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U.S SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ending June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-4142
Infoseek Corporation
(Exact name of registrant as specified in its charter)
2620 AUGUSTINE DRIVE, SUITE 250
SANTA CLARA, CA 95054
(Address of principal executive offices)
408-567-2700
(Registrant's telephone number, including area code)
Check whether the registrant:(1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90days.
Yes No X
As of June 30, 1996, there were 25,400,728 shares of the Registrant's common
stock outstanding.
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<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION NUMBER
<S> <C> <C>
ITEM 1: Financial Statements
Condensed Balance Sheets as of June 30, 1996
and December 31, 1995................................ 3
Condensed Statements of Operations for the Three
and Six Months Ended June 30, 1996 and 1995.......... 4
Condensed Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995.................. 5
Notes to Condensed Financial Statements....................... 6
ITEM 2: Management's Discussion and Analysis of Financial Conditions
and Results of Operations..................................... 7
PART II OTHER INFORMATION............................................. 15
Signatures .............................................................. 18
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFOSEEK CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1996 DECEMBER 31,
ASSETS (UNAUDITED) 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 560 $ 1,128
Short-term investments 55,731 497
Accounts receivable,net 1,302 499
Other current assets 886 111
Total current assets 58,479 2,235
Property and equipment,net 5,225 2,813
Deposits and other assets 675 75
Total assets $ 64,379 $ 5,123
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,709 $ 1,222
Accrued payroll and payroll related expenses 448 71
Other accrued liabilities 1,563 612
Short-term obligations 881 238
Total current liabilities 5,601 2,143
Long-term obligations 2,639 837
Shareholders' Equity:
Preferred stock -- --
Convertible preferred stock -- 6,694
Common stock 74,287 2,412
Accumulated deficit (13,123) (4,833)
Deferred compensation (4,428) (2,080)
Notes from shareholders (597) (50)
Total shareholders' equity 56,139 2,143
Total liabilities and shareholders' equity $ 64,379 $ 5,123
</TABLE>
See notes to condensed financial statements.
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INFOSEEK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
<S> <C> <C> <C> <C>
1996 1995 1996 1995
Revenues $ 3,286 $ 54 $ 5,018 $ 59
Cost of revenues 729 112 1,384 191
Gross profit (loss) 2,557 (58) 3,634 (132)
Operating expenses:
Research and development 950 195 1,579 371
Sales and marketing 5,566 244 8,784 321
General and administrative 919 155 1,659 252
Total operating expenses 7,435 594 12,022 944
Operating loss (4,878) (652) (8,388) (1,076)
Interest income,net 155 31 98 34
Net loss $(4,723) (621) $(8,290) $ (1,042)
Net loss per share $ (0.52) $(0.02) $ (0.47) $ (0.04)
Shares used in computing net
loss per share 9,165 25,863 17,540 25,915
</TABLE>
See notes to condensed financial statements.
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INFOSEEK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,290) $(1,042)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 785 159
Amortization of unearned compensation related to stock options 729 --
Fair value assigned to services provided by Netscape -- 67
Changes in assets and liabilities:
Accounts receivable (803) (36)
Other current assets (775) (19)
Accounts payable 1,487 68
Accrued payroll and payroll related expenses 377 4
Other accrued liabilities 951 11
Net cash used in operating activities $ (5,539) $ (788)
INVESTING ACTIVITIES
Purchase of short term investments (67,730) (2,610)
Proceeds from sales and maturities of available-
for-sale investments 12,496 84
Purchases of property and equipment (3,070) (282)
Net cash used in investing activities (58,304) (2,808)
FINANCING ACTIVITIES
Term loan 2,572 --
Repayments of term loan (127) (40)
Payments of deposit on term loan (675) --
Proceeds from sale of common stock, net 61,505 4,431
Net cash provided by financing activities 63,275 4,391
Net increase (decrease) in cash and cash equivalents (568) 795
Cash and cash equivalents at beginning of period 1,128 568
Cash and cash equivalents at end of period $ 560 $ 1,363
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
Unearned compensation related to stock options amounted to $3,102,000 for the
six months ended June 30, 1996.
See notes to condensed financial statements.
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INFOSEEK CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial information included herein, except for the December
31,1995 balance sheet, which was derived from audited financial statements, have
been prepared by the Company in accordance with generally accepted accounting
principles and reflect all adjustments, consisting only of normal recurring
accruals which in the opinion of management are necessary to fairly state the
Company's financial position, results of operations, and cash flows for the
periods presented. These financial statements should be read in conjunction with
the Company's audited financial statements included in the Company's
Registration Statement on Form S-1 as declared effective by the Securities and
Exchange Commission on June 11, 1996. The results of operations for the three
and six months ended June 30, 1996 are not necessarily indicative of the results
to be expected for any subsequent quarter or for the entire fiscal year ending
December 31, 1996.
2. INITIAL PUBLIC OFFERING
In June 1996, the Company completed its initial public offering and
issued 3,972,675 shares of its common stock to the public at a price of $12.00
per share.The Company received proceeds from the offering of approximately $43.4
million net of underwriting discounts, commissions and other offering costs.
Simultaneously upon the closing of the initial public offering,all outstanding
shares of its redeemable convertible preferred and convertible preferred
stock were automatically converted into shares of common stock.
3. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of
shares of common shares outstanding. Pursuant to the Securities and Exchanges
Commission Staff Accounting Bulletins, convertible preferred stock, redeemable
convertible preferred stock, common stock and common equivalent shares (options
and warrants) issued by the Company at prices below the assumed public offering
price during the twelve-month period prior to the offering have been included in
the calculation through March 31, 1996 as if they were outstanding for all
periods presented regardless of whether they are antidilutive (using the
treasury stock method at an assumed public offering price).
Net loss per share also gives effect, even if antidilutive, to common
equivalent shares from preferred stock that automatically converted upon the
closing of the Company's initial public offering (using the as-if-converted
method). Supplemental pro forma loss per share would have been $0.21 and $0.34
for the three and six months ended June 30, 1996, respectively, assuming the
convertible preferred stock was converted at the beginning of the second
quarter.
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ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Discussion and Analysis contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1993 and
Section 21E of the Securities Exchange Act of 1934. Actual results and the
timing of certain events could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth in "Risk
Factors That May Affect Future Results" and other factors discussed elsewhere in
this Report.
RESULTS OF OPERATIONS
Total Revenues
For the three months ended June 30, 1996 and 1995, total revenues were
$3,286,000 and $54,000, respectively. For the six months ended June 30, 1996 and
1995,total revenues were $5,018,000 and $59,000, respectively.
For the three months ended June 30, 1996 and 1995, advertising revenues
were $3,057,000and $16,000, respectively, representing 93% and 30% of total
revenues in such periods. For the six months ended June 30, 1996 and 1995,
advertising revenues were $4,713,000 and $16,000, respectively, representing 94%
and 27% of total revenues in such periods.The balance of total revenues during
these periods was derived from subscription fees for a premium service offered
to business and professional users. During 1995 and for the first six months of
1996, the Company derived its revenues substantially from the sale of
advertisements on its Web pages and, to a lesser extent, from subscription fees
for the Company's services. The Company expects to continue to derive
substantially all of its revenues for the foreseeable future from selling
advertising space on its Web sites. Advertising revenues are derived principally
from short-term advertising contracts in which the Company guarantees a minimum
number of impressions (display s of an advertisement to the user) for a fixed
fee. Advertising revenues are recognized ratably over the term of the contract
during which services are provided and are stated net of customer discounts.
Also included in advertising revenues is the exchange by the Company of
advertising space on the Company's Web sites for reciprocal advertising space in
other media publications or other Web sites or receipt of applicable goods and
services. Revenues from these exchange transactions are recorded as advertising
revenues at the estimated fair value of the goods and services received and are
recognized when both the Company's advertisements and reciprocal advertisements
are run or applicable goods or services are received. Although such revenues
have been insignificant to date, the Company believes these exchange
transactions are of value,particularly in the marketing of the Infoseek brand,
and expects to continue to engage in these transactions in the future.
The Company has also derived revenues during 1995 and the first six
months of 1996 from fees related to a premium subscription service offered to
business and professional users. Revenues from this service are recognized over
the period the service is provided and have been insignificant to date.
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The Company's current business model to generate revenues through the sale
of advertising on the Internet is unproven. There can be no assurance that
current advertisers will continue to purchase advertising space and services
from the Company or that the Company will be able to successfully attract
additional advertisers.
In March 1996, the Company and NYNEX Information Technologies Company
("NYNEX")entered into a one year agreement, which provides that, beginning in
May1996, the Company will prominently display the Big Yellow logo, which
represents NYNEX's interactive shopping directory, as the exclusive
comprehensive shopping directory within Infoseek Guide. In exchange for such
exclusivity, NYNEX will pay to the Company up to an aggregate of$4.6 million in
monthly payments, which amount will be decreased proportionately if the number
of impressions of the Big Yellow logo is below a specified number. NYNEX may
extend the term of the agreement for additional one year periods, with the fee
to be determined based upon Infoseek's then current advertising rate structure.
In addition, NYNEX has the right to cancel or renegotiate the agreement based
upon certain relative traffic volumes on the Big Yellow and Infoseek Guide
sites.The Company recognized revenue of $320,000 in connection with this
agreement during the three months ended June 30, 1996. There can be no assurance
that the NYNEX arrangement will prove to be mutually beneficial, that it will be
continued after its initial term or that the Company will be able to produce the
levels of traffic that NYNEX has negotiated.
Cost of Revenues
For the three months ended June 30, 1996 and 1995, cost of revenues were
$729,000 and $112,000, respectively. For the six months ended June 30, 1996 and
1995, cost of revenues were $1,384,000 and $191,000, respectively. Cost of
revenues consist primarily of expenses associated with the enhancement,
maintenance and support of the Company's Websites, including telecommunications
costs and equipment depreciation.
Cost of revenues also includes expenses associated with the licensing of
certain third-party technologies, consisting in 1995 and for the six months
ended June 30, 1996 primarily of amortization of the initial license fee for the
ACSIOM search engine, as well as ongoing royalties based on usage of the
product. The initial license fee is amortized at a rate of $37,000 per quarter,
commencing with the first quarter of 1995 and ending in the second quarter of
1996. Royalty fees to ACSIOM were paid commencing in the first quarter of 1995
and will continue as long as the Company utilizes the technology.
Operating Expenses
The Company's operating expenses have increased significantly in absolute
dollar amounts in each quarter of 1995 and 1996, as the Company has transitioned
from the product development stage to the marketing of its services and products
and expansion its business. The Company expects operating expenses to continue
to increase in the future as the Company continues to expand its business.
The Company recorded aggregate deferred compensation of $5,226,000 during
the fourth quarter of 1995 and first quarter of 1996 in connection with certain
stock options granted during those periods. The amortization of such deferred
compensation is being charged to operations over the
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vesting periods of the option, which are typically four years. For the three and
six months ended June 30, 1996, the Company amortized $342,000 and $729,000,
respectively, related to stock options. The amortization of this deferred
compensation will continue to have an adverse effect on the Company's results of
operations.
Research and Development
For the three months ended June 30, 1996 and 1995, research and development
expenses were $950,000 and $195,000, respectively. For the six months ended June
30,1996 and 1995, research and development expenses were $1,579,000 and
$371,000, respectively.Research and development expenses consist principally of
personnel costs and equipment depreciation. Costs related to research, design
and development of products and services have been charged to research and
development expense as incurred.
The increase in research and development expenses for the second quarter of
1996 and for the six months ended June 30, 1996 over the comparable periods of
1995 were primarily the result of continued product enhancements of the Infoseek
Guide product and the development of the Company's next generation search
engine, Ultraseek. The Company believes that a significant level of product
development expenses is required to remain competitive. Accordingly, the Company
anticipates that it will continue to devote substantial resources to product
development and that these costs will substantially increase in absolute dollars
in future periods.
Sales and Marketing
For the three months ended June 30, 1996 and 1995, sales and marketing
expenses were $5,566,000 and $244,000 respectively. For the six months ended
June 30,1996 and 1995, sales and marketing expenses were $8,784,000 and
$321,000, respectively. Sales and marketing expenses consist primarily of
compensation of sales and marketing personnel and promotional expenses.
Sales and marketing expenses for the three and six months ended June 30,
1996 included payments made to Netscape pursuant to an arrangement for the
listing of the Company's product on the Netscape Web page. This agreement with
Netscape provides for payments of up to an aggregate of $5 million over the
course of the one year term of the agreement.The Company has the right to
terminate the agreement at the end of six months, in which case payments to
Netscape would be reduced by an aggregate of approximately $2.5 million. During
the three months ended June 30, 1996, the Company recognized $1,250,000 of the
$5.0 million payment to Netscape as expense.
In addition, the increase in sales and marketing expenses for the second
quarter of 1996 and for the six months ended 1996 over the comparable periods of
1995 were also the result of hiring additional sales and marketing personnel and
an increase in promotional and advertising activity. The Company expects to
continue hiring additional sales and marketing personnel and to increase
promotional and advertising expenses, and anticipates that these costs will
continue to increase in absolute dollars in future periods.
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General and Administrative
For the three months ended June 30, 1996 and 1995, general and
administrative expenses were $919,000 and $155,000 respectively. For the six
months ended June 30, 1996 and 1995, general and administrative expenses were
$1,659,000 and $252,000 respectively.General and administrative expenses consist
primarily of compensation of administrative and executive personnel, occupancy
costs and fees for professional services.
The increase in general and administrative expenses for the second quarter
of 1996 and for the six months ended 1996 over the comparable periods of 1995
was the result of hiring additional administrative and executive staff and
adding infrastructure to manage the expansion of the business. The Company
anticipates that its general and administrative expenses will continue to
increase in absolute dollars as the Company continues to expand its
administrative and executive staff, relocates to larger facilities, adds
infrastructure and incurs additional costs related to being a public company,
such as expenses related to directors' and officers' insurance, investor
relations programs and increased professional fees.
Income Taxes
Due to the Company's loss position, there was no provision for income taxes
for any of the periods presented. At December 31, 1995, the Company had federal
and state net operating loss carry forwards of approximately $4 million and
$600,000, respectively. The federal net operating loss carry forwards will
expire beginning in 2008 through 2010, if not utilized, and the state net
operating loss carry forwards will expire in the years 1998 through 2000.Certain
future changes in the share ownership of the Company, as defined in the Tax
Reform Act of 1986 and similar state provisions, many restrict the utilization
of carry forwards. A valuation allowance has been recorded for the entire
deferred tax asset as a result of uncertainties regarding the realization of the
asset due to the lack of earnings history of the Company.
Liquidity and Capital Resources
From inception through March 31, 1996, the Company financed its operations
and met its capital expenditure requirements primarily through cash proceeds
from private sales of stock totaling $15,887,000. In April 1996, the Company
raised additional net proceeds of $8,088,000 from private sales of preferred
stock. In June 1996, the Company completed its initial public offering and
issued 3,972,675 shares of its common stock to the public at a price of$12.00
per share. The Company received proceeds from the offering of approximately
$43.4 million net of underwriting discounts, commissions and other offering
costs. Simultaneously upon the closing of the initial public offering, all
outstanding shares of its redeemable convertible preferred and convertible
preferred stock were automatically converted into shares of common stock.
For the first six months of 1996 and 1995, operating activities used cash
of $5,539,000 and $788,000 respectively. The net cash used during these periods
was primarily due to net losses and increases in accounts receivable and other
current assets, partially offset by increases in accounts payable and accrued
liabilities.
For the first six months of 1996 and 1995, investing activities used net
cash of $58,304,000 and
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$2,808,000, respectively, primarily associated with the purchase of net
short-term investments and property and equipment. Financing activities
generated cash of $63,275,000 and $4,391,000 in the first six months of 1996 and
1995 and, respectively, primarily from preferred stock sales,the initial public
offering on June 11, 1996 and equipment loans. The Company expects to continue
to incur significant capital expenditures to support expansion of the Company's
business. Furthermore, from time to time the Company expects to evaluate the
acquisition of products, businesses and technologies that complement the
Company's business. The Company does not, however, currently have any
understandings, commitments or agreements with respect to any such acquisitions.
The Company had $56,291,000 and $1,625,000 in cash and cash equivalents and
short-term investments at June 30, 1996 and December 31, 1995, respectively. The
Company believes that its existing funds will satisfy the Company's anticipated
working capital and other cash requirements through at least the next 12 months.
Thereafter, the Company may need to raise additional funds. The Company may need
to raise additional funds sooner, however, in order to fund more rapid
expansion, to develop new or enhance existing services or products,to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the shareholders of the
Company will be reduced, shareholders may experience additional dilution and
such securities may have rights, preferences or privileges senior to those of
the holders of the Company's Common Stock. There can be no assurance that
additional financing will be available on terms favorable to the Company, or at
all. If adequate funds are not available or are not available on acceptable
terms, the Company's ability to fund expansion, take advantage of acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures would be significantly limited. Such limitation could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Risk Factors That May Affect Future Results
In addition to the other information contained in this Report, the
following risk factors should be considered.
Limited Operating History; Anticipation of Continued Losses. The
Company has an limited operating history, which makes it difficult to manage
future operations or predict future operating results. The Company was formed in
August 1993, did not commence generating revenues until January 1995 and has
generated limited revenues to date. The Company has incurred significant net
losses since inception and expects to continue to incur significant losses on a
quarterly and annual basis for the foreseeable future. As of June 30, 1996, the
Company had an accumulated deficit of $13,123,000. The Company and its prospects
must be considered in light of the risks, costs and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in the new and rapidly evolving Internet market. The Company has
achieved only limited revenues to date, and its ability to generate significant
revenues is subject to substantial uncertainty. There can be no assurance that
the Company will be able to address any of these challenges or will be able to
sustain revenue growth or achieve profitability.
Potential Fluctuations in Future Results. As a result of the Company's
limited operating
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history as well as the very recent emergence of the market addressed by the
Company, the Company has neither internal nor industry-based historical
financial data for any significant period of time upon which to base planned
operating expenses.
The Company expects that its results of operations may also fluctuate
significantly in the future as a result of a variety of factors, including; the
continued rate of growth, usage and acceptance of the Internet; the rate of
acceptance of the Internet as an advertising medium; demand for the Company's
products and services; the advertising budgeting cycles of individual
advertisers; the introduction and acceptance of new or enhanced products or
services by the Company or by its competitors; the Company's ability to
anticipate and effectively adapt to a developing market and to rapidly changing
technologies; the Company's ability to attract,retain and motivate qualified
personnel; initiation, renewal or expiration of significant contracts such as
the Company's distribution relationship with NYNEX; pricing changes by the
Company or its competitors; specific economic conditions in the Internet market;
general economic conditions and other factors. In addition, the Company may
elect from time to time to make certain pricing,service or marketing decisions
or acquisitions that could have a short-term material adverse effect on the
Company's operating results may be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected.
Developing Market; Unproven Acceptance of Internet Advertising and of
the Company's Products and Services. The market for the Company's products and
services has only recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants with products and
services for use on the Internet. The Company's future success is highly
dependent upon the increased use of the Internet for information publication,
distribution and commerce. In particular, because the Company expects to derive
substantially all of its revenues in the foreseeable future from sales of
Internet advertising, the future success of the Company is highly dependent on
the development of the Internet as an advertising medium.
The Company is in anew and rapidly evolving industry, with demand for
and market acceptance of recently introduced products and services being subject
to a high level of uncertainty. Accordingly, it is difficult to predict its
size, stability and the extent of its growth, if any.There can be no assurance
that the market for the Company's products and services will develop or that
demand for the Company's products or services by Internet users or by
advertisers will emerge or become sustainable. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors, or if
the Company's products and services do not achieve or sustain acceptance by the
Internet users or advertisers, the Company's business, results of operations and
financial condition will be materially adversely affected.
Reliance on Advertising Revenues. The Company has derived substantially
all of its revenues to date from the sale of advertisements, and expects such
dependence of advertising revenue to continue. The Company's current business
model to generate revenues through the sale of advertising on the Internet is
unproven. The Company's advertising revenues to date have been derived from a
limited number of advertising customers. There can be no assurance that current
advertisers will continue to purchase advertising space and services from the
Company or that sufficient impressions will be achieved or available, or that
the company will be able to successfully attract additional advertisers.
Furthermore, there is intense competition among sellers of advertis-
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ing space on the Internet, and a variety of pricing models offered by different
vendors for a range of advertising services, making it difficult to project
future levels of advertising revenues and pricing models that will be adopted by
the Industry or individual companies. Accordingly,there can be no assurance that
the Company will be successful in generating significant future advertising
revenues and failure to do so will have a material adverse effect on the
Company's business, results of operations and financial condition.
Change in Netscape Relationship . From March 1995 through March 1996,
the Company's service was listed as the sole premier navigational service on the
Netscape Web page accessible via the "Net Search" button. As of March 31,
1996,approximately 85% of the traffic to the Company's Infoseek Guide service
was derived through the Netscape Web page. In March1996, Infoseek entered into a
new agreement with Netscape, which provides that Infoseek will be listed as a
non-exclusive premier provider of navigational services on Netscape's Web page
for the period April 10, 1996 to March 31, 1997. Currently, Netscape's Web page
display four additional premier providers. During the 30 day period from April
11 through May 10, 1996, the Company's average daily traffic was approximately
47% of its average daily traffic or the 30 day period immediately prior to the
change from being Netscape's sole premiere provider to one of five premier
providers. There can be no assurance that the Company will be able to maintain
or increase its current level of traffic and any failure to do so could
materially and adversely impact advertising revenues. In addition, the Company
cannot anticipate the impact on Infoseek traffic of any changes Netscape may
make to this service, to its Web page or its other services, or the effect on
advertising revenues that may be generated from such traffic.Infoseek's
agreement with Netscape provides for payments of up to an aggregate of $5
million to Netscape over the term of the agreement. The Company has the right to
terminate the agreement at the end of six months, in which case the payment to
Netscape would be reduced to an aggregate of approximately $2.5 million.
Furthermore, if traffic is decreased significantly as a result of these or other
changes in the Netscape relationship and the Company is unable to develop
alternative viable distribution channels, advertising revenues would probably be
adversely affected, while the $5 million Netscape obligation would not be
reduced, unless the Company determines to terminate the relationship at six
months, the result being that the Company's business, results of operations and
financial condition would be materially and adversely affected.
Technological Changes and New Products and Services. The market for
Internet products and services is characterized by technological change,
changing customer needs, frequent new product introductions and evolving
industry standards. These market characteristics are exacerbated by the emerging
nature of this market and the fact that many companies are expected to introduce
new Internet products and services in the near future. The Company's future
success will depend in significant part on its ability to continually and on a
timely basis introduce new products, services and technologies and to continue
to improve the performance, features and reliability of the Company's products
and services in response to both evolving demands of the marketplace and
competitive product offerings.
Intense Competition. The market for Internet products and services is
highly competitive,with no substantial barriers to entry, and the Company
expects that competition will continue to intensify. In addition, the market for
the Company's products and services has only recently begun to develop, is
rapidly evolving and is characterized by an increasing number of market entrants
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with competing products and services. The Company does not believe this market
will support the increasing number of competitors and their products and
services. Although the Company believes that the diverse segments of the
Internet market may provide opportunities for more than one supplier of products
and service similar to those of the Company.
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PART II: OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of Shareholders of Infoseek Corporation on May 15,
1996.
1. Election of a Board of Directors The shareholders first considered
the election of directors and the following individuals were nominated to serve
until the election of their successors:
Robert E.L. Johnson, III Oliver D. Curme
Steven T. Kirsch John E. Zeisler
H. DuBose Montgomery Matthew J. Stover
The Inspector of Elections reported that each of the nominees for
election to the Board of Directors were duly elected.
2. Approval of the Amended and Restated Articles of Incorporation. The
shareholders next considered the approval of an amendment and restatement of the
Company's Articles of Incorporation.
The amendment and restatement will (a) effect a 3- or -4 reverse stock
split of all shares of the Company capital stock, and (b) increase the
number of shares of capital stock of the Company and adjust the number
of authorized shares of Preferred Stock, including all existing series
of Preferred Stock, such that following the proposed IPO and the
conversion- of all outstanding shares of Preferred Stock into Common
Stock, the Company will have, on a post-split basis, 60,000,000 shares
of Common Stock authorized and 5,000,000 shares of Preferred Stock
authorized.
The Inspector of Elections reported a resolution approving an amendment
and restatement to the Company's Articles of Incorporation.
3. Approval of Amended and Restated Bylaws. The shareholders then
considered a proposal to approve an amendment to the Company's Bylaws.
The amendment to the Company's Bylaws, will permit certain loans
to officers and directors of the Company.
The Inspector of Elections reported a resolution approving an
amendment to the
15
<PAGE> 16
Company's Bylaws.
4. Approval of the Company's 1996 Stock Option/Stock Issuance Plan,
including the reserve of Common Stock. The Shareholders next considered a
proposal to approve the Company's 1996 Stock Option/Stock Issuance Plan (the
"1996 Plan"),including a reserve of approximately 5,628,000 shares of Common
Stock (as adjusted for the 3- for -4 reverse stock split) for issuance
thereunder.
The Inspector of Elections reported a resolution approving the
Company's1996 Stock Option/Stock Issuance Plan, including the reserve
of Common Stock.
5. Approval of the Company's Employee Stock Purchase Plan,including the
reserve of Common Stock. The shareholders then considered a proposal to approve
the Company's Employee Stock Purchase Plan (the "Purchase Plan"), including
the reserve of 187,500 shares of Common Stock (as adjusted for the 3- for -4
reverse stock split) for issuance thereunder.
The Inspector of Elections reported a resolution approving the
Company's Employee stock Purchase Plan, including the reserve of Common
Stock.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11.0 Statement re: Computation of Earnings Per Share
b) Reports on Form 8-K
The Company did not file any reports on Form 8 - K during the quarter
ended June 30, 1996.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFOSEEK CORPORATION
BY \S\ Leonard Le Blanc
----------------------------------------
Leonard Le Blanc
Executive Vice President, Finance and
Chief Financial Officer
Dated:
CALIFORNIA
(State or other jurisdiction of
incorporation or organization)
77-0353450
(I.R.S. Employer
Identification Number)
17
<PAGE> 1
INFOSEEK CORPORATION
STATEMENT OF COMPUTATION OF NET LOSS PER SHARE
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Loss $ (4,723) $ (621) $ (8,290) $ (1,042)
Weighted average common shares
outstanding during the period 5,261 3,680 4,496 3,732
Shares related to SAB No. 55,64
and 83 -- 12,483 6,802 12,483
Conversion of preferred stock not
included in shares related to SAB
No. 55, 64, and 83 3,904 9,700 6,242 9,700
Total shares used in net loss per share 9,165 25,863 17,540 25,915
Net loss per share $ (0.52) $(0.02) $(0.47) $(0.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 560
<SECURITIES> 55,731
<RECEIVABLES> 1,451
<ALLOWANCES> (149)
<INVENTORY> 0
<CURRENT-ASSETS> 58,479
<PP&E> 6,333
<DEPRECIATION> 1,108
<TOTAL-ASSETS> 64,379
<CURRENT-LIABILITIES> 5,601
<BONDS> 0
0
0
<COMMON> 74,287
<OTHER-SE> (5,025)
<TOTAL-LIABILITY-AND-EQUITY> 64,379
<SALES> 0
<TOTAL-REVENUES> 3,286
<CGS> 729
<TOTAL-COSTS> 7,435
<OTHER-EXPENSES> (155)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,723)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,723)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,723)
<EPS-PRIMARY> (0.52)
<EPS-DILUTED> 0
</TABLE>
