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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GO2NET, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 91-1710182
(State or Other Jurisdiction of incorporation (I.R. S. Employer
or organization) Identification No.)
</TABLE>
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)
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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
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING AGGREGATE REGISTRATION
REGISTERED REGISTERED (1) PRICE PER SHARE (2) OFFERING PRICE (2) FEE
<S> <C> <C> <C> <C>
common stock, par value .01........... 54,302 shares $51.3125 $2,786,371 $736
</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 April 24, 2000 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 APRIL 27, 2000
54,302 Shares of Common Stock
GO2NET, INC.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE SHARES OF GO2NET COMMON STOCK OFFERED BY
THIS PROSPECTUS.
The selling shareholders identified on page 17 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
15. 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 April 26, 2000, the closing price of
one share of Go2Net common stock on The Nasdaq National Stock Market was $51.75
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 , 2000
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THE COMPANY
Go2Net, Inc. (including its subsidiaries, "Go2Net" or the "Company") offers
through the World Wide Web a network of branded properties and aggregated
content in the categories of search and directory, small business and electronic
commerce services, personal finance and multi-player games. The Company also
offers electronic commerce solutions to online merchants by providing payment
authorization and other services to small and medium-sized businesses. The
Company is using its proprietary, scaleable technology platforms to develop
private label portal and ecommerce content solutions for strategic partners to
extend the distribution of its products and services. Go2Net's branded Web
properties offered 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, shopping, auction and multiplayer games
sites;
- MetaCrawler (www.metacrawler.com) and Dogpile (www.dogpile.com), the Web's
leading providers of metasearch services, which simultaneously query a
variety of search engines and directory services and combine the search
results;
- 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;
- The HyperMart Network, consisting of HyperMart (www.hypermart.net),
Virtual Avenue (www.virtualave.net) and FreeYellow.com
(www.freeyellow.com), the Web's leading provider of free hosting services
for small businesses;
- Authorize.Net (www.authorize.net), a leading payment authorization service
for online businesses;
- Haggle Online (www.haggle.com), a provider of Web based person to person
auction services;
- WebMarket (www.webmarket.com), a one-stop comparison shopping service;
- 100Hot (www.100hot.com), a leading directory of the Web's most popular
sites; and
- PlaySite (www.playsite.com), a Java-based multiplayer games site.
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, subscription and ecommerce 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 Web sites;
- 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
Our lack of an extensive operating history makes prediction of future
operating results difficult. We believe that a comparison of our quarterly
results is not meaningful. As a result, you should not rely on the results for
any period as an indication of our future performance. Accordingly, there can be
no assurance that we will generate significant revenues or that we will sustain
a 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. Factors that may
adversely affect our quarterly operating results include:
- the level of use of the Internet;
- demand for advertising and ecommerce;
- seasonal trends in both Internet use and advertising placements;
- the addition or loss of advertisers and licensing partners;
- advertising budgeting cycles of individual advertisers;
- our ability to execute on our licensing strategy;
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- the level of use of our Internet sites;
- the amount and timing of capital expenditures and other costs relating to
acquisitions;
- operation and expansion of our Internet operations;
- the introduction of new sites and services by us or our competitors;
- 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.
In seeking to effectively implement its operating strategy, we may elect
from time to time to make certain advertising and marketing or acquisition
decisions that could have a material adverse effect on our business, financial
condition and operating results. We believe that period to period comparisons of
our operating results are not meaningful and should not be relied upon for an
indication of future performance. Due to all of the foregoing factors, it is
likely that in some future quarters, our operating results may be below the
expectations of public market analysts and stockholders. In such event, the
price of our common stock would likely be materially adversely affected.
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.
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 Web sites 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 Web sites, in return for minimum levels of user impressions or user
requests for additional information made by clicking on the promotional
hyperlink or advertisement. To the extent implemented, these arrangements expose
us to potentially significant financial risks, including the risk that we fail
to deliver required minimum levels of user impressions (in which case, these
agreements typically provide for adjustments to the fees payable thereunder or
"make good" periods) and that third party sponsors do not renew the agreements
at the end of their terms. Some of these arrangements also require us to
integrate advertisers' or sponsors' content with our services, which requires
the dedication of resources and significant programming and design efforts to
accomplish. We cannot assure you that we will be able to attract additional
advertisers or sponsors or that we will be able to renew existing advertising
arrangements when they expire. In addition, we have granted exclusivity
provisions to some of our sponsors and may in the future grant additional
exclusivity provisions. These exclusivity provisions may have the effect of
preventing us, for the duration of the exclusivity arrangements, from accepting
advertising or sponsorship arrangements within a particular subject matter in
our Web sites 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.
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IF WE DO NOT DEVELOP NEW AND ENHANCED FEATURES, PRODUCTS AND SERVICES FOR OUR
BROADBAND SERVICES, WE MAY NOT BE ABLE TO ATTRACT AND RETAIN A SUFFICIENT
NUMBER OF USERS
Because of the competitiveness of the broadband market, we believe it is
important to introduce additional or enhanced features, products and services in
the future in order to differentiate our services and attract users. If we
introduce a feature, product or service that is not favorably received, people
will not use our service and they may choose a competing service.
We will need to continually enhance our products and services to incorporate
rapidly changing technologies. We could incur substantial development costs if
we need to modify our products, services or infrastructure to adapt. Our
business could be harmed if we incur significant costs to adapt to these
changes. If we cannot adapt to these changes, users may discontinue using our
services.
We may also experience difficulties that could delay or prevent us from
introducing our broadband features, products or services. Furthermore, these
features, products or services may contain errors that are discovered after the
feature, product or services are introduced. We may need to modify the design of
them significantly to correct these errors. In addition, we must consult with
and involve our principal cable partners in the development and design of new
features, products or services for our broadband services. Therefore, the
process of introducing new broadband features, products and services is time
consuming and if our principal cable partners object to a new feature, product
or service, we could be prohibited from offering it in particular areas. Our
business could be adversely affected if we experience difficulties in
introducing new products and services or if users do not accept these new
products or services.
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 ECOMMERCE 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
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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 ecommerce transactions and lower demand for our
services.
Our success also depends on our ability to grow, or scale, our ecommerce
transaction systems to accommodate increases in the volume of traffic on our
systems, especially during peak periods of demand. We may not be able to
anticipate increases in the use of our systems and successfully expand the
capacity of our network infrastructure. Our inability to expand our systems to
handle increased traffic could result in system disruptions, slower response
times and other difficulties in providing services to our merchant customers,
which could materially harm our business.
WE ARE EXPOSED TO ECOMMERCE SECURITY RISKS
A requirement of the continued growth of ecommerce is the secure
transmission of confidential information over public networks. We rely on public
key cryptography and digital certificate technology to provide the security and
authentication necessary for secure transmission of confidential information.
Various regulatory and export restrictions may prohibit us from using the
strongest and most secure cryptographic protection available and thereby expose
us to a risk of data interception. A party who is able to circumvent our
security measures could misappropriate proprietary information or interrupt our
operations. Any such compromise or elimination of our security could reduce
demand for our services.
We may be required to expend significant capital and other resources to
protect against 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
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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. Our Internet sites may
not 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 InfoSeek and reorganizing all of its
Internet assets to create a tracking stock;
- 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;
- NBC merging 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 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.
ALLIANCES MAY MAKE IT MORE DIFFICULT TO ACCESS OUR PRODUCTS AND MEDIA PROPERTIES
The 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. 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
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would make it more difficult for consumers to find and use Go2Net services.
Microsoft 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.
We may not be able to compete successfully against current or future
competitors. Competitive pressures faced by us may 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 Web site 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 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
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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 Web sites
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.
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
- 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.
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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 owns
approximately 30.68% 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 new contractual relationships between
Go2Net, on 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 with
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 30.68% 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.
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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. We may not be able to
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. We may
not be able to 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 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
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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 our financial
condition and our ability to implement our 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. Such a venture may not 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.
Interruptions in service may 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.
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
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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 Web sites 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. 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 prosecuted, 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
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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.
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, existing laws may not 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 MAY DEPEND 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. Additional financing may not 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.
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 fiscal 1999, the closing sale prices of our
common stock on The Nasdaq Stock Market ranged from $3.50 (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 shareholders. Accordingly, we will not receive any proceeds from
sales of the Go2Net shares.
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDERS
On March 29, 2000, we issued an aggregate of 54,302 shares of common stock
to the members of Dogpile, LLC, a Delaware limited liability company, pursuant
to an interest purchase agreement.
PLAN OF DISTRIBUTION
Shares of common stock covered hereby may be offered and sold from time to
time by the selling shareholders 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
shareholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. The selling shareholders may sell the
Go2Net shares being offered hereby 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 shareholders 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 shareholders 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.
In effecting sales, brokers, dealers or agents engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or
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concessions from the selling shareholders 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 shareholders.
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 shareholders 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 shareholders
and their affiliates. In addition, we will make copies of the prospectus and any
prospectus supplement available to the selling shareholders and have informed
them 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 shareholders 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 March 29, 2001. 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. We
cannot assure you that the selling shareholders will sell all or any of the
shares of common stock offered hereunder.
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SELLING SHAREHOLDERS
All of the common stock registered for sale pursuant to this prospectus will
be owned immediately after registration by the selling shareholders who include
the former members of Dogpile, and all of the shares offered by the selling
shareholders were acquired in connection with the purchase of Dogpile. None of
the selling shareholders has a material relationship with us, except that some
shareholders of Pile, Inc. are employees 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 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 April 27, 2000, by each
selling shareholder. The following table assumes that the selling shareholders
sell all of the Go2Net shares. Go2Net is unable to determine the exact number of
Go2Net shares that actually will be sold.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES
OWNED BENEFICIALLY
PRIOR TO SHARES WHICH OWNED
OFFERING(1) MAY BE SOLD AFTER OFFERING (2)
------------------- PURSUANT TO -------------------
SELLING SHAREHOLDERS NUMBER PERCENT THIS PROSPECTUS NUMBER PERCENT
- -------------------- -------- -------- --------------- -------- --------
<S> <C> <C> <C> <C> <C>
Pile, Inc........................... 27,694 * 27,694 0 *
Thunderstone Software, LLC.......... 26,608 * 26,608 0 *
</TABLE>
- ------------------------
* Less than 1.0% of the Company's outstanding Common Stock.
(1) The number and percentage of shares beneficially owned was determined in
accordance with Rule 13d-3 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
Rule 13d-3, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within 60 days of the
date of this Prospectus through the exercise of any stock option or other
right. Unless otherwise indicated in the footnotes, each person has sole
voting and investment power (or shares such powers with his or her spouse)
with respect to the shares shown as beneficially owned.
(2) Assumes that each selling shareholder will sell all of the Go2Net shares set
forth above under "Shares Which May Be Sold Pursuant to This Prospectus".
There can be no assurance that the selling shareholders will sell all or any
of the Go2Net shares offered under this prospectus.
LEGAL MATTERS
The validity of the Go2Net shares offered hereby will be passed upon by
Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts,
counsel to the Company.
EXPERTS
The consolidated financial statements of Go2Net, Inc. as of September 30,
1999 and 1998 and for each of the years in the three-year period ended
September 30, 1999, the financial statements of FreeYellow.com, Inc. as of
December 31, 1998 and for the period from December 29, 1998 (inception) to
December 31, 1998, the financial statements of Authorize.Net Corporation as of
December 31, 1997 and 1998 and for the years then ended, the financial
statements of Dogpile LLC and Predecessors as of July 31, 1998 and 1999 and for
the years then ended, the financial statements of Haggle Online, Inc. as of
December 31, 1997 and 1998 and for the period from June 6, 1997 (inception) to
December 31, 1997 and the year ended December 31, 1998, the financial statements
of USAOnline, Inc. as of December 31, 1997
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and 1998 and for the years then ended and the financial statements of IQC
Corporation as of December 31, 1997 and 1998 and for the years then ended have
been incorporated by reference or included herein in reliance upon the reports
of KPMG LLP, independent auditors, incorporated by reference or appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or the SEC, a
registration statement on Form S-3 under the Securities Act of 1933. This
prospectus does not contain all of the information in the registration
statement. We have omitted certain parts of the registration statement, as
permitted by the rules and regulations of the SEC. Additionally, we file annual,
quarterly and special reports, proxy statements and other information with the
SEC. You may inspect and copy the registration statement, including exhibits,
and any reports, statements or other information that we file at the SEC's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549. You
can call the SEC at 1-800-SEC- 0330 for further information about the public
reference rooms. In addition, the SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
Our common stock is quoted on The Nasdaq National Market. Reports, proxy and
information statements and other information concerning Go2Net, Inc. may be
inspected at The Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that information included in these documents is considered
part of this prospectus. Information that we file with the SEC subsequent to the
date of this prospectus will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15 of the
Securities Exchange Act of 1934 until the selling shareholders have sold all the
shares.
The following documents filed with the SEC are incorporated by reference in
this prospectus
- Our Annual Report on Form 10-K for the year ended September 30, 1999,
filed on December 29, 1999.
- Our Current Reports on Form 8-K/A filed on September 13, 1999,
October 18, 1999, January 4, 2000 and January 10, 2000.
- Our Quarterly Report on Form 10-Q for the quarter ended December 31, 1999
filed on February 11, 1999.
- The description of our common stock set forth in our Registration
Statement on Form S-1, filed on April 10, 1997.
We will furnish without charge to you, on written or oral request, a copy of
any or all of the documents incorporated by reference, other than exhibits to
such documents. You should direct any requests for documents to Go2Net, Inc.,
Attention: Investor Relations, 999 Third Avenue, Suite 4700, Seattle, Washington
98104, telephone: (206) 447-1595.
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MATERIAL CHANGES
GO2NET, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
HAGGLE ONLINE, INC.
Independent Auditors' Report.............................. 20
Balance Sheets............................................ 21
Statements of Operations.................................. 22
Statements of Stockholders' Equity (Deficit).............. 23
Statements of Cash Flows.................................. 24
Notes to Financial Statements............................. 25
USAONLINE, INC.
Independent Auditors' Report.............................. 28
Balance Sheets............................................ 29
Statements of Operations.................................. 30
Statements of Stockholders' Equity........................ 31
Statements of Cash Flows.................................. 32
Notes to Financial Statements............................. 33
IQC CORPORATION
Independent Auditors' Report.............................. 36
Balance Sheets............................................ 37
Statements of Operations.................................. 38
Statements of Stockholders' Equity........................ 39
Statements of Cash Flows.................................. 40
Notes to Financial Statements............................. 41
</TABLE>
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Haggle Online, Inc.:
We have audited the accompanying balance sheets of Haggle Online, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the period from June 6, 1997
(inception) to December 31, 1997 and the year ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Haggle Online, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from June 6, 1997 (inception) to December 31, 1997 and the year
ended December 31, 1998 in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Seattle, Washington
December 16, 1999
20
<PAGE>
HAGGLE ONLINE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 8,708 12,420
Accounts receivable....................................... -- 1,145
Rental deposits........................................... -- 593
------- -------
Total current assets.................................. 8,708 14,158
Equipment, net.............................................. 4,001 2,841
------- -------
Total assets.......................................... $12,709 16,999
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Amount due to stockholders................................ $ 7,641 10,436
Accrued expenses.......................................... -- 17,658
Income taxes payable...................................... 886 2,049
------- -------
Total current liabilities............................. 8,527 30,143
------- -------
Deferred income taxes....................................... 257 221
------- -------
Stockholders' equity (deficit):
Preferred stock, $0.001 par value. Authorized 2,000,000
shares; issued and outstanding none..................... -- --
Common stock, $0.001 par value. Authorized 6,000,000
shares; issued and outstanding 3,600,000 shares in 1997
and 4,000,000 shares in 1998............................ 1 401
Retained earnings (accumulated deficit)................... 3,924 (13,766)
------- -------
Total stockholders' equity (deficit).................. 3,925 (13,365)
------- -------
Total liabilities and stockholders' equity
(deficit)........................................... $12,709 16,999
======= =======
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
HAGGLE ONLINE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 6, 1997
(INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
-------------- ------------
<S> <C> <C>
Revenue:
Advertising............................................... $1,433 4,335
Licensing................................................. 7,975 7,182
Transaction fees.......................................... 40 1,981
------ -------
Total revenue......................................... 9,448 13,498
Cost of revenue............................................. 2,589 4,171
------ -------
Gross profit.......................................... 6,859 9,327
------ -------
Operating expenses:
Sales and marketing....................................... -- 17,838
General and administrative................................ 1,792 8,052
------ -------
1,792 25,890
------ -------
Operating income (loss)............................... 5,067 (16,563)
Income tax expense.......................................... 1,143 1,127
------ -------
Net income (loss)..................................... $3,924 (17,690)
====== =======
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
HAGGLE ONLINE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS TOTAL
-------------------- (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT) EQUITY (DEFICIT)
--------- -------- ------------ ----------------
<S> <C> <C> <C> <C>
Balance at date of inception, stock issued to
founder........................................ 3,600,000 $ 1 -- 1
Net income....................................... -- -- 3,924 3,924
--------- ---- ------- -------
Balances at December 31, 1997.................... 3,600,000 1 3,924 3,925
Sale of stock.................................... 400,000 400 -- 400
Net loss......................................... -- -- (17,690) (17,690)
--------- ---- ------- -------
Balances at December 31, 1998.................... 4,000,000 $401 (13,766) (13,365)
========= ==== ======= =======
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
HAGGLE ONLINE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 6, 1997
(INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
-------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $3,924 (17,690)
Adjustments to reconcile net income (loss) to net cash
provided by
operating activities:
Depreciation.......................................... 270 1,525
Deferred income taxes................................. 257 (36)
Changes in operating assets and liabilities:
Accounts receivable................................. -- (1,145)
Amounts due to stockholders......................... 7,641 2,795
Accrued expenses.................................... -- 17,658
Income taxes payable................................ 886 1,163
Rental deposits..................................... -- (593)
------ -------
Net cash provided by operating activities......... 12,978 3,677
Cash used in investing activity--purchase of equipment...... (4,271) (365)
Cash provided by financing activity--proceeds from sale of
common stock.............................................. 1 400
------ -------
Net increase in cash.............................. 8,708 3,712
Cash at beginning of period................................. -- 8,708
------ -------
Cash at end of period....................................... $8,708 12,420
====== =======
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
HAGGLE ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS
Haggle Online, Inc. (the Company) is a Delaware company which was
incorporated on June 6, 1997. The Company operates an online person-to-person
trading community (auction service). The Company's service permits sellers to
list items for sale, buyers to bid on items of interest, and all users to browse
through listed items in a fully automated, topically arranged on-line
environment. Furthermore, the Company offers web-hosting services and licensing
of its auction service software.
(B) PROPERTY AND EQUIPMENT
Equipment is stated at cost. Depreciation is calculated using the
straight-line method over a three-year life.
(C) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(D) REVENUE RECOGNITION
The Company enters into contracts with companies who wish to advertise on
the Company's web site. The Company recognizes advertising revenues based on
contracted rates over the course of the contract term. Transaction fees are
derived primarily from success fees calculated as a percentage of the final
sales transaction value.
The Company's licensing revenues are derived principally from product
licensing fees and fees from maintenance and support of its products. Licensing
revenues are generally recognized upon delivery provided that no significant
Company obligations remain and collection of the receivable is probable. In
cases where there are significant remaining obligations, the Company defers such
revenue until those obligations are satisfied. Fees from maintenance and support
of the Company's products, including revenues bundled with the initial licensing
fees, are deferred and recognized ratably over the service period, which is
typically six months. No deferred revenue existed at the balance sheet dates.
(E) CONTRIBUTED SERVICES
The Company's founder has contributed various services to the Company since
its inception. No amounts have been recorded in the accompanying financial
statements related to these contributed services, as their fair value is not
objectively determinable or measurable.
25
<PAGE>
HAGGLE ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
(G) RECENT PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS 133) in
June 1998. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognizes all derivatives as either assets or liabilities in the balance sheet
and measures those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. SFAS 133, as amended by SFAS 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of this statement is not expected to have a material impact on the
Company's consolidated financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED
FOR INTERNAL USE (SOP 98-1). SOP 98-1 requires that entities capitalize certain
costs related to internal use software once certain criteria have been met. The
Company is required to implement SOP 98-1 for the year ending December 31, 1999.
Adoption of SOP 98-1 is not expected to have a material impact on the Company's
financial condition or results of operations.
In April 1998, the American Institute of Certified Public Accountants issued
SOP 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES (SOP 98-5). Start-up
activities are defined broadly as those one-time activities related to the
opening of a new facility, introducing a new product or service, conducting
business in a new territory, conducting business with a new class of customer,
commencing some new operation, or organizing a new entity. SOP 98-5 requires
that the cost of start-up activities be expensed as incurred. SOP 98-5 is
effective for the Company beginning in fiscal 1999. Adoption of SOP 98-5 is not
expected to have a material impact on the Company's financial condition or
results of operations.
(2) EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
Computer equipment.......................................... $4,271 4,636
Accumulated depreciation.................................... (270) (1,795)
------ ------
$4,001 2,841
====== ======
</TABLE>
26
<PAGE>
HAGGLE ONLINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(3) INCOME TAXES
Deferred tax liabilities represent depreciation temporary differences which
arise from differences in the methods used to depreciate such assets.
The income tax provision consists of the following (state tax current
amounts relate to minimum tax amounts):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Current:
Federal................................................... $ 86 363
State..................................................... 800 800
------ -----
886 1,163
Deferred:
Federal................................................... 257 (82)
State..................................................... -- 46
------ -----
257 (36)
------ -----
$1,143 1,127
====== =====
</TABLE>
(4) LEASE COMMITMENT
The Company leases office space under a month to month operating lease
agreement that commenced in 1998. Rental expense was $3,048 for the year ended
December 31, 1998. Prior to 1998, the Company's operations were run out of the
founder's home and no consideration was received by the founder for this
service.
(5) SUBSEQUENT EVENTS
In March 1999, the Board of Directors amended the Company's Articles of
Incorporation to authorize two million shares of preferred stock with a par
value of $0.001 and to increase the authorized shares of common stock to six
million shares.
The Company granted a consultant an option to purchase 3,200 common shares
at an exercise price of $1.22 per share in March 1999.
In March 1999, the Company effected a 3,200-for-1 stock split. Accordingly,
the accompanying financial statements have been restated to reflect this stock
split.
In April 1999, the stockholders of the Company signed an agreement to
exchange all of the common stock of the Company for approximately 41,000 shares
of Go2Net, Inc., an unrelated publicly traded corporation.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
USAOnline, Inc.:
We have audited the accompanying balance sheets of USAOnline, Inc. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of USAOnline, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Seattle, Washington
December 16, 1999
28
<PAGE>
USAONLINE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 185 --
Accounts receivable....................................... -- 8,989
Prepaid expenses.......................................... -- --
-------- -------
Total current assets.................................. 185 8,989
Computer equipment, net..................................... 859 11,136
-------- -------
Total assets.......................................... $ 1,044 20,125
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 177 623
State income taxes........................................ 200 400
-------- -------
Total current liabilities............................. 377 1,023
-------- -------
Stockholders' equity:
Common stock, no par value. Authorized 5,000,000 shares;
issued and outstanding 50,400 shares in 1997 and 131,760
shares in 1998.......................................... 23,378 62,487
Accumulated deficit....................................... (22,711) (43,385)
-------- -------
Total stockholders' equity............................ 667 19,102
-------- -------
Total liabilities and stockholders' equity............ $ 1,044 20,125
======== =======
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
USAONLINE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
Revenues.................................................... $ 159 12,098
Cost of revenues............................................ 1,392 2,531
------- -------
Gross profit (loss)................................... (1,233) 9,567
------- -------
Operating expenses:
Stock compensation........................................ -- 16,443
General and administrative................................ 4,617 13,598
------- -------
4,617 30,041
------- -------
Operating loss before taxes........................... (5,850) (20,474)
Provision for state income taxes............................ (200) (200)
------- -------
Net loss.............................................. $(6,050) (20,674)
======= =======
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
USAONLINE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
-------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996....................... 50,400 $18,240 (16,661) 1,579
Capital contribution............................... -- 5,138 -- 5,138
Net loss........................................... -- -- (6,050) (6,050)
------- ------- ------- -------
Balances at December 31, 1997...................... 50,400 23,378 (22,711) 667
Stock issued for services rendered................. 81,360 16,443 -- 16,443
Capital contribution............................... -- 22,666 -- 22,666
Net loss........................................... -- -- (20,674) (20,674)
------- ------- ------- -------
Balances at December 31, 1998...................... 131,760 $62,487 (43,385) 19,102
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
USAONLINE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(6,050) (20,674)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation............................................ 225 1,108
Stock compensation...................................... -- 16,443
Changes in operating assets and liabilities:
Accounts receivable................................... -- (8,989)
Prepaid expenses...................................... -- --
Accounts payable...................................... 177 446
State income taxes.................................... 200 200
------- -------
Net cash used in operating activities............... (5,448) (11,466)
Cash used in investing activity--purchases of equipment..... (212) (11,385)
Cash provided by financing activity--proceeds from
contributed capital....................................... 5,138 22,666
------- -------
Net decrease in cash................................ (522) (185)
Cash at beginning of year................................... 707 185
------- -------
Cash at end of year......................................... $ 185 --
======= =======
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
USAONLINE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS
USAOnline, Inc., doing business as Virtual Avenue (the Company) was
incorporated in the state of New Jersey on December 6, 1995. No material
business activity occurred until January 1, 1996. The Company provides free web
hosting for small businesses. The Company earns revenue from advertising on the
small business sites hosted by the Company. The Company's advertising base is
principally the United States.
(B) PROPERTY AND EQUIPMENT
Equipment is stated at cost. Depreciation for financial reporting purposes
is calculated using the straight-line method over the useful lives of the assets
of five to seven years.
(C) INCOME TAXES
The Company has elected S corporation status for federal income tax
purposes. As an S corporation, the Company is not subject to federal income tax,
rather the Company's income is included in the tax returns of the stockholders.
Accordingly, no provision for federal income tax has been reflected in the
accompanying financial statements.
The provision for state income taxes is determined by applying minimum state
statutory rates to financial statement income after adjustment for items
excluded for state income tax purposes. The Company does not provide for
deferred state taxes because such amounts are immaterial to the financial
statements.
(D) REVENUE RECOGNITION
The Company recognizes advertising revenues based on contracted rates over
the course of the contract term.
(E) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
(F) RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES (FAS 133), which the Company will be required to adopt
for the year ending December 31, 2000. This Statement establishes a new model
for accounting for derivatives and hedging activities. FAS 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
Because the Company currently holds no derivative financial instruments and does
not currently engage in hedging activities, adoption of FAS 133 is expected to
have no material impact on the Company's financial condition or results of
operations.
33
<PAGE>
USAONLINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED
FOR INTERNAL USE (SOP 98-1). SOP 98-1 requires that entities capitalize certain
costs related to internal use software once certain criteria have been met. The
Company is required to implement SOP 98-1 for the year ending December 31, 1999.
Adoption of SOP 98-1 is not expected to have a material impact on the Company's
financial condition or results of operations.
In April 1998, the American Institute of Certified Public Accountants issued
SOP 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES (SOP 98-5). Start-up
activities are defined broadly as those one-time activities related to the
opening of a new facility, introducing a new product or service, conducting
business in a new territory, conducting business with a new class customer,
commencing some new operation, or organizing a new entity. SOP 98-5 requires
that the cost of start-up activities be expensed as incurred. SOP 98-5 is
effective for the Company beginning in fiscal 1999. Adoption of SOP 98-5 is not
expected to have a material impact on the Company's financial condition or
results of operations.
(2) EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
Computer hardware........................................... $1,273 12,658
Accumulated depreciation.................................... (414) (1,522)
------ ------
$ 859 11,136
====== ======
</TABLE>
(3) STOCKHOLDERS' EQUITY
At the date of inception of the Company in 1995, a stockholder received
50,400 shares of common stock for services rendered under a consulting agreement
at a price of $.10 per share. In 1998, stockholders received 81,360 shares of
common stock in exchange for services rendered under a consulting agreement at
prices ranging from $.15 to $.30 per share. The fair value of the price per
share was set by the Board of Directors at the date of issuance.
In 1997 and 1998, stockholders contributed $5,138 and $22,666, respectively,
to the Company as capital contributions in the form of payments of expenditures
on behalf of the Company.
(4) LEASE COMMITMENT
The Company entered into a noncancelable operating lease for equipment in
1998. Rental expense related to the lease was $1,274.
34
<PAGE>
USAONLINE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(4) LEASE COMMITMENT (CONTINUED)
Future minimum lease payments at December 31, 1998 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ 7,641
2000...................................................... 7,641
2001...................................................... 6,378
-------
$21,660
=======
</TABLE>
(5) SUBSEQUENT EVENT
In April 1999, the stockholders of the Company signed an agreement to
exchange all of the common stock of the Company for 150,000 shares of
Go2Net, Inc., an unrelated publicly traded entity.
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
IQC Corporation:
We have audited the accompanying balance sheets of IQC Corporation as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IQC Corporation as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Seattle, Washington
December 16, 1999
36
<PAGE>
IQC CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1997 1998
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ -- 3,577
Prepaid expenses.......................................... -- 2,600
--------- --------
Total current assets.................................. -- 6,177
Equipment, net.............................................. 29,933 39,808
--------- --------
Total assets.......................................... $ 29,933 45,985
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 10,810 34,048
Loan payable.............................................. 10,300 --
--------- --------
Total current liabilities............................. 21,110 34,048
--------- --------
Stockholders' equity:
Common stock, no par value. Authorized 100,000,000 shares;
issued and outstanding 6,000,000 shares in 1997 and
6,400,000 shares in 1998................................ 600,000 640,000
Subscription receivable................................... (123,000) --
Accumulated deficit....................................... (468,177) (628,063)
--------- --------
Total stockholders' equity............................ 8,823 11,937
--------- --------
Total liabilities and stockholders' equity............ $ 29,933 45,985
========= ========
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
IQC CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------------
1997 1998
--------- --------
<S> <C> <C>
Revenues.................................................... $ 19,416 251,215
Cost of revenues............................................ 59,299 111,207
--------- --------
Gross profit (loss)................................... (39,883) 140,008
--------- --------
Operating expenses:
Selling and marketing..................................... 5,299 71,070
Research and development.................................. 49,666 79,008
General and administrative................................ 101,630 149,816
--------- --------
156,595 299,894
--------- --------
Net loss.............................................. $(196,478) (159,886)
========= ========
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
IQC CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- SUBSCRIPTION ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE DEFICIT EQUITY
--------- -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996......... 6,000,000 $600,000 (305,000) (271,699) 23,301
Payments on subscription
receivable......................... -- -- 182,000 -- 182,000
Net loss............................. -- -- -- (196,478) (196,478)
--------- -------- -------- -------- --------
Balances at December 31, 1997........ 6,000,000 600,000 (123,000) (468,177) 8,823
Payments on subscription
receivable......................... -- -- 123,000 -- 123,000
Exercise of stock options............ 400,000 40,000 -- -- 40,000
Net loss............................. -- -- -- (159,886) (159,886)
--------- -------- -------- -------- --------
Balances at December 31, 1998........ 6,400,000 $640,000 -- (628,063) 11,937
========= ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
IQC CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
--------------------
1997 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(196,478) (159,886)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation............................................ 14,791 19,521
Changes in operating assets and liabilities:
Prepaid expenses...................................... 859 (2,600)
Accounts payable...................................... 4,365 23,238
--------- --------
Net cash used in operating activities............... (176,463) (119,727)
--------- --------
Cash used in investing activity--purchases of equipment..... (13,665) (29,396)
--------- --------
Cash flows from financing activities:
Sale of common stock...................................... -- 40,000
Proceeds from subscription receivable..................... 182,000 123,000
Payments on loan payable.................................. -- (10,300)
--------- --------
Net cash provided by financing activities........... 182,000 152,700
--------- --------
Net increase (decrease) in cash..................... (8,128) 3,577
Cash at beginning of year................................... 8,128 --
--------- --------
Cash at end of year......................................... $ -- 3,577
========= ========
Supplemental disclosure of cash flow information--cash paid
during the year for income taxes.......................... $ 1,664 800
========= ========
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
IQC CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS
IQC Corporation (the Company) was incorporated in the State of California on
June 11, 1996. The Company began operations under the name I.Q. Net, Inc. and
amended the articles of incorporation on August 11, 1998 to change the name of
the company to IQC Corporation. The Company provides web-based technical
analysis stock graphing software to individual investors. The Company earns
revenue from software license fees and from providing real time stock quotes.
The Company's customer base is located principally in the United States.
(B) EQUIPMENT
Equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of three years.
(C) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(D) REVENUE RECOGNITION
The Company licenses its software to customers on a month-to-month basis and
recognizes the revenue ratably over each month. The Company provides real time
stock quotes to its customers on a month-to-month basis and recognizes the
revenue ratably over each month. All software license and real time quote fees
are billed and collected in the month the service is provided.
(E) ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising expense was
approximately $4,000 and $34,000 for the years ended December 31, 1997 and 1998,
respectively.
(F) STOCK BASED COMPENSATION
The Company is subject to Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS 123). As allowed by
SFAS 123, the Company accounts for stock based compensation to employees in
accordance with Accounting Principles Board (APB) Opinion 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES. In cases where exercise prices are less than the fair
value as of the grant date, compensation expense is recognized over the vesting
period.
41
<PAGE>
IQC CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
(H) RECENT PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133) in
June 1998. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognizes all derivatives as either assets or liabilities in the balance sheet
and measures those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. SFAS 133, as amended by SFAS 137, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of this statement is not expected to have a material impact on the
Company's consolidated financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE (SOP 98-1), which the Company will be
required to adopt for the year ending December 31, 1999. SOP 98-1 requires that
entities capitalize certain costs related to internal use software once certain
criteria have been met. Adoption of SOP 98-1 is not expected to have a material
impact on the Company's financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
SOP 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES (SOP 98-5). Start-up
activities are defined broadly as those one-time activities related to the
opening of a new facility, introducing a new product or service, conducting
business in a new territory, conducting business with a new class of customer,
commencing some new operation, or organizing a new entity. SOP 98-5 requires
that the cost of start-up activities be expensed as incurred. SOP 98-5 is
effective for the Company beginning in fiscal 1999. Adoption of SOP 98-5 is not
expected to have a material impact on the Company's financial condition or
results of operations.
(2) EQUIPMENT
Equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1998
-------- --------
<S> <C> <C>
Computer hardware........................................ $ 50,291 79,688
Accumulated depreciation................................. (20,358) (39,880)
-------- -------
$ 29,933 39,808
======== =======
</TABLE>
42
<PAGE>
IQC CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(3) STOCKHOLDERS' EQUITY
The Company issued 6,000,000 shares of common stock at inception of which,
4,000,000 shares were issued in exchange for $95,000 in cash and a subscription
receivable in the amount of $305,000. The remaining 2,000,000 shares were issued
to employees for services rendered and compensation expense of $200,000
associated with these grants was recorded during the period ended December 31,
1996.
(4) INCOME TAXES
The Company did not provide an income tax benefit for any of the periods
presented because it has experienced operating losses since inception.
The following is a reconciliation of the statutory federal income tax rate
to the Company's effective income tax rate for the year ended December 31:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Statutory federal income tax benefit........................ (34)% (34)%
State income tax benefit.................................... (6) (6)
Valuation allowance......................................... 40 40
--- ---
-- % -- %
=== ===
</TABLE>
The components of deferred tax assets and related valuation allowance are as
follows at December 31:
<TABLE>
<CAPTION>
1997 1998
--------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 183,000 243,000
Other................................................ 5,000 9,000
--------- --------
188,000 252,000
Less valuation allowance............................. (188,000) (252,000)
--------- --------
Net deferred tax assets........................ $ -- --
========= ========
</TABLE>
Due to the uncertainty surrounding the timing of realizing the net deferred
tax assets in future tax returns, the Company has placed a valuation allowance
equal to its net deferred tax assets.
At December 31, 1998, the Company has net operating losses for both federal
and state income tax purposes of approximately $606,000, which are available to
offset future taxable income, if any, through 2019 and 2005, respectively. Due
to the change in ownership (see note 7) the net operating losses are likely to
be subject to limitations.
(5) STOCK BASED COMPENSATION
On June 11, 1996, the stockholders of the Company adopted the Stock Option
Plan (the Plan). Each grant of options under the Plan vest on a case-by-case
basis as approved by the administrator, generally over a range of immediately
vested to vesting over five years. Under the Plan, the Company has granted
options to employees and nonemployees to purchase shares of the Company's stock
at a price equal to the fair market value of the common stock on the date of
grant.
43
<PAGE>
IQC CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(5) STOCK BASED COMPENSATION (CONTINUED)
Information with respect to the Plan during 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
EMPLOYEES NONEMPLOYEES TOTAL
-------------------- ------------------- --------------------
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at December 31, 1996..... 2,000,000 $0.10 -- $ -- 2,000,000 $0.10
Granted.............................. 20,000 0.10 -- -- 20,000 0.10
--------- ----- ------- ----- --------- -----
Outstanding at December 31, 1997..... 2,020,000 0.10 -- -- 2,020,000 0.10
Granted.............................. 350,000 0.10 200,000 0.10 550,000 0.10
Exercised............................ (400,000) 0.10 -- -- (400,000) 0.10
--------- ----- ------- ----- --------- -----
Outstanding at December 31, 1998..... 1,970,000 $0.10 200,000 $0.10 2,170,000 $0.10
========= ===== ======= ===== ========= =====
Options exercisable.................. 1,010,000 200,000 1,210,000
========= ======= =========
</TABLE>
The weighted average fair value of options granted during 1997 and 1998 was
$0.06.
At December 31, 1997, options to purchase 900,000 shares were exercisable at
$0.10. The weighted average exercise prices for options granted and exercisable
at December 31, 1998 and the weighted average remaining contractual life for
options outstanding at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE OF
EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
-------- --------- ------------ -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Employees......................... $0.10 1,970,000 2.8 $0.10 1,010,000 $0.10
Nonemployees...................... 0.10 200,000 4.4 0.10 200,000 0.10
</TABLE>
SFAS 123 requires disclosure of pro forma net loss based upon the fair value
of the options issued. The Company calculated the fair value of each options
granted on the date of the grant using the Black-Scholes options pricing model
as prescribed by SFAS 123 using the following weighted average assumptions in
1997 and 1998:
<TABLE>
<S> <C>
Risk-free interest rate..................................... 5.59%
Volatility.................................................. 67.72%
Expected life (in years).................................... 5
Dividend yield.............................................. 0%
</TABLE>
The option pricing model requires the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing model does
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
44
<PAGE>
IQC CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
(5) STOCK BASED COMPENSATION (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma net loss for the years ended December 31, 1997 and 1998 is $237,000
and $206,000, respectively.
(6) RELATED PARTY TRANSACTIONS
The Company shares and leases office space from a related party under a
month to month operating lease. Rent expense was approximately $12,000 and
$16,000 for the years ended December 31, 1997 and 1998, respectively. The
Company also reimburses the related party for office supplies, telecommunication
fees and certain employee benefits. The total amount of these other related
party transactions approximated $4,000 and $6,000 for the years ended
December 31, 1997 and 1998, respectively.
(7) SUBSEQUENT EVENT (UNAUDITED)
In January 1999, the Company loaned $240,000 to a stockholder, Goldenwood
International Inc.
In February 1, 1999, the Company issued 600,000 shares of common stock
raising proceeds of $240,000.
In April 1999, the Company issued 1,600,000 shares of common stock as a
result of the exercise of stock options. In May 1999, the stockholders of the
Company signed an agreement to exchange all of the common stock of the Company
for 113,313 shares of Go2Net, Inc., an unrelated publicly traded entity. All
outstanding options of the Company will be assumed by Go2Net in conjunction with
the transaction. Included in the agreement is a provision for the Company to
extend the office space lease and the arrangement for office supplies,
telecommunication fees and certain employee benefits for twelve months.
45
<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........................................ $ 736
Legal fees and expenses..................................... $10,000
Accounting fees and expenses................................ $15,000
Printing fees and expenses.................................. $ 1,000
Miscellaneous expenses...................................... $ 1,264
-------
Total....................................................... $28,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law,
Go2Net's Amended and Restated Certificate of Incorporation, as amended, includes
a provision that eliminates the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. In addition, the
Delaware General Corporation Law and Go2Net's Amended and Restated By-laws
provide for indemnification of Go2Net's directors and officers for liabilities
and expenses that they may incur in such capacities. In general, directors and
officers are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of Go2Net,
and with respect to any criminal action or proceeding, actions that the
indemnitee has no reasonable choice to believe were unlawful.
Go2Net has purchased insurance with respect to, among other things, the
liabilities that may arise under the provisions referred to above. The directors
and officers of Go2Net also are insured against liabilities, including
liabilities arising under the Securities Act of 1933, as amended, which might be
incurred by them in their capacities as directors and officers of Go2Net and
against which they are not indemnified by Go2Net.
In connection with this offering, the selling shareholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the selling shareholders and contained
herein up to a maximum of the net proceeds received by the selling shareholders
from the sale of their Go2Net shares hereunder.
ITEM 16. EXHIBITS
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-4).
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
A. UNDERTAKING PURSUANT TO RULE 415
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(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
II-2
<PAGE>
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-3
<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 27 day of
April, 2000.
<TABLE>
<S> <C> <C>
GO2NET, INC.
By: /s/ RUSSELL C. HOROWITZ
-----------------------------------------
Russell C. Horowitz
CHIEF EXECUTIVE OFFICER
</TABLE>
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
--------- ----- ----
<C> <S> <C>
Chief Executive Officer,
/s/ RUSSELL C. HOROWITZ Chief Financial Officer
------------------------------------------- and Director (principal April 27, 2000
Russell C. Horowitz executive, financial and
accounting officer)
/s/ WILLIAM D. SAVOY
------------------------------------------- Director April 27, 2000
William D. Savoy
/s/ DIANE DAGGATT
------------------------------------------- Director April 27, 2000
Diane Daggatt
/s/ DENNIS CLINE
------------------------------------------- Director April 27, 2000
Dennis Cline
/s/ WILLIAM FLECKENSTEIN
------------------------------------------- Director April 27, 2000
William Fleckenstein
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
5.1......... Opinion of Hutchins, Wheeler & Dittmar, A Professional
Corporation.
23.1........ Consent of KPMG LLP, Independent Auditors.
23.2........ Consent of Counsel (included in Exhibit 5.1).
24.1........ Power of Attorney (included on page II-4).
</TABLE>
<PAGE>
EXHIBIT 5.1
Opinion of
HUTCHINS, WHEELER & DITTMAR, A Professional Corporation
April 27, 2000
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 54,302 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
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
Go2Net, Inc.:
We consent to the use of our report dated December 17, 1999 relating to
the consolidated financial statements of Go2Net, Inc. incorporated herein by
reference and to the reference to our firm under the heading "Experts" in the
Registration Statement.
We also consent to the use of our report dated December 15, 1999
relating to the financial statements of FreeYellow.com, Inc. incorporated
herein by reference.
We also consent to the use of our report dated August 31, 1999 relating
to the financial statements of Authorize.Net Corporation incorporated herein
by reference.
We also consent to the use of our report dated October 7, 1999 relating
to the financial statements of Dogpile LLC and Predecessors incorporated
herein by reference.
We also consent to the use of our reports dated December 16, 1999
relating to the financial statements of Haggle Online, Inc., USAOnline, Inc.
and IQC Corporation included herein.
/s/ KPMG LLP
Seattle, Washington
April 27, 2000
