717,390 SHARES
GO2NET, INC.
COMMON STOCK
This Prospectus relates to the public offering, which is not being
underwritten, of up to 717,390 shares of Common Stock, par value $0.01 per share
(the "Shares"), of Go2Net, Inc. The selling stockholders may offer their Go2Net
common stock through public or private transactions, on or off the United States
exchanges, at prevailing market prices, or at privately negotiated prices. We
will receive no part of the proceeds of these sales. All of the Shares being
offered were originally issued by us in connection with our acquisition of
Web21, a California corporation, by and through a merger of a wholly-owned
subsidiary of Go2Net, WTO Acquisition Corp., with and into Web21. The Shares
were issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, 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 December 31, 1998 by and among Go2Net, WTO Acquisition Corp.
and certain shareholders of Web21.
Go2Net's common stock is listed on the Nasdaq National Stock Market
with the ticker symbol "GNET." On April 5, 1999, the closing price of one share
of Go2Net common stock on the Nasdaq National Stock Market was $129.5625 per
share.
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SEE "RISK FACTORS"
BEGINNING ON PAGE 3 HEREOF.
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THE DATE OF THIS PROSPECTUS IS April 27, 1999
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy any reports, statements or other information Go2Net files at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from commercial document retrieval services and at the Website maintained by the
SEC at www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC 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 stockholders sell all the shares. This prospectus
is part of a registration statement we filed with the SEC (Registration No.
333-76069).
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- Go2Net's Annual Report on Form 10-K for the year ended September 30, 1998, filed on December 29, 1998.
- Go2Net's Definitive Proxy Statement dated January 28, 1999, filed in connection with Go2Net's March 22, 1999
Annual Meeting of Stockholders.
- Go2Net's Current Reports on Form 8-K filed on January 12, 1999 and April 12, 1999.
- Go2Net's Quarterly Reports on Form 10-Q for the quarter ended December 31, 1998, filed on February 16, 1999.
- All documents subsequently filed by Go2Net under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 (e.g., Forms 10-Q, 10-K, 8-K and Proxy Statements) after
the date of this prospectus.
- All other reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 since the end
of the fiscal year ended September 30, 1998.
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If there is any contrary information in a previously filed document
that is incorporated by reference, then you should rely on the information in
this prospectus.
If you are a stockholder, you can obtain any of the documents
incorporated by reference through Go2Net or the SEC. Documents incorporated by
reference are available from Go2Net without charge, excluding all exhibits. You
may obtain documents incorporated by reference in this prospectus by requesting
them in writing to the following address or by telephone:
Go2Net, Inc.
Attention: Investor Relations
999 Third Avenue, Suite 4700
Seattle, Washington 98104
(206) 447-1595
You should rely on the information contained or incorporated by
reference in this prospectus or any supplement. We have not authorized anyone to
provide you with information that is different from what is contained in this
prospectus. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities, or the solicitation of a proxy,
in any jurisdiction in which, or to any person to whom, it is unlawful to make
any such offer or solicitation.
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THE COMPANY
Go2Net, Inc. (http://www.go2net.com) offers through the World Wide Web
a network of branded, technology and community-driven Web sites focused on the
following categories: personal finance, search and directory, commerce, and
games. We also develop Web-related software. Our properties include: Silicon
Investor (http://www.siliconinvestor.com), the Web's premier 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 metasearch
service that combines various existing search/index guides into one service;
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; PlaySite (http://www.playsite.com), a Java-based
multiplayer online games site; and 100hot (http://www.100hot.com), a directory
of the most popular sites on the Web in various categories.
We believe that the traffic and user demographics on our Web sites
provide an attractive platform for measurable, targeted, cost-effective and
interactive advertising on the Internet. Since our inception, the source of the
majority of our revenue has been derived from advertising sales. As of December
31, 1999, we had relationships with over 225 advertisers. In order to leverage
our marketing resources and to facilitate the distribution of some of our
services, we enter into strategic co-branding relationships.
We have agreed to issue and sell to Vulcan Ventures Incorporated
("Vulcan"), and Vulcan has agreed to purchase from us, 300,000 shares of our
Series A Convertible Preferred Stock, par value $.01 per share, in two separate
issuances (the "First Issuance" and "Second Issuance") of 167,507 shares and
132,493 shares. Our primary purposes for issuing the shares are (i) providing us
with significant cash resources, (ii) providing us with a beneficial strategic
partner and (iii) permitting us to continue to utilize publicly traded stock as
consideration in acquisitions of other businesses, since the Common Stock
permitting us to continue to trade on the Nasdaq National Market. The First
Issuance was consummated concurrently with the execution of the Stock Purchase
Agreement on March 15, 1999. Assuming consummation of the Second Issuance, the
Series A Convertible Preferred Stock initially will be convertible into an
aggregate of 4,537,891 shares of Common Stock. Simultaneously with the closing
of the First Issuance, Go2Net and Vulcan entered into a Registration Rights
Agreement, and Vulcan entered into an agreement with each director of Go2Net,
pursuant to which Vulcan agreed to purchase 1,403,312 shares of Common Stock
from the directors of Go2Net, three of whom are executive officers of Go2Net, at
a price of $90.00 per share. On March 19, 1999, pursuant to the Stock Purchase
Agreement, Vulcan commenced a tender offer to purchase 3,596,688 shares of the
Common Stock for a purchase price of $90.00 per share, net to the seller in
cash. For additional information regarding the various transactions consummated
or to be consummated with Vulcan, you should read our Form 8-K filed on April 9,
1999, which sets forth excerpts from our Schedule 14d-9 filed in response to
Vulcan's tender offer.
RISK FACTORS
You should carefully consider the following risk factors before
purchasing the shares of Go2Net common stock offered by this prospectus. The
discussion contained in this prospectus contains forward-looking statements that
involve risk and uncertainties. These forward looking statements use language
such as "believes," "expects," "may," "will," "should," or "anticipates" or
similar expressions and may include discussions of future strategy. The risk
factors described below apply to all forward-looking statements wherever they
appear in this prospectus. Our actual results could differ materially from the
forward-looking statements. Important factors that could cause or contribute to
such differences include those discussed below.
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO EVALUATE US
We were incorporated in February 1996. Accordingly, we have a limited
operating history for you to use in evaluating us and our prospects. You should
consider the risks, expenses and uncertainties frequently encountered by
companies in their early stages of development that operate exclusively in new
and rapidly evolving markets. Our success will depend on our ability to:
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* 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 our Websites;
* provide original and compelling products and services to Internet users;
* develop and upgrade our technology;
* effectively respond to competitive developments;
* attract new qualified personnel; and
* retain existing qualified personnel.
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There can be no assurance that we will 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 December 31,1998, had an accumulated deficit of $5,234,095. 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 an
operating profit (before one-time charges) for the quarter ended September 30,
1998, 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.
WE DEPEND SIGNIFICANTLY ON ADVERTISING CONTRACTS, AND THEREFORE, OUR QUARTERLY
OPERATING RESULTS MAY FLUCTUATE
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:
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* 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;
* advertising expenditures fluctuate significantly with economic cycles;
* demand for Internet advertising may fluctuate;
* level of use of our Websites may fluctuate;
* seasonal trends and budgeting cycles in advertising sales may fluctuate;
* incurrence of costs relating to the development, operation and expansion of our Internet operations;
* introduction of new products and services by us and our competitors;
* price competition or pricing changes in the industry;
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* technical difficulties or system failures; and
* general economic conditions and economic conditions specific to the Internet and Internet media.
</TABLE>
In response to an evolving competitive market, we may elect from time
to time to make advertising and marketing or acquisition decisions that could
adversely affect our business, financial condition and operating results. As a
result, it is likely that in future quarters, our operating results may be below
the expectations of public market analysts and stockholders. Consequently, the
price of our Common Stock would likely be adversely impacted.
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. For the quarter ended December 31, 1998, we
generated $2,600,040 in revenues, of which approximately 83% of revenues were
attributable to advertising. Many of our relationships with advertisers are
terminable within a short period of time. Accordingly, 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.
OUR SUCCESS DEPENDS ON QUARTERLY REVENUES
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.
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 as well as 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. There can be no
assurance 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
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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. There can be no
assurance 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. There can be no assurance
that the Internet advertising market will continue to develop as an attractive
and sustainable medium. If Internet-based advertising is not widely accepted by
advertisers and advertising agencies, our business, financial condition and
operating results will be adversely affected.
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. There can be no assurance 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.
WE MUST CONTINUE TO RESPOND QUICKLY TO TECHNOLOGICAL CHANGE TO REMAIN
COMPETITIVE
The market for Internet products and services is rapidly evolving.
Competition among Internet sites is intense and is expected to increase
significantly in the future. To compete successfully, we must develop and
deliver popular, original, entertaining, informative and compelling product
offerings to attract Internet users and to support advertising and subscription
fees. If we are unable to adapt quickly to technological changes, our
competitors may attract our current users to their services and, consequently,
dissuade them from accessing our Internet sites. Consequently, our future
success depends on our ability to respond quickly to technological change so as
to attract a significant number of Internet users to our Internet sites.
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
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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.
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.
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.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH
Since our inception, we have grown rapidly and as of March 31, 1999 had
102 full-time employees and 9 independent contractors. This growth has placed,
and is expected to continue to place, a significant strain on our management,
physical and capital resources. It is expected that we will need to hire
additional key personnel in order to fully implement our business strategy. We
can make no assurances as to whether, when, if ever, and under what terms we
will be able to attract new personnel. In order to manage this growth
successfully, we will be required to implement and manage our operational and
financial systems on a timely basis and to train, manage and expand our growing
employee base. There can be no assurance that our current personnel, systems,
procedures and quality and accounting controls will be adequate to support our
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 we are
unable to effectively manage growth, our business, financial condition and
operating results will be adversely affected.
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. There can be no assurance 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
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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.
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, 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.
WE MAY BE AFFECTED BY THE ISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK
We agreed to issue and sell to Vulcan 300,000 shares of Series A
Convertible Preferred Stock, par value $.01 per share, of which we issued
167,507 shares in the First Issuance and we intend to issue the remaining
132,493 in the Second Issuance. Our primary purposes for issuing the shares are
(i) providing us with significant cash resources, (ii) providing us with a
beneficial strategic partner and (iii) permitting us to continue to utilize
publicly traded stock as consideration in acquisitions of other businesses,
since the Common Stock would continue to trade on The Nasdaq National Market.
Assuming consummation of the Second Issuance, the preferred stock initially will
be convertible into an aggregate of 4,537,891 shares of Common Stock. Upon
completion of the tender offer, if all 3,596,668 shares of Common Stock are
tendered and purchased pursuant to the terms of the tender offer, and Vulcan
acquires all 1,403,312 shares of Common Stock from the directors pursuant to
their agreements with Vulcan, then Vulcan will own approximately 54.9% of the
outstanding Common Stock (including shares issuable upon conversion of preferred
stock). If no shares are tendered but Vulcan closes the Second Issuance and buys
shares from the directors, then Vulcan will own approximately 34.2% of the
outstanding Common Stock (including shares issuable upon conversion of the
preferred stock). Vulcan also has the right to designate at least two directors
to serve on the Board of Directors of the Company pursuant to the Stock Purchase
Agreement with us dated March 15, 1999. In addition, after the closing of the
Second Issuance and as long as 50% of the shares of preferred stock remain
outstanding, we may not engage in certain actions, including certain mergers and
acquisitions, without the consent of the holders of a majority of the
outstanding shares of preferred stock. Assuming consummation of the Second
Issuance, the preferred stock initially will be convertible into an aggregate of
4,537,891 shares of Common Stock. Accordingly, consummation of the transactions
could permit Vulcan to control most, and in certain cases all, actions taken by
the Board or us and could limit the ability of our current stockholders to
affect or influence the direction of our company and the composition of the
Board. Upon a voluntary or involuntary liquidation, dissolution or winding up of
our business, the Series A Convertible Preferred Stock is entitled to a
liquidation preferences of $1,000 per share plus any declared and unpaid
dividends prior to any payment to the Common Stock. In such an event, there may
not be any assets available for distribution to the holders of Common Stock
after satisfaction of the liquidation preferences of the preferred stock.
WE MAY NOT COMPLETE THE PROPOSED DISTRIBUTION ARRANGEMENT WITH VULCAN'S
AFFILIATED CABLE COMPANIES
There can be no assurance that we will be able to reach agreement with
Vulcan's affiliated cable companies regarding a distribution arrangement, or
that if such an agreement is reached, that it will be profitable to us.
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.
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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., News Alert, Junglee, Edgar
Online, 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.
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 substantial 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
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<PAGE>
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. For example, the Company has acquired
Silicon Investor, Hypermart and Web21. 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. There can be no assurance 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,
there can be no assurance that insurance will be sufficient to provide for all
losses or damages that we incur.
WE MAY BE SUBJECT TO NEW GOVERNMENT REGULATIONS
There are currently few laws and regulations directly applicable to the
Internet. However, it is possible that new laws and regulations will be adopted
covering issues which relate to our products and services. This type of
legislation could dampen the growth of the Internet generally and decrease the
acceptance of the Internet as an advertising medium. As a result, this type of
legislation could have a material adverse effect on our business, financial
condition and operating results.
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.
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<PAGE>
OUR PERFORMANCE WILL DEPEND ON ADVANCEMENT OF INTERNET SECURITY
We have instituted security measures designed to protect our Internet
sites and other operations from unauthorized use and access. These measures
cannot guarantee complete security, however, and a party who is able to
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our Internet operations. We 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 our activities or those of any third
party contractors involve the storage and transmission of proprietary
information, security breaches could expose us to a risk of loss or litigation
and possible liability. There can be no assurance that contractual provisions
attempting to limit our liability in such areas will be successful or
enforceable, or that parties will accept those types of contractual provisions
as part of the our agreements.
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 if 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.
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. We are not currently aware of any legal proceedings or
claims that we believe will have a material adverse effect on our business,
financial condition and operating results.
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 stockholders would be reduced,
stockholders 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
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<PAGE>
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.
VOLATILITY OF STOCK PRICE
Our stock price, like that of other technology companies, is subject to
significant volatility. The announcement of new products, services or
technological innovations by us or our competitors, quarterly variations in our
results of operations, changes in revenue or earnings estimates by the
investment community and speculation in the press or investment community are
among the factors affecting our stock price. In addition, the stock price may be
affected by general market conditions and domestic and international economic
factors unrelated to our performance. Because of these reasons, recent trends
should not be considered reliable indicators of future stock prices or financial
results.
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.
<PAGE>
USE OF PROCEEDS
All net proceeds from the sale of the Shares will go to the
stockholders who offer and sell their Shares. Accordingly, we will not receive
any proceeds from sales of the Shares.
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<PAGE>
SELLING STOCKHOLDERS
The shares listed below represent all of the shares that each selling
stockholder currently owns:
<TABLE>
<CAPTION>
SHARES WHICH
SHARES BENEFICIALLY MAY BE SOLD SHARES
OWNED (1) PURSUANT TO BENEFICIALLY OWNED
PRIOR TO OFFERING THIS PROSPECTUS AFTER OFFERING (2)
---------------
------------------------------ -----------------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER PERCENT
------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Bert F. Fornaciari (3) 704,342 4.56% 658,842 __ *
Catapult Partners, Inc. 6,524 * 6,524 __ *
Graham Cameron 6,524 * 6,524 __ *
</TABLE>
* Less than 1.0% of the Company's outstanding Common Stock.
(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) 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 under this prospectus.
(3) Includes an aggregate of 45,500 options which, subject to stockholder
approval of the Vulcan transaction, will be exercisable within 60 days.
Includes an aggregate of shares of Common Stock beneficially owned by
the Selling Stockholders that have been deposited in escrow pursuant to
the Merger Agreement to secure the respective indemnification
obligations of the Selling Stockholders thereunder (the "Escrowed
Shares"). The Escrowed Shares will be released from escrow on December
31, 1999 only to the extent that no claims have been made against the
Escrowed Shares and Go2Net has received a signed opinion from its
independent auditors certifying Go2Net's financial statements for the
fiscal year ending September 30, 1999 in connection with their
completion of the audit of such financial statements. The Escrowed
Shares may not be sold by the Selling Stockholders until the Escrowed
Shares are released from the Escrow.
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<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may offer their Shares at various times in one
or more of the following transactions:
<TABLE>
<S> <C>
* on any of the United States securities exchanges where our capital stock is listed, including The Nasdaq National
Market;
* in the over-the-counter market;
* in transactions other than on such exchanges or in the over-the-counter market;
* in connection with short sales of the Shares;
* by pledge to secure debts and other obligations;
* 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
* in a combination of any of the above transactions.
</TABLE>
The selling stockholders 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 stockholders may use broker-dealers to sell their shares.
If this happens, broker-dealers will either receive discounts or commissions
from the selling stockholders, 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 December 31, 1999.
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.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
September 30, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
- 14 -
<PAGE>
<TABLE>
<S> <C>
NO ONE (INCLUDING ANY SALESMAN OR BROKER) TABLE OF CONTENTS
IS AUTHORIZED TO PROVIDE ORAL OR WRITTEN
INFORMATION ABOUT THIS OFFERING THAT IS NOT PAGE
INCLUDED IN THIS PROSPECTUS. Where You Can Find More Information........................2
Incorporation of Certain Documents By Reference............2
______________________ The Company................................................3
Risk Factors...............................................4
Use of Proceeds...........................................13
Selling Stockholders......................................14
Plan of Distribution......................................15
Legal Matters.............................................15
Experts...................................................15
</TABLE>
GO2NET, INC.
717,390 SHARES
OF
COMMON STOCK
PROSPECTUS
April 27, 1999
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