<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-Q
                            ------------------------
 
(MARK ONE)
 
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR
 
                   THE QUARTERLY PERIOD ENDED AUGUST 31, 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: 0-27090
 
                                CKS GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------
 
<TABLE>
<S>                                             <C>
                  DELAWARE                                       77-0385435
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)
</TABLE>
 
                    10441 BANDLEY DRIVE, CUPERTINO, CA 95014
             (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
 
      (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (408) 366-5100
 
                                      N/A
(FORMER NAME, FORMER ADDRESS & FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
 
                            ------------------------
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES X  NO __
 
     Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
 
     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  YES __  NO __
 
                     APPLICABLE ONLY TO CORPORATE ISSUERS:
 
     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
 
<TABLE>
<CAPTION>
                   CLASS                               OUTSTANDING AT AUGUST 31, 1996
-------------------------------------------      -------------------------------------------
<S>                                              <C>
     COMMON STOCK -- $0.001 PAR VALUE                            13,141,749
</TABLE>
 
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<PAGE>   2
 
                        CKS GROUP, INC. AND SUBSIDIARIES
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                     PAGE NO.
                                                                                     --------
<S>                                                                                  <C>
PART I.  FINANCIAL INFORMATION
  Item 1.  FINANCIAL STATEMENTS
     Condensed Consolidated Balance Sheets -- August 31, 1996 and November 30,
      1995.........................................................................      3
     Condensed Consolidated Statements of Income -- Three and nine months ended
      August 31, 1996 and August 31, 1995..........................................      4
     Condensed Consolidated Statements of Cash Flows -- Nine months ended August
      31, 1996 and August 31, 1995.................................................      5
     Notes to Condensed Consolidated Financial Statements..........................      6
  Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
           OF OPERATIONS...........................................................      7
PART II.  OTHER INFORMATION
  Item 1.  LEGAL PROCEEDINGS.......................................................     13
  Item 2.  CHANGES IN SECURITIES...................................................     13
  Item 3.  DEFAULTS UPON SENIOR SECURITIES.........................................     13
  Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS...................     13
  Item 5.  OTHER INFORMATION.......................................................     13
  Item 6.  EXHIBITS AND REPORTS ON FORM 8-K........................................     13
SIGNATURES.........................................................................     14
</TABLE>
 
                                        2
<PAGE>   3
 
PART I.  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
                        CKS GROUP, INC. AND SUBSIDIARIES
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                       AUGUST 31,     NOVEMBER 30,
                                                                          1996            1995
                                                                       ----------     ------------
<S>                                                                    <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents..........................................   $ 14,037        $  2,327
     Marketable securities...........................................     29,964              --
  Accounts receivable, net of allowances of $892 and $868 in 1996 and
     1995, respectively..............................................     11,799           7,203
  Fees and expenditures in excess of billings........................      1,660             471
  Prepaid expenses and other current assets..........................      2,117           1,095
                                                                         -------         -------
          Total current assets.......................................     59,577          11,096
Property and equipment, net..........................................      4,081           2,590
Intangibles resulting from business acquisitions.....................      4,853              --
                                                                         -------         -------
          Total assets...............................................   $ 68,511        $ 13,686
                                                                         =======         =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable...................................................   $  4,600        $  3,681
  Accrued expenses...................................................      4,393           2,371
  Billings in excess of fees and expenditures........................      2,148             959
  Current portion of notes payable and capital lease obligations.....        442             316
  Income taxes payable...............................................         --             972
                                                                         -------         -------
          Total current liabilities..................................     11,583           8,299
Notes payable and capital lease obligations, less current portion....        449             412
Deferred income taxes................................................        243             380
                                                                         -------         -------
          Total liabilities..........................................     12,275           9,091
                                                                         -------         -------
Stockholders' equity:
  Preferred stock; $.001 par value; 5,000,000 shares authorized; none
     issued and outstanding..........................................         --              --
  Common stock; $.001 par value; 30,000,000 shares authorized:
     Series A common stock; none and 3,114,437 shares issued and
      outstanding as of August 31, 1996 and November 30, 1995,
      respectively...................................................         --               3
     Common stock; 13,141,749 and 7,125,000 issued and outstanding as
      of August 31, 1996 and November 30, 1995, respectively.........         13               7
  Additional paid-in capital.........................................     50,500           2,380
  Notes receivable from stockholders.................................       (292)           (292)
  Retained earnings..................................................      6,015           2,497
                                                                         -------         -------
          Total stockholders' equity.................................     56,236           4,595
                                                                         -------         -------
          Total liabilities and stockholders' equity.................   $ 68,511        $ 13,686
                                                                         =======         =======
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        3
<PAGE>   4
 
                        CKS GROUP, INC. AND SUBSIDIARIES
 
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED       NINE MONTHS ENDED
                                                      -------------------     -------------------
                                                          AUGUST 31,              AUGUST 31,
                                                      -------------------     -------------------
                                                       1996        1995        1996        1995
                                                      -------     -------     -------     -------
<S>                                                   <C>         <C>         <C>         <C>
Revenues............................................  $15,523     $ 9,532     $38,418     $24,470
                                                      -------     -------     -------     -------
Operating expenses:
  Direct salaries and related expenses..............    4,273       2,862      11,048       7,513
  Other direct operating expenses...................    5,788       3,512      14,247       9,322
  General and administrative expenses...............    3,512       2,470       8,796       6,184
                                                      -------     -------     -------     -------
          Total operating expenses..................   13,573       8,844      34,091      23,019
                                                      -------     -------     -------     -------
Operating income....................................    1,950         688       4,327       1,451
Other income (expense), net.........................      355         (10)      1,129         (43)
                                                      -------     -------     -------     -------
Income before income taxes..........................    2,305         678       5,456       1,408
Income taxes........................................      832         298       1,938         619
                                                      -------     -------     -------     -------
          Net income................................  $ 1,473     $   380     $ 3,518     $   789
                                                      =======     =======     =======     =======
Net income per share................................  $  0.11     $  0.04     $  0.27     $  0.07
                                                      =======     =======     =======     =======
Shares used in per share computation................   13,519      10,739      13,249      10,721
                                                      =======     =======     =======     =======
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        4
<PAGE>   5
 
                        CKS GROUP, INC. AND SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                         -------------------------
                                                                         AUGUST 31,     AUGUST 31,
                                                                            1996           1995
                                                                         ----------     ----------
<S>                                                                      <C>            <C>
Cash flows from operating activities:
  Net income...........................................................   $   3,518       $  789
  Adjustments to reconcile net income to net cash provided by operating
     activities:
     Deferred taxes....................................................        (213)         (10)
     Compensation related to stock options.............................          78          130
     Depreciation and amortization.....................................         701          540
     Changes in operating assets and liabilities:
       Accounts receivable.............................................      (3,090)        (983)
       Fees and expenditures in excess of billings.....................      (1,189)        (347)
       Prepaid expenses and other current assets.......................      (1,051)        (328)
       Accounts payable................................................         545          (16)
       Accrued expenses................................................       1,601          571
       Billings in excess of fees and expenditures.....................         697          211
       Income taxes payable............................................        (279)         260
                                                                           --------       ------
          Net cash provided by operating activities....................       1,318          817
                                                                           --------       ------
Cash flows from investing activities:
  Purchases of property and equipment..................................      (1,690)        (686)
  Purchases of marketable securities, net..............................     (29,964)          --
  Cash acquired in business combination................................          55           --
                                                                           --------       ------
          Net cash used in investing activities........................     (31,599)        (686)
                                                                           --------       ------
Cash flows from financing activities:
  Net borrowings (repayments) on line of credit and notes payable......        (364)        (718)
  Collections on stockholder notes receivable..........................          --           71
  Proceeds from issuance of common stock...............................      42,355        1,994
  Repurchase of common stock...........................................          --          (15)
                                                                           --------       ------
          Net cash provided by financing activities....................      41,991        1,332
                                                                           --------       ------
Change in cash and cash equivalents....................................      11,710        1,463
Cash and cash equivalents, beginning of period.........................       2,327           43
                                                                           --------       ------
Cash and cash equivalents, end of period...............................   $  14,037       $1,506
                                                                           ========       ======
Supplemental non-cash investing and financing activities:
  Issuance of common stock in business acquisition.....................   $   4,997           --
                                                                           ========       ======
Supplementary disclosure of cash paid:
  Interest.............................................................   $      42       $   77
                                                                           ========       ======
  Income taxes.........................................................   $   3,948       $  601
                                                                           ========       ======
</TABLE>
 
     See accompanying notes to condensed consolidated financial statements.
 
                                        5
<PAGE>   6
 
                        CKS GROUP, INC. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
     NOTE 1. BASIS OF PRESENTATION.  The unaudited condensed consolidated
financial statements for the three and nine month periods ended August 31, 1996
and August 31, 1995 reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the interim
periods. The condensed consolidated financial statements should be read in
conjunction with those consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1995. The results of operations for the three
and nine months ended August 31, 1996 are not necessarily indicative of the
results expected for any subsequent quarter or for the entire fiscal year ending
November 30, 1996.
 
     NOTE 2. PUBLIC STOCK OFFERINGS.  In December 1995, the Company completed
its initial public offering (IPO) and issued 2,475,000 shares of its common
stock to the public at a per share price of $17.00. The Company received
proceeds of approximately $37.8 million in cash, net of underwriting discounts,
commissions and other costs.
 
     In June 1996, the Company completed a secondary public offering of
1,800,000 shares of its common stock at a per share price to the public of
$34.00. Of these shares, 131,500 were sold by the Company, and 1,668,500 were
sold by certain stockholders. The Company received proceeds of approximately
$3.8 million in cash, net of underwriting discounts, commissions and other
costs.
 
     NOTE 3. INCORPORATION IN DELAWARE.  On December 7, 1995, the Company was
reincorporated in the State of Delaware. In conjunction with the reincorporation
in Delaware, all outstanding shares of Series A Common Stock were converted into
an equal number of shares of Common Stock of the Company and all outstanding
options to purchase shares of Series B Common Stock of the Company were
converted into options to purchase an equal number of shares of Common Stock of
the Company.
 
     NOTE 4. NET INCOME PER SHARE.  Net income per share is computed using the
weighted average number of shares outstanding of common stock and dilutive
common equivalent shares from stock options using the treasury stock method. In
accordance with certain Securities and Exchange Commission (SEC) Staff
Accounting Bulletins, such computations for periods prior to the IPO include all
common and common equivalent shares issued within 12 months of the offering date
as if they were outstanding for all periods presented using the treasury stock
method and the anticipated initial public offering price. The difference between
primary and fully diluted net income per share is either not significant or
anti-dilutive in all periods presented.
 
     NOTE 5. ACQUISITION.  On August 1, 1996, the Company acquired
Schell/Mullaney, Inc. ("SMI"), a New York corporation, by means of a merger of
SMI Acquisition Corp., a New York corporation and wholly owned subsidiary of the
Company ("Sub"), with and into SMI pursuant to an Agreement and Plan of
Reorganization, dated as of June 7, 1996, by and among the Company, Sub, SMI and
the shareholders of SMI.
 
     Upon the closing of the merger the shares of common stock of SMI ("SMI
Common Stock") that were issued and outstanding immediately prior to the closing
were converted into 183,066 shares of common stock of the Company, and the right
to receive up to an additional $9.0 million in common stock of the Company in
1998 and 1999 upon attainment of certain financial performance goals by SMI (the
"Subsequent Payment Shares"). The number of Subsequent Payment Shares to be
issued to holders of SMI Common Stock will be determined based on the average
closing price of the Company's common stock during the forty-day period ending
two days prior to the issuance dates of such shares.
 
     The acquisition was accounted for as a purchase with the results of SMI
included from the acquisition date. The following summary, prepared on pro forma
basis, combines the Company's consolidated results of operations for the three
month and nine month periods ended August 31, 1996 and 1995 with SMI's results
of
 
                                        6
<PAGE>   7
 
operations for the three month and nine month periods ended June 30, 1996 and
1995, respectively, as if SMI had been acquired as of the beginning of the
periods presented.
 
<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED       NINE MONTHS ENDED
                                                      -------------------     -------------------
                                                          AUGUST 31,              AUGUST 31,
                                                      -------------------     -------------------
                                                       1996        1995        1996        1995
                                                      -------     -------     -------     -------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>         <C>         <C>         <C>
Revenues............................................  $16,513     $10,663     $42,522     $28,492
Net income..........................................  $ 1,857     $   578     $ 4,837     $ 1,543
Net income per share................................  $  0.14     $  0.05     $  0.36     $  0.14
Shares used in per share computation................   13,641      10,922      13,412      10,904
</TABLE>
 
     The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from combined operations.
 
     NOTE 6. SUBSEQUENT EVENT.  On October 4, the Company and DG Acquisition,
Inc., a wholly owned subsidiary of the Company (the "Subsidiary") entered into
an agreement (the "Purchase Agreement") to acquire the assets and assume
substantially all the liabilities of Donovan & Green, Inc. ("DGI"), a New
York-based integrated marketing communications firm specializing in
environmental design and information architecture.
 
     The Purchase Agreement provides for initial payments to DGI of $3.33
million in cash and $1.82 million in shares of common stock of the Company. In
addition, DGI will be entitled to receive an additional $3.22 million in cash
and a number of shares of common stock of the Company with a value of up to
$1.61 million over the next three fiscal years.
 
     DGI will also have the right to receive additional payments if the
Subsidiary attains certain earnings goals during the fiscal years ending
November 30, 1997, 1998, 1999 and 2000. DGI may receive $889,000 in cash and
shares of common stock of the Company with a value of $444,000 in each of 1998
and 1999 if the Subsidiary meets its earnings goals for the 1997 and 1998 fiscal
years. To the extent that the Subsidiary exceeds its earnings goals for the
1997, 1998, 1999 and 2000 fiscal years by more than 10%, DGI will be entitled to
receive cash and common stock of the Company with a combined value of up to $1.0
million per year for each of these four years.
 
     Consummation of the acquisition is subject to a number of conditions,
including the issuance of a permit by the California Department of Corporations
following a hearing as to the fairness of the proposed acquisition, the absence
of material adverse changes in the business of the Company and/or DGI and other
matters. There can be no assurance that the acquisition of DGI will be
consummated.
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.
 
     This section contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements as a result of various
factors, including those set forth under "Factors Affecting Operating Results
and Market Price of Stock." Readers are also encouraged to refer to the
Company's Annual Report on Form 10-K for a further discussion of the Company's
business and the risks and opportunities attendant thereto.
 
RESULTS OF OPERATIONS
 
THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
 
     Revenues
 
     The Company generates substantially all of its revenues through project
fees on a fixed fee for service basis. Revenues increased to $15.5 million in
the quarter ended August 31, 1996 from $9.5 million in the same quarter of
fiscal year 1995, representing an increase of 62.9%. This increase in revenues
was due to an increase in the volume of creative, design and production projects
undertaken for existing clients of the Company, as
 
                                        7
<PAGE>   8
 
well as the establishment of new client relationships. Revenues from new media
projects represented approximately 35% of revenues for the quarter ended August
31, 1996. The Company defines new media as media that delivers content to end
users in digital form, including the World Wide Web, the Internet, proprietary
online services, CD-ROMs, laptop PC presentations and interactive kiosks.
 
     Direct Salaries and Related Expenses
 
     Direct salaries and related expenses consist primarily of salaries and
other related benefits for regular and temporary employees. The Company's direct
salaries and related expenses increased 49.3% to approximately $4.3 million in
the quarter ended August 31, 1996 from approximately $2.9 million during the
same quarter of fiscal year 1995, and decreased to 27.5% of revenues for the
third quarter of fiscal year 1996 from 30.0% of revenues in the same quarter of
fiscal 1995. This increase in absolute dollars resulted principally from the
Company's hiring of additional full time employees, many of whom initially
provided services to the Company as independent consultants on a periodic basis.
The decrease in these expenses as a percentage of revenues reflects a more rapid
increase in revenues than in direct salaries and related expenses. Fees paid to
independent consultants are included in other direct operating expenses.
 
  Other Direct Operating Expenses
 
     Other direct operating expenses include materials, contract freelance
talent (independent consultants), facilities and equipment expenses necessary to
provide services to the Company's clients. Other direct operating expenses
increased 64.8% to $5.8 million in the quarter ended August 31, 1996, from $3.5
million in the same quarter of fiscal year 1995, representing 37.3% of revenues
in the third quarter of 1996 and 36.8% of revenues in the same quarter of fiscal
1995. The period over period increase in absolute dollars was attributable to
increases in freelance talent, materials, and facilities costs necessary to
support the higher level of revenues. As a percentage of revenues, other direct
operating expenses remained relatively flat from quarter to quarter, with a
slight increase in freelance talent costs related to video production projects.
 
  General and Administrative Expenses
 
     General and administrative expenses include headquarters expenses,
insurance, personnel costs for finance and administration, accounting and legal
fees, bad debt expense, management information systems expenses, and employee
benefits. General and administrative expenses increased to approximately $3.5
million in the fiscal quarter ended August 31, 1996 from approximately $2.5
million in the same quarter of fiscal year 1995, representing an increase of
42.2%. As a percentage of revenues, general and administrative expenses
decreased to 22.6% of revenues in the quarter ended August 31, 1996 from 25.9%
in the same quarter of 1995. This period over period increase in absolute
dollars in general and administrative expenses was attributable principally to
higher general and administrative payroll costs and increased facilities costs
to support the Company's growth, as well as increases in business development
expense, partially offset by decreases in bad debt expense and a reduction in
management fees paid to The Interpublic Group of Companies ("IPG"). As a
percentage of revenues, decreases in bad debt expense, administrative and
facilities costs, and IPG management fees were partially offset by increases in
general and administrative payroll and business development costs. In the
future, general and administrative expenses will include expense associated with
the amortization of approximately $4.8 million in goodwill related to the
Schell/Mullaney Acquisition, to be amortized over twenty years.
 
     Other Income (Expense), Net
 
     Other income, net increased primarily due to an increase in interest income
of approximately $384,000 in the fiscal quarter ended August 31, 1996 versus the
same quarter of fiscal 1995 due to higher average cash, cash equivalents, and
marketable securities balances.
 
                                        8
<PAGE>   9
 
     Income Taxes
 
     Combined federal and state income tax rates were 36.1% in the quarter ended
August 31, 1996 and 44.0% in the third quarter of 1995. The reduction in rate is
primarily due to the impact of income generated by the Company's holdings in tax
advantaged investments.
 
NINE MONTHS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
 
     Revenues
 
     Revenues increased to $38.4 million in the nine months ended August 31,
1996 from $24.5 million in the nine months ended August 31, 1995, representing
an increase of 57.0%. This increase in revenues was primarily due to an increase
in the volume of creative and design projects undertaken for existing clients of
the Company, as well as the establishment of new client relationships. Revenues
from new media projects represented approximately 33% of revenues for the nine
months ended August 31, 1996.
 
     Direct Salaries and Related Expenses
 
     The Company's direct salaries and related expenses increased 47.1% to
approximately $11.0 million in the nine months ended August 31, 1996 from
approximately $7.5 million during the nine months ended August 31, 1995, and
decreased to 28.8% of revenues for the first nine months of fiscal year 1996
from 30.7% of revenues for the first nine months of fiscal 1995. This increase
in absolute dollars resulted principally from the Company's hiring of additional
full time employees, many of whom initially provided services to the Company as
independent consultants on a periodic basis. The decrease in these expenses as a
percentage of revenues reflects a more rapid increase in revenues than in direct
salaries and related expenses. Fees paid to independent consultants are included
in other direct operating expenses.
 
     Other Direct Operating Expenses
 
     Other direct operating expenses increased 52.8% to $14.2 million in the
nine months ended August 31, 1996 from $9.3 million in the first nine months of
fiscal year 1995, representing 37.1% of revenues in the first nine months of
1996 and 38.1% of revenues in the first nine months of 1995. The period over
period increase in absolute dollars was attributable to increases in freelance
talent and materials costs necessary to support the higher level of revenues.
The decrease in other direct operating expenses as a percentage of revenues
resulted principally from the increased proportion of higher margin creative and
design projects.
 
     General and Administrative Expenses
 
     General and administrative expenses increased to approximately $8.8 million
in the nine months ended August 31, 1996 from approximately $6.2 million in the
same period of fiscal year 1995, representing an increase of 42.2%. As a
percentage of revenues, general and administrative expenses decreased to 22.9%
of revenues in the nine months ended August 31, 1996 from 25.3% in the first
nine months of fiscal 1995. This period over period increase in absolute dollars
in general and administrative expenses was attributable principally to increased
facilities and payroll costs to support the Company's growth, as well as
increases in business development expense, offset in part by reductions in bad
debt expense and management fees paid to IPG. The decrease in these expenses as
a percentage of revenues reflects a more rapid increase in revenues than in
general and administrative expenses. In the future, general and administrative
expenses will include expense associated with the amortization of approximately
$4.8 million in goodwill related to the Schell/Mullaney Acquisition, to be
amortized over twenty years.
 
     Other Income (Expense), Net
 
     Other income, net increased primarily due to an increase in interest income
of approximately $996,000 during the nine months ended August 31, 1996 over the
same period of fiscal 1995 due to higher average cash, cash equivalents, and
marketable securities balances.
 
                                        9
<PAGE>   10
 
     Income Taxes
 
     Combined federal and state income tax rates were 35.5% in the nine months
ended August 31, 1996 and 44.0% in the first nine months of fiscal 1995. The
reduction in rates is primarily due to the impact of income generated by the
Company's holdings in tax advantaged investments.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Since inception, the Company has financed its operations and investments in
property and equipment through cash generated from operations, bank borrowing,
equity financing and capital lease financing arrangements. At August 31, 1996,
the Company had no material capital commitments.
 
     Cash, cash equivalents and marketable securities, consisting primarily of
high-quality municipal bonds and tax-advantaged money market instruments,
totaled $44.0 million at August 31, 1996 compared to $2.3 million at November
30, 1995. The increase in cash, cash equivalents and marketable securities
during this period was primarily due to net proceeds of $37.8 million and $3.7
million resulting from the sale of stock in connection with the Company's
initial public offering in December 1995 and a secondary offering in June 1996,
respectively, and from cash provided by operations of $1.3 million.
 
     As of August 31, 1996, the Company had a $3.0 million credit facility
available under a revolving line of credit based on 75% percent of eligible
accounts receivable, as well as a $1.0 million three year term loan facility
available for purchases of equipment, both of which expired on September 30,
1996. The credit facilities were secured by all the assets of the Company and
bore interest at prime plus 0.5% for the line of credit and prime plus 0.75% for
the term loan. At August 31, 1996, there was no indebtedness outstanding under
these credit facilities. On September 30, 1996, the Company renewed its $3.0
million credit facility under a revolving line of credit. This new credit line
is not restricted by eligible accounts receivable. The Company also renewed its
$1.0 million three year term loan facility available for purchases of equipment.
The new credit facilities are secured by all the assets of the Company and bear
interest at prime for the line of credit and prime plus 0.5% for the term loan.
These credit agreements, which are scheduled to expire on September 30, 1997,
require compliance with various financial covenants and restrictions, including
maintenance of minimum levels of net worth and profitability, and restrict the
Company's ability to pay dividends or to effect mergers or acquisitions without
the bank's consent.
The Company believes its current cash, cash equivalents, and marketable
securities, together with existing credit facilities and cash flows from
operations, if any, will be sufficient to meet the Company's cash requirements
for at least the next twelve months, including the cost of business
acquisitions, if any.*
 
     The Company may need to raise additional funds through public or private
debt or equity financing in order to take advantage of opportunities that may
become available to the Company, including expansion and acquisition of
businesses, products or technologies, or otherwise to respond to competitive
pressures. There can be no assurance that the Company will be able to raise
additional capital on favorable terms or at all.
 
FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK
 
     CKS operates in a rapidly changing environment that involves a number of
uncertainties, some of which are beyond the Company's control. In addition to
the uncertainties described elsewhere in this report and in the Company's Annual
Report on Form 10-K for the fiscal year ended November 30, 1995, these
uncertainties include the following:
 
     The Company's five largest clients accounted for 32.8% of the Company's
revenues for the nine months ended August 31, 1996, with fluctuations in the
amount of revenue contribution from each such client from quarter to quarter.
Since the Company's clients generally retain the Company on a project by project
basis, a client from whom the Company generates substantial revenue in one
period may not be a substantial source of revenue in a subsequent period. To the
extent that the Company's major clients do not remain a significant
 
---------------
 
    * This statement is a forward-looking statement reflecting current
      expectations. There can be no assurance that the Company's actual
      performance will meet the Company's current expectations.
 
                                       10
<PAGE>   11
 
source of revenues, and the Company is unable to replace these clients, there
could be a direct and immediate material adverse effect on the Company's
business, financial condition and operating results.
 
     The Company generates the substantial majority of its revenues through
project fees on a fixed fee for service basis. The Company assumes greater
financial risk on fixed-price type contracts than on either time-and-material or
cost-reimbursable contracts. Failure to anticipate technical problems, estimate
costs accurately or control costs during performance of a fixed-price contract
may reduce the Company's profit or cause a loss. Although the majority of the
Company's projects typically last four to six weeks and therefore each
individual short-term project creates less exposure than a long-term fixed-price
contract, in the event the Company does not accurately anticipate the progress
of a number of significant revenue-generating projects, there could be a
material adverse effect on the Company's business, operating results and
financial condition.
 
     The Company's operating results have fluctuated in the past and may
fluctuate in the future as a result of a variety of factors, including timing of
the completion, material reduction or cancellation of major projects or the loss
of a major client, timing of the receipt of new business, timing of the hiring
or loss of personnel, timing of the opening or closing of an office, the
relative mix of high margin creative projects as compared to lower margin
production projects, changes in the pricing strategies and business model of the
Company or its competitors, capital expenditures and other costs relating to the
expansion of operations, and other factors that are outside of the Company's
control. Operating results could also be materially adversely affected by
increased competition in the Company's markets. The Company experiences some
seasonality in its business which results from timing of product introductions
and business cycles of the Company's clients. As a result of the foregoing and
other factors, the Company anticipates that it may experience material and
adverse fluctuations in future operating results on a quarterly or annual basis.
Therefore, the Company believes that period to period comparisons of its
revenues and operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance.
 
     The trading price of the Company's Common Stock is subject to fluctuations
in response to quarterly variations in operating results, announcements of
technological innovations or new products or services by the Company or its
competitors, as well as other events or factors. In addition, the stock market
has from time to time experienced price and volume fluctuations which have
particularly affected the market price of technology-oriented and media
companies, which often have been unrelated to the operating performance of these
companies. These broad market fluctuations may adversely affect the market price
of the Company's Common Stock.
 
     The Company's future growth is dependent to a significant extent upon its
ability to increase the amount of revenue it derives from providing marketing
and advertising solutions to its customers through new media, which the Company
defines as media that delivers content to end users in digital form, including
the World Wide Web, the Internet, proprietary online services, CD-ROMs, laptop
PC presentations and interactive kiosks. The market for marketing and
advertising through new media has only recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed products and services for communication and
commerce through new media. Demand and market acceptance for recently introduced
products and services are subject to a high level of uncertainty. There can be
no assurance that commerce and communication through new media will continue to
grow.
 
     Conflicts of interest are inherent in certain segments of the marketing
communications industry, particularly in advertising. The Company has in the
past and will in the future be unable to pursue potential advertising and other
opportunities because such opportunities will require the Company to provide
services to direct competitors of existing Company clients. In addition, the
Company risks alienating or straining relationships with existing clients each
time the Company agrees to provide services to even indirect competitors of
existing Company clients. Conflicts of interest may jeopardize the stability of
revenues generated from existing clients and preclude access to business
prospects, either of which developments could have a material adverse effect on
the Company's business, financial condition and operating results.
 
     As part of its business strategy, the Company has made and expects to
continue to make acquisitions of, or significant investments in, businesses that
offer complementary marketing communication services, products and technologies.
Any such future acquisitions or investments would be accompanied by the risks
 
                                       11
<PAGE>   12
 
commonly encountered in acquisitions of businesses. Such risks include, among
other things, the difficulty of assimilating the operations and personnel of the
acquired businesses, the potential disruption of the Company's ongoing business,
the inability of management to maximize the financial and strategic position of
the Company through the successful incorporation of acquired personnel and
clients, the maintenance of uniform standards, controls, procedures and policies
and the impairment of relationships with employees and clients as a result of
any integration of new management personnel.
 
                                       12
<PAGE>   13
 
PART II.  OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
     None.
 
ITEM 2.  CHANGES IN SECURITIES
 
     None.
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
 
     None.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
ITEM 5.  OTHER INFORMATION
 
     None.
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
     a. Exhibits
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                   DESCRIPTION
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<S>          <C>                                                                 
   11.1      Statement Regarding Computation of Per-Share Earnings
   27        Financial Data Schedule
</TABLE>
 
     b. Reports on Form 8-K
 
          Form 8-K dated June 7, 1996 was filed in connection with the signing
     of a definitive agreement to acquire Schell/Mullaney, Inc.
 
          Form 8-K dated August 1, 1996 was filed on August 15, 1996 in
     connection with the closing of the acquisition of Schell/Mullaney, Inc.
     ("The Schell/Mullaney Acquisition").
 
          Form 8-K/A dated August 1, 1996 was filed on October 9, 1996 in
     connection with the closing of the Schell/Mullaney Acquisition.
 
                                       13
<PAGE>   14
 
                                   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.
 
                                          CKS GROUP, INC.
                                          (Registrant)
 
Date: October 11, 1996                    By:       /s/ MARK D. KVAMME
 
                                            ------------------------------------
                                                      Mark D. Kvamme,
                                            Chairman and Chief Executive Officer
                                               (Principal Executive Officer)
 
Date: October 11, 1996                    By:       /s/ CARLTON H. BAAB
 
                                            ------------------------------------
                                                      Carlton H. Baab,
                                                Executive Vice President and
                                                  Chief Financial Officer
                                            (Principal Financial and Accounting
                                                           Officer)
 
                                       14
<PAGE>   15
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                        EXHIBITS
-------     ----------------------------------------------------------------------------
<C>         <S>                                                                         <C>
  11.1      Statement Regarding Computation of Per-Share Earnings
  27        Financial Data Schedule
</TABLE>