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As filed with the Securities and Exchange Commission on December 7, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of Amount to be Registered (1) Proposed Maximum Proposed Maximum Aggregate Amount of
Securities to be Registered Offering Price per Share Offering Price (2) Registration Fee
(2)
<S> <C> <C> <C> <C>
common stock, par value 334,161 shares $73.3125 $24,498,178.32 $6,467.52
$.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 high and low prices of the Company's common stock
as reported on The Nasdaq National Stock Market on December 1, 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.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 7, 1999
334,161 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 16 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 December 1, 1999, the
closing price of one share of Go2Net common stock on The Nasdaq National
Stock Market was $72.50 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
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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:
- 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;
- MetaCrawler (www.metacrawler.com) and Dogpile
(www.dogpile.com), metasearch services that combine various
existing search/index guides into one service;
- 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;
- HyperMart (www.hypermart.net) and Virtual Avenue
(www.virtualave.net), the Web's leading providers of free
business hosting services;
- Authorize.net (www.authorize.net), the Internet's leading
payment authorization system for online businesses;
- Haggle Online (www.haggle.com), a provider of Web based
person to person auction services;
- WebMarket (www.webmarket.com), a one-step comparison
shopping service;
- Web21 (www.100hot.com), a leading directory of the Web's
most popular sites;
- Playsite (www.playsite.com), a Java-based multiplayer games
site; and
- FreeYellow (www.freeyellow.com), a website hosting service.
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.
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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:
- 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;
- continue to develop and extend the Go2Net brand;
- effectively generate revenues through sponsored services and
placements;
- attract new qualified personnel; and
- 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:
- the demand for Internet advertising;
- the level of usage of the Internet;
- the level of user traffic on our Websites;
- seasonal trends and budgeting cycles in advertising sales;
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- 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;
- costs incurred with respect to acquisitions;
- price competition or pricing changes in the industry;
- technical difficulties or system failures; and
- 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.
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
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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 these 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.
This 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
these 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.
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
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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 these security breaches or to address problems caused by
these 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 some 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 these 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:
- The Walt Disney Company acquiring a significant interest in
Infoseek;
- AOL acquiring Netscape;
- Yahoo! acquiring GeoCities Corporation and Broadcast.com;
- @HomeNetworks, a provider of high speed Internet access
serving the cable television infrastructure and the largest
stockholder of which is AT&T, acquiring Excite;
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- NBC announcing that it intends to merge its Internet assets
with XOOM.com, Inc. and Snap.com, a subsidiary of CNET; and
- 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. These 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 these 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.
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
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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 like 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, Dogpile, LLC
and FreeYellow. Go2Net expects to enter into additional business combinations
and acquisitions. Acquisition transactions are accompanied by a number of
risks, including:
- the difficulty of assimilating the operations and personnel
of the acquired companies;
- the potential disruption of our ongoing business and
distraction of management;
- the difficulty of incorporating acquired technology or
content and rights into our products and media properties;
- 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;
- the failure to successfully develop an acquired in-process
technology resulting in the impairment of amounts currently
capitalized as intangible assets;
- unanticipated expenses related to technology integration;
- the maintenance of uniform standards, controls, procedures
and policies;
- the impairment of relationships with employees and customers
as a result of any integration of new management personnel;
and
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- 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 these 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:
- 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,
- 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
- 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.
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 these 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
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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 these 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.
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
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and academic purposes. The search technology underlying the MetaCrawler
Service and the MetaCrawler trademark is licensed to or owned by Netbot and
sublicensed to us 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, Go2Net may entertain new business opportunities
and ventures in a broad range of areas. Typically, these opportunities
require extended negotiations, the outcome of which cannot be predicted. If
Go2Net were to enter into such a venture, Go2Net could be required to invest
a substantial amount of capital, which could have a material adverse effect
on the our financial condition and its ability to implement its existing
business strategy. Such an investment could also result in large and
prolonged operating losses for Go2Net. Further, these negotiations or
ventures could place additional, substantial burdens on Go2Net'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 Go2Net to recover the substantial investment required to launch and
operate such a venture would have a material adverse effect on Go2Net'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.
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 these laws and
regulations, and dampen the growth in use of the Web.
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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 these laws. These 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.
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
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in the expenditure of significant financial and managerial resources. To this
date, we are not aware of any legal proceedings or claims against us. These
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 Go2Net'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
Go2Net's business, financial condition and operating 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 these
"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'
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failure to adequately address the Year 2000 issue could result in
misstatement of reported financial information or otherwise adversely affect
Go2Net'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 this software is year 2000 compliant. We have been informed by
our financial institutions that their information systems are year 2000
compliant.
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 these 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.
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USE OF PROCEEDS
All proceeds from the sale of the Go2Net shares are solely for the
account of the selling shareholder. Accordingly, we will not receive any
proceeds from sales of the Go2Net shares.
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDER
On October 22, 1999, we issued an aggregate of 334,161 shares of common
stock to the sole shareholder of FreeYellow.com Inc., a Florida corporation
("FreeYellow"), pursuant to an agreement and plan of merger. Under the terms of
the purchase agreement, FreeYellow became a wholly-owned subsidiary of Go2Net.
PLAN OF DISTRIBUTION
Shares of common stock covered hereby may be offered and sold from
time to time by the selling shareholder including donees, transferees,
pledgees or other successors in interest that receive the Go2Net shares as a
gift, pledge, partnership distribution or other non-sale related transfer.
The selling shareholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale. The selling shareholder
may sell the Go2Net shares being offered hereby on The Nasdaq National
Market, or otherwise, at prices and under terms then prevailing or at prices
related to the then current market price or at negotiated prices. The Go2Net
shares may be sold by one of more of the following means of distribution:
- a block trade in which the broker-dealer so engaged will
attempt to sell shares as agent, but may position and resell a
portion of the block as principal to facilitate the
transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its own account pursuant to the rules of
the Nasdaq National Market;
- an over-the-counter distribution in accordance with the rules
of the Nasdaq National Market:
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- in privately negotiated transactions; or
- in any combination of the above transactions.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the Go2Net shares or otherwise, the selling shareholder
may:
- enter into hedging transactions with broker-dealers or other
financial institutions;
- enter into transactions with broker-dealers or other financial
institutions in connection with which broker-dealers or other
financial institutions may engage in short sales of our common
stock in the course of hedging the positions they assume with
the selling shareholder and sell our common stock short and
redeliver the shares to close out these short positions;
- enter into option or other transactions with broker-dealers or
other financial institutions which require the delivery to the
broker-dealer or other financial institution of shares offered
hereby, which shares the broker-dealer or other financial
institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction);
- pledge shares to a broker-dealer or other financial
institution, and, upon a default, the broker-dealer or other
financial institution, may effect sales of the pledged shares
pursuant to this prospectus (as supplemented or amended to
reflect such transaction); or
- enter into a combination of any of the above transactions.
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In effecting sales, brokers, dealers or agents engaged by the selling
shareholder may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling shareholder in amounts to be negotiated prior to the sale. These brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with these sales, and any of these commissions, discounts or concessions may be
deemed to be underwriting discounts or commissions under the Securities Act of
1933. We will pay all expenses incident to the filing of this registration
statement other than commissions and discounts of underwriters, broker-dealers
or agents or legal fees and disbursements of counsel for the selling
shareholder.
In order to comply with the securities laws of some states, if
applicable, the Go2Net shares must be sold in these jurisdictions only through
registered brokers or dealers. In addition, in some states the Go2Net shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling shareholder that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934 may apply to
sales of the Go2Net shares in the market and to the activities of the selling
shareholder and his affiliates. In addition, we will make copies of the
prospectus and any prospectus supplement available to the selling shareholder
and have informed him of the need for delivery of copies of this prospectus and
any prospectus supplements to purchasers at or prior to the time of any sales of
the Go2Net shares offered hereby. The selling shareholder may indemnify any
broker-dealer that participates in transactions involving the sale of the Go2Net
shares against certain liabilities, including liabilities under the Securities
Act of 1933.
We have agreed to keep the registration statement of which this
prospectus constitutes a part effective until October 22, 2000. No sales may be
made pursuant to this prospectus after that date unless we amend or supplement
this prospectus to indicate that we have agreed to extend this period of
effectiveness. There can be no assurance that the selling shareholder will sell
all or any of the shares of common stock offered hereunder.
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SELLING SHAREHOLDER
All of the common stock registered for sale pursuant to this prospectus
will be owned immediately after registration by the selling shareholder who is
the former sole shareholder of FreeYellow, and all of the shares offered by the
selling shareholder were acquired in connection with the acquisition of
FreeYellow. The selling shareholder has a material relationship with us as an
employee of Go2Net. This registration statement shall also cover any additional
shares of common stock which become issuable in connection with the shares
registered for sale by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt of
consideration which results in an increase in the number of the our outstanding
shares of common stock.
The following table sets forth relevant information known to us with
respect to beneficial ownership of Go2Net's common stock as of December 7,
1999, by the selling shareholder. The following table assumes that the selling
shareholder sells 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)
-------------------- ------------------- ------------------
SELLING SHAREHOLDER NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
John P. Molino 334,161 * 334,161 0 *
</TABLE>
* Less than 1.0% of Go2Net'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 these powers with
his or her spouse) with respect to the shares shown as beneficially
owned.
(2) Includes an aggregate of 35,222 shares of common stock beneficially owned
by the selling shareholder that have been deposited in escrow pursuant to
the FreeYellow merger agreement, to secure the indemnification
obligations of the selling shareholder. The escrowed shares may not be
sold by the selling shareholder until they are released from the escrow.
(3) Assumes that the 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 shareholder 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 Go2Net.
EXPERTS
[TO BE ADDED BY AMENDMENT]
16
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
[TO BE ADDED BY AMENDMENT]
17
<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.................................... $ 6,467.52
Nasdaq National Stock Market Listing Fee................ $ 6,683.22
Legal fees and expenses................................. $10,000.00
Printing fees and expenses.............................. $ 1,000.00
Miscellaneous expenses.................................. $ 1,849.29
----------
Total.................................................... $26,000.00
</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 KPMG LLP, Independent Auditors.*
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-3).
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
A. UNDERTAKING PURSUANT TO RULE 415
The undersigned Registrant hereby undertakes:
II-1
<PAGE>
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(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 7th day of
December, 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 December 7, 1999
and Director (principal executive, financial and
accounting officer)
/s/ WILLIAM D. SAVOY
- ---------------------------
William D. Savoy Director December 7, 1999
/s/ DIANE DAGGATT
- ---------------------------
Diane Daggatt Director December 7, 1999
/s/ DENNIS CLINE
- ---------------------------
Dennis Cline Director December 7, 1999
/s/ WILLIAM FLECKENSTEIN
- ---------------------------
William Fleckenstein Director December 7, 1999
</TABLE>
II-3
<PAGE>
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 KMPG LLP, Independent Auditors.*
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-3).
* To be filed by amendment
<PAGE>
EXHIBIT 5.1
Opinion of
HUTCHINS, WHEELER & DITTMAR, A Professional Corporation
December 7, 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 334,161 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
