effectively adapt to these or any
other technological developments could adversely affect our business, operating
results and financial condition.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH AND INTEGRATING RECENTLY ACQUIRED
COMPANIES
Our recent growth has placed a significant strain on our managerial,
operational, and financial resources. To manage our growth, we must continue to
implement and improve our operational and financial systems and to expand,
train, and manage our employee base. Any inability to manage growth effectively
could have a material adverse effect on our business, operating results, and
financial condition.
The process of managing advertising within large, high traffic Websites
such as ours is an increasingly important and complex task. We rely on both
internal and licensed third-party advertising inventory management and analysis
systems. To the extent that any extended failure of our advertising management
system results in incorrect advertising insertions, we may be exposed to "make
good" obligations, which, by displacing advertising inventory, could defer
advertising revenues. Failure of our advertising management systems to
effectively scale to higher levels of use or to effectively track and provide
accurate and timely reports on advertising results also could negatively affect
our relationships with advertisers.
As part of our business strategy, we have completed several
acquisitions and expect to enter into additional business combinations and
acquisitions including our acquisitions of Silicon Investor, Web21, Hypermart,
Haggle Online, Virtual Avenue, IQC, Authorize.net and Dogpile, LLC. Go2Net
expects to enter into additional business combinations and acquisitions.
Acquisition transactions are accompanied by a number of risks, including:
o the difficulty of assimilating the operations and
personnel of the acquired companies;
o the potential disruption of our ongoing business and
distraction of management;
o the difficulty of incorporating acquired technology or
content and rights into our products and media
properties;
o the correct assessment of the relative percentages of
in-process research and development expense which can be
immediately written off as compared to the amount which must
be amortized over the appropriate life of the asset;
<PAGE>
o the failure to successfully develop an acquired in-process
technology resulting in the impairment of amounts
currently capitalized as intangible assets;
o unanticipated expenses related to technology integration;
o the maintenance of uniform standards, controls, procedures
and policies;
o the impairment of relationships with employees and customers
as a result of any integration of new management
personnel; and
o the potential unknown liabilities associated with acquired
businesses.
We may not be successful in addressing these risks or any other
problems encountered in connection with such acquisitions.
WE MAY BE SUBJECT TO RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
In the future, we may pursue acquisitions of companies, technologies or
assets that complement our business. We cannot assure you that we will be able
to identify suitable acquisition candidates available for sale at reasonable
prices, consummate any acquisition or successfully integrate any acquired
business into our 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
our business, financial condition and results of operations. As described above,
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 we have
little or no experience. We have made, and may in the future make, investments
in companies involved in the development of technologies or services that are
complementary or related to our operations. Problems with an acquired business
could have a material adverse effect on our performance as a whole.
RISKS ASSOCIATED WITH THE ACQUISITION BY VULCAN VENTURES OF GO2NET CAPITAL STOCK
Influence over Go2Net Actions. Vulcan Ventures Incorporated recently
acquired approximately 30.83% of Go2Net's outstanding common stock (including
common stock issuable upon conversion of Series A Preferred Stock). Vulcan's
ownership could be sufficient to enable Vulcan to significantly influence the
vote on most matters submitted to a vote of the public shareholders, including
the election of the Board of Directors. Vulcan has acquired the right to
designate two directors to serve on Go2Net's Board of Directors.
Conflicts of Interest. Conflicts of interest may arise as a consequence of
the relationship between Vulcan and Go2Net,
including:
o conflicts between Vulcan, as a shareholder with a significant
ownership interest in Go2Net and representation on the Board
of Directors, and the other shareholders of Go2Net, whose
interests may differ with respect to, among and other things,
the strategic direction of Go2Net or significant corporate
transactions,
o conflicts arising in respect of corporate opportunities that
could be pursued by Go2Net, on the one hand, or by Vulcan and
any of its other affiliated entities, on the other hand, or
o conflicts arising in respect of any new contractual
relationships between Go2Net, one the one hand, and Vulcan and
any of its other affiliated entities, on the other hand.
To the extent that conflicts arise as a result of Vulcan's relationship
Go2Net, the Board of Directors (including any directors nominated by Vulcan)
would be guided by its fiduciary obligations as directors under Delaware law,
including the directors' duty of loyalty. In addition, Vulcan's beneficial
ownership of approximately 30.83% of Go2Net's outstanding common stock will make
it more difficult for a third party to effect a change in management or to
acquire control of Go2Net without the approval of Vulcan and, therefore, may
delay, prevent or deter a proxy contest for control of Go2Net or other changes
in management, or discount bids for a merger, acquisition or tender offer, in
which Go2Net's shareholders could receive a premium for their shares.
<PAGE>
Blocking Rights. Vulcan is not required to sell its block of shares,
even if an offer is made that might be attractive to the other shareholders. In
addition, the consent of the holders of Series A Preferred Stock, voting as a
class, is required to effect particular corporate actions, including without
limitation, to amend Go2Net's Restated Certificate of Incorporation or By-laws
in any manner that would adversely affect the powers, preferences or special
rights of the Series A Preferred Stock.
Distribution Agreement. One of the important considerations for Go2Net
in entering into the Vulcan transactions was the fact that Vulcan, through its
affiliated entities, operates cable systems that serve over 6,200,000 cable
subscribers and that such cable companies may provide an opportunity for Go2Net
to establish a distribution or other relationship with them. As a result of the
Vulcan transactions, these cable companies have commenced negotiations with
Go2Net with respect to the establishment of a distribution or other relationship
to offer Go2Net's content to their subscribers. There can be no assurance that
an agreement will be reached or, if an agreement is reached, that it will be
profitable to Go2Net.
WE ARE DEPENDENT ON KEY PERSONNEL
Our future success depends to a significant degree on the skill, experience
and efforts of Russell C. Horowitz, Michael J. Riccio, Jr., John Keister and the
other members of our management team, as well as on our ability to retain and
motivate our officers and key employees. The loss of Mr. Horowitz, Mr. Riccio,
Mr. Keister or the other members of our management team could have a material
adverse effect on our business, operating results and financial condition. We
also depend on the ability of our executive officers and other members of senior
management to work effectively as a team. We have entered into employment
agreements with Messrs. Horowitz, Keister and Riccio. We maintain $10,000,000
"key man" life insurance policies on the lives of Mr. Riccio and Mr. Keister and
a $20,000,000 "key man" life insurance policy on the life of Mr. Horowitz.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A TIGHT LABOR MARKET
Qualified personnel are in great demand throughout the technology
industry. Our future success depends on our continuing ability to attract and
retain highly qualified technical and managerial personnel. There can be no
assurance that we will be able to retain our existing employees and independent
contractors or that we 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 our business,
financial condition and operating results.
WE DEPEND UPON THIRD PARTIES FOR CRITICAL ELEMENTS OF OUR BUSINESS
We depend upon third parties in order to advertise our Internet sites
on other Internet sites. In addition, the willingness of the owners and
operators of such sites to direct users to our Internet sites through hypertext
links are critical to the success of our Internet operations. There can be no
assurance that we will establish or maintain such arrangements in the future.
WE DEPEND ON THIRD PARTIES FOR CONTENT DEVELOPMENT OF OUR INTERNET SITES
Our 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 we are unable
to develop and maintain satisfactory, relationships with third parties on terms
acceptable to us, or if our competitors are better able to leverage these
relationships, our business, financial condition and operating results will be
materially adversely affected. We have relied, and will continue to rely
substantially, on the product and service development efforts of third parties.
For example, we rely on S&P Comstock, Dow Jones & Company. Inc., New York Stock
Exchange, Inc., The Nasdaq Stock Market, Inc., Reuters and Market Guide, Inc. to
provide a significant portion of the information included on our Internet sites.
There can be no assurance we will maintain these relationships in the future.
Any failure of these third parties to provide this information to us could have
a material adverse effect on our business, financial condition and operating
results.
<PAGE>
OUR PERFORMANCE DEPENDS ON THE SUCCESS OF THE METACRAWLER LICENSE
We entered into a License Agreement with Netbot, Inc. (the "MetaCrawler
License Agreement"), in which Netbot, Inc. granted us an exclusive (subject to
some limited exceptions), worldwide license to provide the MetaCrawler Service.
As part of the MetaCrawler License Agreement, we have 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). A material portion of the traffic to our Internet sites is
currently derived from users of the MetaCrawler Service. A termination of the
MetaCrawler License Agreement or the inability of Go2Net to continue to provide
access to the search engines included in the MetaCrawler Service, could have a
material adverse effect on our business, financial condition and operating
results. Netbot has licensed the MetaCrawler Service and the other intellectual
property rights associated therewith from the University of Washington on an
exclusive basis. The license has been granted to us 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. The license is subject to the rights of the University of
Washington to use, modify and reproduce the MetaCrawler search engine and
derivatives of the MetaCrawler site to operate Internet sites for internal
purposes within the University of Washington 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
use pursuant to the MetaCrawler License Agreement.
WE MUST CONTINUE TO DIVERSIFY OUR REVENUE STREAMS
The long-term success of our business strategy will depend to a
significant extent on our ability to successfully diversify our revenue streams.
We currently derive revenue from advertising, licensing, subscriptions and
electronic commerce. However, we are largely dependent on advertising revenues,
and continue to seek out ways to develop these other sources of revenue. This
includes the investigation of new business areas. Expansion into new business
areas and new Internet sites may bring us into direct competition with new
competitors. Any expansion of product offerings or operations, or new Internet
sites developed and launched by us that are not favorably received by Internet
users could damage our 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. It
will also strain our management, financial and operational resources.
From time to time, the Company may entertain new business opportunities
and ventures in a broad range of areas. 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.
WE ARE SUBJECT TO SYSTEM DISRUPTIONS AND CAPACITY CONSTRAINTS
The satisfactory performance, reliability and availability of our
Internet sites and our computer network infrastructure are critical to
attracting Internet users and maintaining relationships with advertising
customers. Our Internet-based advertising revenues will be directly related to
the number of advertisement impressions delivered by us. System interruptions
that result in the unavailability of our Internet sites or slower response times
for users would reduce the number of advertisements delivered and reduce the
attractiveness of our Internet sites to users and advertisers. We may experience
periodic system interruptions from time to time in the future. Additionally, any
substantial increase in traffic on our Internet sites may require us to expand
and adapt our computer network infrastructure. Our inability to add additional
computer software, hardware and bandwidth to accommodate increased use of our
Internet sites may cause unanticipated system disruptions and result in slower
response times. We cannot assure you that we will be able to expand our computer
network infrastructure on a timely basis to meet increased use. Any system
interruptions or slower response times resulting from these factors could have a
material adverse effect on our business, financial condition and operating
results. We are dependent on third parties for uninterrupted Internet access. In
addition, we are dependent on various third parties for substantially all of our
news and information. Loss of these services from any one or more of third
parties may have a material adverse effect on our business, financial condition
and operating results. No assurance can be given as to whether, or on what
terms, we would be able to obtain these services from other third parties in the
event of the loss of any of these services.
Our Internet operations are vulnerable to interruption by fire,
earthquake, power loss, telecommunications failure and other events beyond our
control. There can be no assurance that interruptions in service will not
materially adversely affect our operations in the future. While we carry
business interruption insurance to compensate us for losses that may occur, we
cannot assure you that insurance will be sufficient to provide for all losses or
damages that we incur.
<PAGE>
WE ARE SUBJECT TO U.S. AND FOREIGN GOVERNMENT REGULATION OF THE INTERNET, THE
IMPACT OF WHICH IS DIFFICULT TO PREDICT
There are currently few laws or regulations directly applicable to the
Internet. The application of existing laws and regulations to Go2Net relating to
issues such as user privacy, defamation, pricing, advertising, taxation,
gambling, sweepstakes, promotions, content regulation, quality of products and
services, and intellectual property ownership and infringement can be unclear.
In addition, we will also be subject to new laws and regulations directly
applicable to our activities. Any existing or new legislation applicable to us
could expose us to substantial liability, including significant expenses
necessary to comply with such laws and regulations, and dampen the growth in use
of the Web.
Other nations, including Germany, have taken actions to restrict the
free flow of material deemed to be objectionable on the Web. The European Union
has recently adopted privacy and copyright directives that may impose additional
burdens and costs on our international operations. In addition, several
telecommunications carriers, including America's Carriers' Telecommunications
Association, are seeking to have telecommunications over the Web regulated by
the FCC in the same manner as other telecommunications services. Many areas with
high Web use have begun to experience interruptions in phone service, and local
telephone carriers, such as Pacific Bell, have petitioned the FCC to regulate
ISPs and OSPs and to impose access fees. A number of proposals have been made at
the federal, state and local level that would impose additional taxes on the
sale of goods and services through the Internet. If any such proposals are
adopted, it could substantially impair the growth of the Internet and adversely
affect us.
Several recently passed federal laws could have an impact on our
business. The Digital Millennium Copyright Act is intended to reduce the
liability of online service providers for listing or linking to third-party
Websites that include materials that infringe copyrights or other rights of
others. The Children's Online Protection Act and the Children's Online Privacy
Protection Act are intended to restrict the distribution of materials deemed
harmful to children and impose additional restrictions on the ability of online
services to collect user information from minors. In addition, the Protection of
Children From Sexual Predators Act of 1998 requires online service providers to
report evidence of violations of federal child pornography laws under some
circumstances. We are currently reviewing this legislation, and cannot currently
predict the effect, if any, that it will have on our business. Such legislation
may impose significant additional costs on our business or subject us to
additional liabilities.
Due to the global nature of the Web, it is possible that the
governments of other states and foreign countries might attempt to regulate its
transmissions or prosecute us for violations of their laws. We might
unintentionally violate such laws. Such laws may be modified, or new laws
enacted, in the future. Any such developments could have a material adverse
effect on our business, results of operations, and financial condition.
WE MAY BE SUBJECT TO A VARIETY OF LEGAL UNCERTAINTIES THAT IMPAIR OUR BUSINESS
As a publisher and a distributor of content over the Internet, we face
potential liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute. In addition, we could be exposed to liability
with respect to the content or unauthorized duplication of material indexed in
our search services. Although we carry liability insurance, our insurance may
not cover potential claims of this type or may not be adequate to indemnify us
for all liability that may be imposed.
We host a wide variety of services that enable individuals to exchange
information, generate content, conduct business and engage in various online
activities, including services relating to online auctions and the homesteading
and other services. The law relating to the liability of providers of these
online services for activities of their users is currently unsettled. Claims
could be made against us for defamation, negligence, copyright or trademark
infringement, unlawful activity, tort, including personal injury, fraud or other
theories based on the nature and content of information that we provide links to
or that may be posted online or generated by our users or with respect to
auctioned materials. These types of claims have been brought, and sometimes
successfully pressed, against online service providers in the past. In addition,
we are aware that governmental agencies are currently investigating the conduct
of online auctions.
We also periodically enter into arrangements to offer third-party
products, services, or content under the Go2Net brand or via distribution on
Go2Net properties, including stock quotes and trading information. We may be
subject to claims concerning these products, services or content by virtue of
our involvement in marketing, branding, broadcasting or providing access to
them, even if we do not ourself host, operate, provide, or provide access to
these products, services or content. While our agreements with these parties
often provide that we will be indemnified against such liabilities, such
indemnification may not be adequate.
<PAGE>
It is also possible that, if any information provided directly by us
contains errors or is otherwise negligently provided to users, third parties
could make claims against us. For example, we offer Web-based email services,
which expose us to potential risks, such as liabilities or claims resulting from
unsolicited email, lost or misdirected messages, illegal or fraudulent use of
email, or interruptions or delays in email service.
WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY LITIGATION
From time to time, we 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 us or our
licensees. Such claims could result in the expenditure of significant financial
and managerial resources. To this date, we are not aware of any legal
proceedings or claims against us. Such proceedings or claims could, if brought
or asserted, have a material adverse effect on our business, financial condition
and operating results.
WE DEPEND ON LICENSED TECHNOLOGY IN OUR PRODUCTS AND SERVICES
We are dependent upon obtaining existing third party technology related
to our operations. To the extent new technological developments are unavailable
to us on terms acceptable to us or at all, we may be unable to continue to
execute our business plan and our business, financial condition and operating
results would be materially adversely affected.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY
Our success is dependent upon our ability to protect and leverage the
value of our original Internet technologies, software, content and our
trademarks, trade names, service marks, domain names and other proprietary
rights we either currently have or may have in the future. We have filed service
marks for our logo and name, as well as for the names of each of our 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 our technologies, sites or domain names. Policing
unauthorized use of our technologies, content and other intellectual property
rights entails significant expenses and could otherwise be difficult or
impossible to do given the global nature of the Internet.
OUR SUCCESS DEPENDS ON OUR ABILITY TO OBTAIN ADDITIONAL CAPITAL
We intend to enhance and expand our Internet sites in order to improve
our competitive position and meet the increasing demands for quality
Internet-based products and services and competitive advertising and
subscription pricing. Our ability to grow will depend in part on our ability to
expand and improve our Internet operations, expand our advertising and marketing
efforts, expand and improve our Internet user support capabilities and develop
new Internet technologies, products and services. As a result, we 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, we may
need to raise additional funds in order to avail ourselves of 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 our 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 our then existing shareholders would be reduced,
shareholders may experience additional and significant dilution and the 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 us or at all. If adequate funds are not
available or are not available on terms acceptable to us, we may be unable to
implement our 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.
WE MAY BE AFFECTED BY GENERAL ECONOMIC CONDITIONS
Our 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 we expect that
business entities, including our advertisers and potential advertisers, could
substantially and immediately reduce their advertising and marketing budgets. In
addition, our ability to charge subscription fees for access to specific
portions of our 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.
<PAGE>
WE MAY BE ADVERSELY IMPACTED BY YEAR 2000 ISSUES
Many currently installed computer systems and software products are
dependent upon internal calendars coded to accept only two digit entries in the
date code field. These date code fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. Computer systems and
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements. We have completed our review of the potential impact
of Year 2000 issues and do not anticipate any significant costs, problems or
uncertainties associated with becoming Year 2000 compliant. Our failure or our
software providers' failure to adequately address the Year 2000 issue could
result in misstatement of reported financial information or otherwise adversely
affect the Company's business operations.
State of Readiness. We have completed our assessment of all current
versions of our information technology systems and we believe we are year 2000
compliant. The supplier of our current financial and accounting software has
informed us that such software is year 2000 compliant. We have been informed by
our financial institutions that they are in the process of making their
information systems year 2000 compliant, and that this process will be complete
by the beginning of 1999.
Costs. To date, we have not incurred any material expenditure in
connection with identifying or evaluating year 2000 compliance issues. Most of
our expenses have related to the retention of an outside consultant to evaluate
our financial and accounting software, and the opportunity cost of time spent by
our employees evaluating this software and year 2000 compliance matters
generally. Although we are not aware of any material operational issues or costs
associated with preparing our internal systems for the year 2000, there can be
no assurances that we will not experience serious unanticipated negative
consequences and/or material costs caused by undetected errors or defects in the
technology used in our internal systems, which are comprised predominantly of
acquired technology and our own software developments. We believe that
internally generated funds or available cash would be sufficient to cover the
costs of year 2000 compliance. At this time, based upon the information provided
to us, we do not believe there exists a material impact of year 2000 compliance
issues relating to our non-IT systems, our vendors, our customers and other
parties. We continue to update our assessment of year 2000 issues as it relates
to our non-IT systems, our vendors, our customers and other parties.
Contingency Plan. As we are not aware of any material year 2000
compliance issues, we have not developed a year 2000-specific contingency plan.
We continue to assess the impacts of year 2000 issues, and if year 2000
compliance issues are discovered, we will evaluate the need for one or more
contingency plans relating to such issues.
OUR STOCK PRICE HAS HISTORICALLY BEEN VOLATILE, WHICH MAY MAKE IT MORE
DIFFICULT FOR YOU TO RESELL SHARES WHEN YOU CHOOSE TO AT
PRICES YOU FIND ATTRACTIVE
The trading price of our common stock has been and may continue to be
subject to wide fluctuations. During the first six months of calendar 1999, the
closing sale prices of our common stock on The Nasdaq Stock Market ranged from
$9.06 (adjusted to reflect two stock splits) to $99.50. The stock price may
fluctuate in response to a number of events and factors, such as quarterly
variations in operating results, announcements of technological innovations or
new products and media properties by us or our competitors, changes in financial
estimates and recommendations by securities analysts, the operating and stock
price performance of other companies that investors may deem comparable, and
news reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-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 our stock, regardless of our
operating performance.
<PAGE>
USE OF PROCEEDS
All proceeds from the sale of the Go2Net shares are solely for the
account of the selling shareholders. Accordingly, we will not receive any
proceeds from sales of the Go2Net shares.
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDERS
On August 4, 1999, we issued an aggregate of 682,156 shares of common
stock to the members of Dogpile, LLC, a Delaware limited liability company,
pursuant to an interest purchase agreement. Under the terms of the purchase
agreement, Dogpile became a wholly-owned subsidiary of Go2Net.
On September 3,1999, we conveyed an aggregate of 4,744 shares of common
stock to Unique Media Services, LLC, a South Carolina limited liability company,
pursuant to a settlement agreement.
PLAN OF DISTRIBUTION
Shares of common stock covered hereby may be offered and sold from time
to time by the selling shareholders. The selling shareholders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale. The selling shareholders may sell the Go2Net shares being
offered hereby as follows: (i) on The Nasdaq National Market, or otherwise at
prices and at terms then prevailing or at prices related to the then current
market price; or (ii) in private sales at negotiated prices directly or through
a broker or brokers, who may act as agent or as principal or by a combination of
such methods of sale.
o on any of the United States securities exchanges where our
capital stock is listed, including The Nasdaq National
Market;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in connection with short sales of the Go2Net shares;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and
exchange-traded call options, in hedge transactions and in
settlement of other transactions in standardized or
over-the-counter options; or
o in a combination of any of the above transactions.
The selling shareholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices.
The selling shareholders may use broker-dealers to sell their shares.
If this happens, broker-dealers will either receive discounts or commissions
from the selling shareholders, or they will receive commissions from purchasers
of shares for whom they acted as agents.
We have agreed to keep the registration statement of which this
prospectus constitutes a part effective until August 4, 2000. No sales may be
made pursuant to this prospectus after such date unless we amend or supplement
this prospectus to indicate that it has agreed to extend such period of
effectiveness. There can be no assurance that the selling shareholders will sell
all or any of the shares of common stock offered hereunder.
<PAGE>
SELLING SHAREHOLDERS
All of the common stock registered for sale pursuant to this prospectus
will be owned immediately after registration by the selling shareholders who
include (i) the former members of Dogpile or (ii) Unique Media Services, LLC,
and all of the shares offered by the selling shareholders were acquired in
connection with the purchase of Dogpile or the settlement agreement. None of the
selling shareholders has a material relationship with us, except that some
shareholders of Pile, Inc. are or will be employees of Go2Net.
The following table sets forth relevant information known to us with
respect to beneficial ownership of Go2Net's common stock as of September 3,
1999, by each selling shareholder. The following table assumes that the selling
shareholders sell all of the Go2Net shares. Go2Net is unable to determine the
exact number of Go2Net shares that actually will be sold.
<TABLE>
<CAPTION>
SHARES WHICH
SHARES BENEFICIALLY MAY BE SOLD SHARES
OWNED PURSUANT TO BENEFICIALLY OWNED
PRIOR TO OFFERING(1) THIS PROSPECTUS (2) AFTER OFFERING (3)
-------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
SELLING SHAREHOLDERS NUMBER PERCENT NUMBER PERCENT
Pile, Inc. 347,899 * 347,899 0 *
Thunderstone Software, LLC 334,257 * 334,257 0 *
Unique Media Services, LLC 4,744 * 4,744 0 *
</TABLE>
* Less than 1.0% of the Company's outstanding Common Stock.
(1) The number and percentage of shares beneficially owned was 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 Rule 13d-3, 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 93,797 shares of Common Stock beneficially owned
by the selling shareholders that have been deposited in escrow pursuant
to the Dogpile purchase agreement, to secure the indemnification
obligations of the selling shareholders. The escrowed shares may not be
sold by the selling shareholders until they are released from the escrow.
(3) Assumes that each selling shareholder will sell all of the Go2Net shares
set forth above under "Shares Which May Be Sold Pursuant to This
Prospectus". There can be no assurance that the selling shareholders will
sell all or any of the Go2Net shares offered under this prospectus.
LEGAL MATTERS
The validity of the Go2Net shares offered hereby will be passed upon by
Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts,
counsel to the Company.
<PAGE>
EXPERTS
Ernst & Young LLP, independent auditors, have audited (i) our financial
statements included in our Annual Report on Form 10-K for the year ended
September 30, 1998, (ii) the financial statements of Haggle Online, Inc. as of
December 31, 1998 and 1997 for the year then and for the period ended from
inception to December 31, 1997 included in our Current Report on form 8-K/A,
(iii) the financial statements of USAOnline, Inc. as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998
included in our Current Report on Form 8-K/A and (iv) the financial statements
of IQC Corporation as of December 31, 1998 and 1997 and for the years then ended
and for the period from inception to December 31, 1996 included in our Current
Report on Form 8-K/A as set forth in their reports, which are incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and the financial statements of each of Haggle Online,
Inc., USAOnline, Inc. and IQC Corporation are incorporated by reference in
reliance on Ernst & Young LLP's reports, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or the SEC, a
registration statement on Form S-3 under the Securities Act of 1933. This
prospectus does not contain all of the information in the registration
statement. We have omitted certain parts of the registration statement, as
permitted by the rules and regulations of the SEC. Additionally, we file annual,
quarterly and special reports, proxy statements and other information with the
SEC. You may inspect and copy the registration statement, including exhibits,
and any reports, statements or other information that we file at the SEC's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549. You
can call the SEC at 1-800-SEC- 0330 for further information about the public
reference rooms. In addition, the SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
Our common stock is quoted on The Nasdaq National Market. Reports, proxy and
information statements and other information concerning Go2Net, Inc. may be
inspected at The Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that information included in these documents is
considered part of this prospectus. Information that we file with the SEC
subsequent to the date of this prospectus will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14
or 15 of the Securities Exchange Act of 1934 until the selling shareholders have
sold all the shares.
The following documents filed with the SEC are incorporated by
reference in this prospectus
o Our Annual Report on Form 10-K for the year ended September
30, 1998, filed on December 29, 1998.
o Our Current Reports on Form 8-K filed on January 12, 1999,
April 12, 1999, May 3, 1999, May 28, 1999, July 13, 1999, July
19, 1999 and August 18, 1999.
o Our Current Reports on Form 8-K/A filed on July 2, 1999 and
July 27, 1999.
o Our Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1998, March 31, 1999 and June 30, 1999, filed on
February 16, 1999, May 4, 1999 and August 13, 1999.
o The description of our common stock set forth in our
Registration Statement on Form S-1, filed on December 31,
1996.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, other than
exhibits to such documents. You should direct any requests for documents to
Go2Net, Inc., Attention: Investor Relations, 999 Third Avenue, Suite 4700,
Seattle, Washington 98104, telephone: (206) 447-1595.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Go2Net will pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. Such expenses are set
forth in the following table. All of the amounts shown are estimates except the
SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee............................................................ $11,512
Nasdaq National Stock Market Listing Fee........................................ $17,500
Legal fees and expenses......................................................... $10,000
Printing fees and expenses...................................................... $1,000
Miscellaneous expenses.......................................................... $988
--------
Total............................................................................ $41,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law,
Go2Net's Amended and Restated Certificate of Incorporation, as amended, includes
a provision that eliminates the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. In addition, the
Delaware General Corporation Law and Go2Net's Amended and Restated By-laws
provide for indemnification of Go2Net's directors and officers for liabilities
and expenses that they may incur in such capacities. In general, directors and
officers are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of Go2Net,
and with respect to any criminal action or proceeding, actions that the
indemnitee has no reasonable choice to believe were unlawful.
Go2Net has purchased insurance with respect to, among other things, the
liabilities that may arise under the provisions referred to above. The directors
and officers of Go2Net also are insured against liabilities, including
liabilities arising under the Securities Act of 1933, as amended, which might be
incurred by them in their capacities as directors and officers of Go2Net and
against which they are not indemnified by Go2Net.
In connection with this offering, the selling shareholders have agreed
to indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the selling shareholders and contained
herein up to a maximum of the net proceeds received by the selling shareholders
from the sale of their Go2Net shares hereunder.
ITEM 16. EXHIBITS
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-3).
ITEM 17. UNDERTAKINGS
A. UNDERTAKING PURSUANT TO RULE 415
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
II-1
<PAGE>
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price, set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement; provided, however,
that paragraphs (a) and (b) above do not apply if the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the SEC by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference into the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of this offering.
B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE
ACT DOCUMENTS BY REFERENCE
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. UNDERTAKING IN RESPECT OF INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on this 3rd day of
September, 1999.
Go2Net, Inc.
By: /s/ Russell C. Horowitz
Russell C. Horowitz
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT each person whose signature appears
below severally constitutes and appoints Russell C. Horowitz with the power to
act as attorney-in-fact, with the power of substitution, for him or her in any
and all capacities, to sign any amendment to this Registration Statement and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney-in-fact, and full power and authority to do and perform each and every
act and thing requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Russell C. Horowitz
Russell C. Horowitz Chief Executive Officer, Chief Financial Officer September 3, 1999
and Director (principal executive, financial and
accounting officer)
/s/ William D. Savoy
William D. Savoy Director September 3, 1999
/s/ Diane Daggatt
Diane Daggatt Director September 3, 1999
/s/Dennis Cline
Dennis Cline Director September 3, 1999
/s/ William Fleckenstein
William Fleckenstein Director September 3, 1999
II-3
<PAGE>
</TABLE>
INDEX TO EXHIBITS
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-3).
EXHIBIT 5.1
Opinion of
HUTCHINS, WHEELER & DITTMAR, A Professional Corporation
September 3, 1999
GO2NET, Inc.
999 Third Avenue, Suite 4700
Seattle, Washington 98104
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about the date hereof (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of up to 686,900 shares of your Common
Stock, par value $.01 per share (the "Shares"). All of the Shares are issued and
outstanding and may be offered for sale for the benefit of the selling
shareholders named in the Registration Statement. We understand that the Shares
are to be sold from time to time at prevailing prices or as otherwise described
in the Registration Statement. As your legal counsel, we have also examined the
proceedings taken by you in connection with the issuance of the Shares.
Based on the foregoing, it is our opinion that the Shares are validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
We understand that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.
Very truly yours,
/s/Hutchins, Wheeler & Dittmar
HUTCHINS, WHEELER & DITTMAR,
A Professional Corporation
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Go2Net, Inc. for
the registration of 686,900 shares of its common stock and to the incorporation
by reference therein of our reports (a) dated November 9, 1998, with respect to
the financial statements of Go2Net, Inc. included in its Annual Report (Form
10-K) for the year ended September 30, 1998, (b) dated June 18, 1999 with
respect to the financial statements of Haggle Online, Inc. and USAOnline, Inc.
included in Go2Net, Inc.'s Current Report on Form 8-K/A filed on July 2, 1999,
and (c) dated June 25, 1999 with respect to the financial statements of IQC
Corporation included in Go2Net, Inc.'s Current Report on Form 8-K/A filed on
July 27, 1999, all filed with the Securities and Exchange Commission.
Seattle, Washington Ernst & Young LLP
September 2, 1999
