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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition from ________________ to _________________

                        COMMISSION FILE NUMBER 000-26365

                                 GoTo.com, Inc.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                     95-4652060
(State or Other Jurisdiction of                        (I.R.S. Employer
 Incorporation or Organization)                       Identification No.)


                       74 NORTH PASADENA AVENUE 3RD FLOOR
                           PASADENA, CALIFORNIA 91103
                    (Address of principal executive offices)

                                  626-685-5600
              (Registrant's telephone number, including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                        Common Stock, $0.0001 par value

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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, based on the closing price for the
registrant's Common Stock in the Nasdaq National Market on February 29, 2000,
was approximately $1.7 billion. This calculation does not reflect a
determination that certain persons are or are not affiliates of the registrant
for any other purposes and assumes that shares held by affiliates include only
shares held by executive officers, members of the board of directors (but not
any fund of which any such persons may be a partner), holders of greater than 5%
and all shares that have been reported on Schedule 13D, filed March 6, 2000, to
be beneficially owned by Bill Gross' idealab! or members of the group filing
such Schedule 13D. The number of outstanding shares of the registrant's Common
Stock as of the close of business on February 29, 2000 was 48,990,386, which
included 3,068,840 shares issued to Cadabra Inc. upon the consummation of our
acquisition of Cadabra Inc. on January 31, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12 and 13 of Part III incorporate information by reference from
the definitive proxy statement for the registrant's 2000 Annual Meeting of
Stockholders, which will be filed with the Securities and Exchange Commission
not later than 120 days after December 31, 1999.

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                                 GOTO.COM, INC.

                    FISCAL YEAR 1999 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS
<TABLE>
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                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
PART I

   ITEM 1.    BUSINESS......................................................................................     3

   ITEM 2.    PROPERTIES....................................................................................    17

   ITEM 3.    LEGAL PROCEEDINGS.............................................................................    18

   ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................    18

PART II

   ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................    19

   ITEM 6.    SELECTED FINANCIAL DATA.......................................................................    20

   ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS........    21

   ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................    42

   ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................    42

   ITEM 9.    CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING  AND FINANCIAL DISCLOSURE..........    42

PART III

   ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................    43

   ITEM 11.   EXECUTIVE COMPENSATION........................................................................    43

   ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................    43

   ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................    43

PART IV

   ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...............................    43

   SIGNATURES...............................................................................................  F-18
</TABLE>



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                            Forward Looking Statement

     In addition to historical information, this Form 10-K contains
forward-looking statements. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause actual results to differ include, but are not limited to, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Risks That Could Affect Our
Financial Condition and Results of Operations." Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. The Company undertakes no
obligation to revise or publicly release the results of any revision to these
forward-looking statements.

                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     GoTo.com operates an online marketplace that introduces consumers and
businesses who search the Internet to advertisers, who provide products,
services and information. Advertisers participating in our marketplace include
retail merchants, wholesale and service businesses and manufacturers. We
facilitate these introductions through our search service, which enables
advertisers to bid in an ongoing auction for priority placement in our search
results. Priority placement means that the search results appear on the page
ranked in descending order of bid price, with the highest bidder's listing
appearing first. Each advertiser pays GoTo.com the amount of its bid whenever a
consumer clicks on the advertiser's listing in our search results. Advertisers
pay GoTo.com for each click-through, so advertisers bid only on keywords
relevant to the products, services or information that they offer. Because each
advertiser chooses the bid amount and advertisement placement that is optimal
for its business, we believe the GoTo.com marketplace provides advertisers with
a cost-effective way to target consumers. Consumers access the GoTo.com search
service both at our Web site and through our affiliates, a network of Web sites
that have integrated the GoTo.com search service into their sites or that direct
consumer traffic to our site. On January 31, 2000, GoTo.com acquired Cadabra
Inc. (Cadabra), an online comparison shopping service that we now call "GoTo
Shopping." We believe GoTo Shopping further facilitates introductions between
consumers and advertisers. GoTo Shopping simplifies the consumers' process of
finding desired products by automating product comparison across multiple
attributes. By enabling consumers to search at the product level, GoTo Shopping
creates more targeted, and therefore highly valuable, advertising opportunities
for our advertisers. As with Web search, we will offer GoTo Shopping at our Web
site as well as through our affiliate network, providing consumers with multiple
points of access to, and advertisers with, multiple points of distribution for
the advertisers' products.

     Our revenue is determined primarily by the number of paid introductions,
that is the result of the number of times consumers click on advertisers'
listings, multiplied by the bid price for those listings. The number of paid
introductions for each of the last six fiscal quarters is as follows:

<TABLE>
<CAPTION>
       NUMBER OF PAID INTRODUCTIONS          FOR THE QUARTER ENDED
       ----------------------------          ---------------------
<S>                                          <C>
73 million.................................  December 31, 1999
54 million.................................  September 30, 1999
31 million.................................  June 30, 1999
15 million.................................  March 31, 1999
 7 million.................................  December 31, 1998
 2 million.................................  September 30, 1998
</TABLE>


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     The average price per paid introduction results from advertisers' online
bidding for priority placement in the search results. The average price per paid
introduction for each of the last six fiscal quarters is as follows:

<TABLE>
<CAPTION>
             AVERAGE PRICE PER
             PAID INTRODUCTION               FOR THE QUARTER ENDED
             -----------------               ---------------------
<S>                                          <C>
$0.17......................................  December 31, 1999
 0.14......................................  September 30, 1999
 0.11......................................  June 30, 1999
 0.08......................................  March 31, 1999
 0.05......................................  December 31, 1998
$0.03......................................  September 30, 1998
</TABLE>

     We believe the quarterly number of paid introductions and average price per
paid introduction listed above are not necessarily indicative of future results
and that the periods prior to the three-month period ended September 30, 1998
are not relevant because our service was only in its initial stage. It is
difficult to forecast the future growth of the average price per paid
introduction, as advertisers, rather than GoTo.com, determine the price paid. We
do not anticipate our historical growth rate to continue. Our growth rate and
results depend on our ability to continue to increase the number of advertisers
who use our service, the amount our advertisers spend on our service and the
number of consumers who use our service. We anticipate these variables to
fluctuate, affecting our growth rate and results.

     GoTo.com was incorporated in September 1997 and has a limited operating
history. We launched a proof-of-concept version of our search service in the
fiscal year ended December 31, 1997. Our pay-for-performance service was
announced in February 1998, and following further proof-of-concept testing, was
officially launched on June 1, 1998. GoTo.com has devoted significant resources
to launching its search service, including developing an infrastructure and
building a management team. GoTo.com's losses for the years ended December 31,
1999 and 1998 were approximately $29.3 million and approximately $14.0 million,
respectively.

     In April 1999, GoTo.com issued a total of 3,628,447 shares of Series D
Preferred Stock to various investors at a purchase price of $6.89 per share.

     In June 1999, GoTo.com completed its initial public offering and issued
6,900,000 shares of its common stock at a price to the public of $15.00 per
share. We received approximately $94.8 million in cash, net of underwriting
discounts, commissions and other offering costs. Simultaneously with the closing
of the initial public offering, each outstanding share of Series A, B, C and D
Preferred Stock was automatically converted into one share of common stock.

     On January 31, 2000, GoTo.com acquired Cadabra, an online comparison
shopping service that we now call GoTo Shopping. Pursuant to the Agreement and
Plan of Reorganization, GoTo.com acquired all of the outstanding shares of
capital stock and assumed all outstanding options to acquire shares of capital
stock of Cadabra, for $8.0 million in cash and 3,283,672 shares of GoTo.com
common stock.

     On March 8, 2000, GoTo.com entered into an agreement to acquire all of the
outstanding shares of capital stock and assume all of the outstanding options of
AuctionRover.com, Inc., a one-stop resource for online auctions, for 3.47
million shares of GoTo.com common stock. The purchase would enable GoTo.com to
carry listings of numerous other auction sites.

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INDUSTRY OVERVIEW

     EVOLUTION OF INITIAL SEARCH SERVICES

     Search services enable consumers to search the Internet for a listing of
Web sites based on a specific product, service or topic of interest. After
e-mail, consumers use search services more than any other Internet application.
Initially, these search services offered consumers the ability to efficiently
locate desired information on Web sites. However, the companies who provide
search services realized that increasing the number, frequency and duration of
consumer visits to their sites, rather than sending consumers to other Web
sites, yielded greater potential advertising and electronic commerce
opportunities. Accordingly, these companies evolved into portals, or online
media companies, that, in addition to search services, deliver a broad array of
content and other services designed to keep consumers at their sites.

     CONSUMERS' UNMET SEARCH NEEDS

     We believe that consumers are not well served by current search offerings.
Consumers want to quickly and easily locate relevant products, services and
information. This desire is in conflict with the economic incentive of most
search services, which require consumers to click-through multiple branches of a
hierarchical directory before locating the relevant products, services and
information. This unwieldy process benefits the search services that are now
portals because they can earn additional advertising revenue by keeping
consumers at their sites and exposing them to multiple pages through a prolonged
search process.

     In addition, most portals assign search results to keywords in a way that
often generates irrelevant search listings. Search services that rely upon
automated search technology to catalog search results generally rely on
invisible Web site descriptions or "meta tags" that are authored by Web site
operators. Operators may freely tag their sites as they choose. Consequently,
some operators tag their sites with popular search terms not relevant to their
site because by doing so they may attract additional consumer attention at
little or no marginal cost. In addition, many Web sites have similar tags, and
automated search technology is not equipped to prioritize results in accordance
with consumers' preferences. As a result of this conflict and the growth in the
number of Web sites on the Internet, consumer searches now frequently generate
hundreds and often even thousands of results, many of which may have little
relevance to consumers' interests.

     LIMITATIONS OF TRADITIONAL INTERNET ADVERTISING

     Historically, traditional online advertising has failed to exploit many of
the unique attributes of the Internet. To date, Internet advertising has
primarily taken the form of banner or sponsorship advertisements which, like
traditional media advertising, are typically priced with advertisers paying for
exposures to potential consumers. This approach, which is called
impression-based advertising, inefficiently exploits the Internet's direct
marketing potential, resulting in low consumer click-through rates averaging
less than approximately 0.5%, according to Nielsen//NetRatings. Advertisers
therefore are paying for exposure to many viewers who are not interested in the
product or service advertised. In addition, on the portals, where historically
most advertising was placed, advertising frequently is sold on an exclusive
basis, limiting the advertising opportunities for advertisers and limiting the
number of advertisers who can participate.

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     This appears to be changing, as industry trends, as reported by Forrester
Research, show a decreased emphasis on broad based banner advertising on
portals. Instead, we believe that advertisers will focus on more targeted
marketing opportunities as they recognize they can offer a level of
targetability, interactivity and measurability not generally available in other
media. With the proper tools, Internet advertisers have the ability to target
their messages to specific groups of consumers and receive prompt feedback as to
the effectiveness of their advertising campaigns. Accordingly, the Internet can
give advertisers the opportunity to develop one-to-one relationships with
consumers worldwide without a local market presence.

     OUTSOURCED INTERNET SERVICES

     Like the portals, other Web sites seek to attract and retain consumer
attention and maximize the revenue opportunity represented by that attention;
however, all but the largest Web sites are limited in their ability to do so.
Although Web sites other than AOL, msn.com and Yahoo currently represent
approximately 85% of all page views on the Web, according to Forrester Research,
Internet advertising is concentrated on the portals. As a result, other Web
sites are disadvantaged in their efforts to monetize consumer attention.

     In an effort to more effectively capitalize on their consumer audiences and
provide more valuable advertising vehicles, many Web sites are now outsourcing
popular consumer services and content offerings. In traditional media such as
television, radio and print, syndicated content has been widely used by local
media in order to augment their core programming and, in so doing, extend their
audience reach and retention. On the Internet, providers have emerged offering
Web sites syndicated services such as search, e-mail and mapping as well as
content such as stock quotes and news wires. Web sites use these offerings to
enhance consumer usage, loyalty and retention.

     LIMITATIONS ON COMPARISON SHOPPING

     Recently, several shopping services have been introduced that offer
consumers the ability to shop for products on the Internet. However, we believe
these services have a limited number of advertisers and, consequently, limited
offerings, and do not offer consumers the breadth of options they are seeking or
the ability to search for products by different terms or attributes.

     THE NEED FOR A MORE EFFECTIVE ONLINE SHOPPING SERVICE

     Current online shopping comparison services lack the ability to directly
compare multiple product features and attributes, limiting consumers' ability to
make fully informed purchasing decisions. We believe that, because these
services do not permit comparison on multiple product features, they do not
permit advertisers to efficiently target consumers. Consequently, we believe
there is a significant opportunity to extend our pay-for-placement model for Web
search to a shopping comparison service, to further facilitate introductions
between consumers and advertisers.

     THE NEED FOR AN ONLINE CONSUMER AND ADVERTISER MARKETPLACE

     Search on portals increasingly generates multiple pages of irrelevant
results for consumers. At the same time, advertisers find it increasingly
difficult to cost-effectively acquire qualified consumer leads on the Internet
for many reasons, including the diffusion of consumer attention across the
Internet, the concentration of online advertising on large

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Web sites, the pricing of Internet advertisements on an impression basis with
significant minimum expenditure requirements, and the frequent use of exclusive
arrangements. This is particularly true for advertisers seeking to reach
targeted markets, despite the unique abilities of the Internet to facilitate
direct marketing. As a result, consumers' needs and advertisers' desires to meet
those needs often go unmatched. GoTo.com believes there is a significant need
for a sophisticated, distributed online marketplace to serve both of these
constituencies by providing a targeted, cost-effective Internet advertising
solution.

THE GOTO.COM SOLUTION

     We believe the GoTo.com marketplace offers consumers quick, easy and
relevant search results for products, services and information, while providing
advertisers with a cost-effective way to target them. We also believe our
marketplace offers the same benefits to businesses searching for products,
services and information on the Internet. Key elements of GoTo.com's solution
include the following:

     SEARCH MADE SIMPLE. GoTo.com is dedicated to assisting consumers in easily
finding what they are looking for on the Internet. GoTo.com does not fill its
home page with banner advertisements, which cause clutter, distraction and
confusion for users. Instead, the GoTo.com home page prominently features the
GoTo.com search box, without distractions, which we believe enables consumers to
easily execute their searches for products, services and information. In
addition, our search results page contains an easily navigable directory to
facilitate consumer search. By generating a list of 40 results per page,
GoTo.com frequently allows consumers to locate a relevant destination site on
the first page of results. GoTo.com believes it ensures relevant search results
by reviewing and editing advertisers' site descriptions and requiring that
advertisers appear only on search results pages that relate to their site.
Furthermore, by foregoing exclusive advertising relationships and extraneous
content, GoTo.com removes significant barriers and enables consumers to locate
relevant information and pass quickly through GoTo.com to the desired
information source.

     Since advertisers must pay for each click-through, or paid introduction, to
their Web site, advertisers select and bid only on those search keywords that
are most relevant to their offerings. These choices of keywords and bids are
consistent with their economic incentive to secure high conversion rates, that
is, to convert traffic into sales. GoTo.com believes that its
pay-for-performance advertising model efficiently aligns advertiser and consumer
interests, and improves a consumer's ability to quickly and easily find relevant
search listings for products, services and information on the GoTo.com service.
Consequently, we believe GoTo.com can provide more relevant and higher quality
search results by requiring advertisers to assign a cost to their placement
decisions.

     TARGETED PAY-FOR-PERFORMANCE ADVERTISING. Any advertiser in the GoTo.com
marketplace is able to specifically target those consumers who are interested in
the products, services or information offered by the advertiser. We believe
GoTo.com enables highly efficient and cost-effective advertising expenditures.
An advertiser pays only for consumers who elect to visit its Web site after
searching targeted keywords on which the advertiser has bid. As a result,
advertisers pay only for self-qualified leads rather than exposures to potential
consumers, as with impression-based advertising.

     Advertisers maintain control on a real-time basis over the amounts of their
bids for keywords they have selected and the aggregate amount spent on
advertising with GoTo.com. As a result, advertisers are able to precisely
control their costs of customer acquisition using the GoTo.com service. In
addition, GoTo.com does not enter into

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exclusive advertising arrangements, thereby enabling access to the marketplace
by all potential advertisers.

     OUR AFFILIATE NETWORK. By offering our search service to other Web sites,
we have created a network of Web sites that have integrated the GoTo.com search
service into their sites or that direct consumer traffic to the GoTo.com Web
site. Web sites participating in our network, whom we call "affiliates," can
provide Internet search capabilities with a search box on their sites, which
generate GoTo.com search results while maintaining the look, feel and navigation
features specific to the affiliates' sites. This enables affiliates to enhance
their users' experience with search functionality and to generate additional
revenue from the consumer audiences visiting their sites through the sale of
advertising on search pages. The economics of these agreements vary from
affiliate to affiliate. Because GoTo.com focuses on deriving its revenue
primarily from search results rather than banner advertising, GoTo.com can
provide these benefits without charging licensing or set-up fees and without
competition for consumer attention for non-search content. GoTo.com's agreements
with its affiliates are generally terminable at any time by either party.
Through our network, we are building relationships with affiliates that are
intended to increase the number of click-throughs delivered to advertisers,
which would increase the value of the GoTo.com advertising proposition. For the
quarter ended December 31, 1999, traffic from our affiliate network accounted
for approximately 90% of all of GoTo.com's traffic. Of GoTo.com's total traffic,
approximately 40% of the total traffic came from the browsers, Microsoft's
Internet Explorer and Netscape, approximately 50% of the total traffic came from
other affiliates and the remaining 10% of the total traffic came directly to the
GoTo.com Web site.

     GOTO SHOPPING. Consistent with its dedication to assisting consumers to
easily find what they are looking for on the Internet, GoTo.com has launched a
highly targeted comparison shopping service that we call "GoTo Shopping." GoTo
Shopping helps consumers learn about product features, and simplifies the
consumers' process of finding desired products by automating product comparison
across multiple attributes. By enabling consumers to search at the product
level, GoTo Shopping creates more targeted, and therefore highly valuable,
advertising opportunities for our advertisers. As with Web search, we will offer
GoTo Shopping at our Web site as well as through our affiliate network,
providing consumers with multiple points of access to the service, and
advertisers with multiple points of distribution for, the advertisers' products.

GOTO.COM STRATEGY

     GoTo.com's objective is to expand participation and increase transactions
in its online marketplace. We believe that a critical mass of advertisers,
consumers and affiliates supports a self-reinforcing cycle that stimulates
growth in the number of marketplace participants, which in turn can increase the
efficiency of the GoTo.com service. We further believe that this efficiency will
increase the competition for prominent search result placement on our search and
shopping services and may, thereby, increase the amounts advertisers are willing
to bid for participation in the GoTo.com marketplace. We believe that
advertisers are attracted to GoTo.com as a result of the large number of
opportunities to reach interested consumers, and that consumers are attracted to
GoTo.com by the breadth of relevant advertiser links displayed on the GoTo.com
service. A large and active base of paying advertisers increases GoTo.com's
ability to generate comprehensive, relevant search results and to monetize
consumer search requests. The resulting revenue

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opportunity provides the incentive for GoTo.com's affiliates to direct traffic
to GoTo.com's Web site. Key elements of GoTo.com's strategy are:

     INCREASE ADVERTISERS THROUGH AUTOMATED SIGN UP. In the month of December
1999, the GoTo.com marketplace had over 21,000 paying advertisers. GoTo.com
intends to substantially increase the number of paying advertisers using the
GoTo.com marketplace primarily through the use of its online automated sign up
form. To build further advertiser participation, GoTo.com will also leverage its
reputation for pay-for-performance, direct response marketing among advertisers
and their intermediaries, such as advertising consultants and media buyers.
GoTo.com intends to reach these constituencies through multiple marketing
channels, including targeted online marketing, mailings, sponsorship of Web
sites where advertisers congregate, participation at trade shows, appearances in
advertising industry periodicals and agreements with companies who refer
advertisers to us. We believe that the GoTo.com marketplace is scalable and can
support a broader and deeper array of advertisers than traditional online
advertising solutions. Accordingly, GoTo.com intends to capture a significant
share of the advertising from the growing number of new online businesses.

     EXPAND CONSUMER BASE WITH OUR AFFILIATE NETWORK. The GoTo.com marketplace
had approximately 73 million paid introductions in the fourth quarter of 1999.
GoTo.com intends to substantially increase the number of consumers participating
in the GoTo.com marketplace by providing the GoTo.com search service to Web
sites in our affiliate network.

     UTILIZE TECHNOLOGY TO FURTHER EXPAND OPERATIONS INFRASTRUCTURE. The
services GoTo.com currently provides to advertisers include online account
creation and keyword bidding, as well as a proprietary account maintenance
product that allows advertisers to login to a secure Web site where they can
perform account management functions such as adding funds to their accounts,
viewing performance reports and changing their bids in real time. GoTo.com
intends to utilize its technology to grow an efficient and scalable operations
infrastructure enabling millions of billing events for hundreds of thousands of
advertisers at a high quality service level and at a relatively low internal
cost. In addition, GoTo.com plans to continue to enhance the services it
provides to advertisers. GoTo.com intends to increasingly automate the sale of
advertising, enabling advertisers to have greater control over, and satisfaction
with, advertising on the GoTo.com marketplace. GoTo.com is able to reduce its
cost of revenue and customer service costs because a majority of advertisers
open and maintain their accounts with GoTo.com through an automated interface.

     DERIVE STRATEGIC ADVANTAGE FROM EFFICIENT COST STRUCTURE. GoTo.com believes
that its business model provides a number of competitive advantages. The
advertisers participating in the GoTo.com marketplace can provide their own Web
site descriptions and, through competitive bidding, with bid amounts visible to
all participants, rank and set the prices paid for their position in the search
results and, consequently, the amounts they pay GoTo.com for each click on their
search result. This reduces the costs GoTo.com must pay to perform these tasks.
In addition, our business model does not require us to carry any physical
inventory. GoTo.com is therefore able to direct the capital that would otherwise
be used for these purposes towards growing our business, enhancing our services,
building brand awareness and pursuing other strategic opportunities.

     EXPAND THE GOTO.COM SERVICE THROUGH ENHANCEMENTS TO OUR EXISTING SEARCH
OFFERING. GoTo.com believes that its marketplace and business model can be
successful in areas beyond our existing search offering. We have made a
significant step in this direction

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with GoTo Shopping. In the past, Web search and shopping services have been
operated as completely separate offerings and supported by different business
models. GoTo.com's business model allows the creation of a completely unified
and integrated user experience, benefiting consumers, advertisers and
affiliates. GoTo Shopping allows GoTo.com to further enhance its marketplace by
facilitating more targeted high-value introductions between consumers and
advertisers.

     EXPAND THE GOTO.COM SERVICE INTO INTERNATIONAL MARKETS. GoTo.com believes
that international consumers also desire quick, easy and relevant search results
for products, services and information and that international advertisers can
benefit from a cost-effective, targeted way to reach consumers using GoTo.com's
pay-for-performance model. GoTo.com also believes that its automated advertiser
sign-up technology, distributed affiliate network model and efficient cost
structure will enable it to replicate its U.S.-based marketplace in other
countries. Therefore, we intend to expand into the United Kingdom within the
next 12 months.

THE GOTO.COM SERVICE

     SEARCH TOOL

     Consumers use the GoTo.com search service to locate desired providers of
products, services and information. GoTo.com's home page features a prominent
search box facilitating ease of use. In addition, consumers can access the
GoTo.com service from the tens of thousands of Web sites that are affiliates.
After entering a targeted keyword search, or performing a directory search,
consumers are presented with a list of 40 search results per page. This
relatively large number of results per page frequently enables one-page
searches. In addition, our search results page also contains an easily navigable
directory to facilitate consumer search. Consumers then access the desired Web
site by clicking on the hypertext links included in the search results. To
further assist consumers in locating desired Web sites, GoTo.com search results
pages include suggested related searches.

     Consumers using the GoTo.com search service can access GoTo Shopping as
well. While using GoTo Shopping, consumers access a proprietary data
normalization technology called Dynamic Data Integration (DDI). DDI is a
parametric search engine that allows consumers to comparison shop online by
using everyday shopping terminology and techniques. We believe DDI solves the
difficult problem of integrating disparate databases, enabling accurate,
relevant product comparisons on price, product and detailed product attributes.
Consumers using GoTo Shopping can comparison shop, educate themselves on product
features and then find the Web sites that offer the product with the specified
features and price points.

     AUCTION FOR PRIORITY PLACEMENT OF SEARCH RESULTS

     GoTo.com search results for the search service are, and we intend that the
search results for GoTo Shopping will be, prioritized for consumers based on
advertiser bids for placement of their search listings within the search
results. Paying advertisers are listed in descending bid order, with the highest
bidder appearing at the top of the search results. Bids are expressed as the
amount advertisers pay GoTo.com for each paid introduction. Based on GoTo.com
search data, a disproportionate number of GoTo.com consumers click on the first,
second or third Web sites listed. Following paid priority results of the search
service, GoTo.com offers a listing of Web sites generated by traditional search
technology currently provided through a partnership agreement with Inktomi
Corporation.

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     Advertiser bid amounts are displayed next to each search result. By
disclosing bids to both consumers and other advertisers, GoTo.com promotes an
open and efficient marketplace. Using the open bidding information, advertisers
are able to determine the bids necessary to achieve their desired ranking, which
enables competition among advertisers and promotes greater relevancy for
consumers.

     ADVERTISING ON GOTO.COM

     GoTo.com offers a self-service, online form where advertisers can sign up
and bid for search listings, which we intend to expand for GoTo Shopping
listings. Potential advertisers find the GoTo.com Web site directly or through
custom offer pages on our affiliates' sites. On the welcome page of the sign up
form, potential advertisers are able to access a frequently asked questions page
that contains information about GoTo.com's guidelines for crafting relevant
search results, instructions for opening a new account and account maintenance
information.

     As part of the sign up process, advertisers enter basic contact information
and select a unique user ID and password for accessing and maintaining account
information online using GoTo.com's proprietary account maintenance product.
Each advertiser also enters keywords on which it wishes to bid, the bid amounts
and information about the advertiser's Web site including a title customized for
the applicable keyword, a description of its Web site offerings and information
necessary for hypertext linking. Advertisers are only required to provide a
textual description of their offerings, as opposed to labor-intensive graphics
and other multimedia content, which significantly enlarges the number of
potential participants.

     During the sign up process, advertisers also enter payment information.
Advertisers must currently commit to a minimum initial payment of $25.00. An
advertiser may choose to pay by check or credit card. After entering payment
information, advertisers are presented with the terms and conditions of
advertising on the GoTo.com service, which must be accepted before an order is
processed. After the advertiser accepts these terms, a confirmation screen
appears with a tracking number for the advertiser's convenience. If an
advertiser contacts GoTo.com's customer service, the tracking number enables us
to quickly find the advertiser's enrollment application. Once the sign up
process has been completed, the advertiser receives a confirmation by e-mail
that GoTo.com received the sign up form.

     By automating the sale and maintenance of advertising accounts, GoTo.com
enables advertisers to have greater control over, and satisfaction with, the
advertising process, while simultaneously reducing GoTo.com's cost of revenue.
GoTo.com also employs an experienced sales and support team to attract large
accounts, to review advertising for relevancy and to assist advertisers in cases
where more personal attention is required.

     GoTo.com offers advertisers a variety of payment plans to ensure that
advertisers maintain sufficient funds in their GoTo.com account and remain
active on the service. Advertisers on the GoTo.com service may pay for
advertising in advance, or for qualified accounts, may elect to be invoiced.
GoTo.com notifies advertisers using its service by e-mail when account balances
are running low. Advertisers who prepay may authorize GoTo.com to either charge
them on a monthly basis to refresh their account or charge them an additional
fixed amount each time their account approaches a zero balance.

     To promote fairness and efficiency, GoTo.com has adopted marketplace rules
and policies. For example, advertisers are not permitted to bid on search
results unrelated to

                                       11
<PAGE>   12

their Web site offerings, use false or misleading advertising, or engage in
defamation, harassment or other illegal activity. Each advertiser's compliance
with these rules and policies is enforced in part by other advertisers
participating in the service. The GoTo.com service also uses proprietary fraud
protection systems that are designed to bill advertisers only for genuine
click-throughs by consumers.

MARKETING, SALES AND SERVICE

     GoTo.com attracts consumers through direct marketing efforts, as well as
through our affiliate network. Direct marketing efforts include banner
advertisements incorporating the GoTo.com search box on several major Web sites
as well as traditional offline advertising. Our sales and marketing contracts
with other Web sites provide that we pay these Web sites to direct traffic to
the GoTo.com service through online links placed on their sites, some in the
form of banner advertisements, promoting our service. In addition to online
marketing with high-traffic Web sites, GoTo.com has established relationships
with browsers that offer GoTo.com search functionality as a default search
service in rotation with other providers of search functionality.

     Web sites may participate in our affiliate network in several ways:

     First, affiliate sites can place a GoTo.com search box on their site and
earn a payment for each consumer that conducts a search and is delivered to the
GoTo.com search results. Affiliates interested in receiving payment for
directing traffic to GoTo.com's Web site fill out an application form at our
site. Once the application form is accepted, the affiliate receives a
confirmation e-mail from us, which directs the affiliate to a Web site where it
can obtain a search box to place on its site. At this Web site, the affiliate
can also obtain user traffic information and revenue reports. GoTo.com offers
affiliates several different search box options. Once an affiliate selects a
search box, it receives a tracking ID that enables GoTo.com, with assistance
from a third party provider, to track traffic from the affiliate to GoTo.com.

     Second, GoTo.com generates traffic on its service by syndicating the
GoTo.com search service to other sites. Through this part of our affiliate
network, a consumer queries the GoTo.com search service at an affiliate's Web
site and receives search results with or without leaving the affiliate's site at
the affiliate's choice.

     The economic arrangement for this offering of our service generally vary
and range from:

     - payment for impression of our search results;

     - payment for impression of our search box;

     - payment for searches done on our service; and

     - payment for clicks on our search results.

     Affiliates electing to host GoTo.com search functionality on their sites
can take advantage of any or all of the following benefits:

     - acquire turnkey search service without the need to develop and manage it
       in-house;

     - generate revenue without the costs and challenges associated with
       building and maintaining their own advertising sales force;

     - enable rapid implementation of search functionality with no out-of-pocket
       investment; and

                                       12
<PAGE>   13

     - build and maintain brand loyalty by delivering content with the look,
       feel and navigation features specific to each affiliate, creating the
       impression to consumers that they have not left the affiliate's site.

     In addition, as part of our affiliate network, we have established
contracts with Web sites that aggregate the search offerings of several
providers of search services. These contracts provide that our search service is
included in the aggregated search offerings on these sites. We also have entered
into contracts with providers of Internet browsers, like Microsoft Internet
Explorer and Netscape Communicator, which provide that our search service is
offered on the browser's search page or as part of the browser's search
functionality. We also have entered into contracts with Internet Service
Providers (ISPs) in which our search service is featured to the ISPs' users.
These contracts with other Web sites, browser providers and ISPs are typically
short term, generally expiring within two years or less. Our costs for traffic
under these contracts vary widely and are generally incurred on either a per
impression basis where we pay a specified amount for each consumer who views the
Web page upon which the search service is placed, or a click-through basis where
we pay for each consumer who clicks through to our service. Set forth below are
descriptions of certain of our existing agreements with Web sites and browser
providers.

     Netscape Premier Provider Agreement: On July 1, 1999, GoTo.com and Netscape
entered into a one-year agreement under which GoTo.com became one of Netscape's
premier search and directory service providers on the Netscape browser. GoTo.com
also agreed to pay Netscape for cumulative search session traffic in excess of a
minimum payment based on a fixed rate per search session. Cumulative search
session traffic has not exceeded the minimum payments as of the year ended
December 31, 1999.

     Microsoft: On January 18, 2000, GoTo.com and Microsoft entered into a
one-year agreement. Under the terms of the agreement, Microsoft will include
GoTo.com along with other search engines among the choices of search engines
provided to users of their Internet Explorer 4 and Internet Explorer 5 browsers.
GoTo.com paid a fixed amount for the term of the agreement. Microsoft is under
no obligation to deliver a specified number of impressions or searches. We
anticipate that traffic from this source will continually diminish throughout
the year and that eventually we will receive no traffic from Internet Explorer 4
and Internet Explorer 5.

     EarthLink: In September 1999, EarthLink and GoTo.com entered into a
two-year agreement beginning in January 1, 2000, that would provide for GoTo.com
to be the default provider of search engine services on the EarthLink site.
Under the agreement, EarthLink agreed to provide a minimum number of referrals
during the initial term and renewal term, if any. In addition to the minimum
payment, GoTo.com agreed to pay EarthLink a fixed rate per referral for
referrals in excess of the minimum each month.

     MindSpring: On December 1, 1999, MindSpring and GoTo.com entered into a
one-year agreement under which GoTo.com search boxes and search links were
placed on MindSpring's Web sites. GoTo.com agreed to pay MindSpring a fixed rate
per click-through.

     OneMain: On November 7, 1999, OneMain and GoTo.com entered into an
agreement effective through December 31, 2001 under which GoTo.com shall be the
exclusive search provider for all of OneMain's Web sites. Under the agreement,
GoTo.com agreed to pay OneMain a fixed rate for each search. The rate for each
search increases incrementally when the cumulative number of searches exceeds
agreed-upon levels.

                                       13
<PAGE>   14

     Dogpile: On April 1, 1999, GoTo.com and Dogpile entered into a one-year
agreement, which continues there-after until terminated by either party upon 30
days' written notice. Under the agreement, Dogpile shall position GoTo.com's
search results on the first page of all Dogpile's meta-search results. GoTo.com
agreed to pay Dogpile a fixed rate for each search.

     GoTo.com estimates that it had approximately 15.5 million unique users for
the month of December 1999. In the quarter ended December 31, 1999, traffic from
our affiliate network accounted for approximately 90% of all of GoTo.com's
traffic. Of GoTo.com's total traffic, approximately 40% of the total traffic
came from the browsers, Microsoft's Internet Explorer and Netscape,
approximately 50% of the total traffic came from other affiliates and the
remaining 10% of the total traffic came directly to the GoTo.com Web site.

     To build further advertiser participation, GoTo.com will leverage its
reputation for pay-for-performance, direct response marketing among advertisers
and their intermediaries, such as advertising consultants and media buyers.
GoTo.com intends to reach these constituencies through multiple marketing
channels, including targeted online marketing, mailings, sponsorship of Web
sites where advertisers congregate, participation at trade shows and appearances
in advertising industry periodicals. GoTo.com also enters into referral
agreements with companies that receive payment for each advertiser that they
refer to us who become an advertiser of our service.

TECHNOLOGY

     The GoTo.com technical operating environment is designed to provide the
best search experience on the Internet to our consumers, advertisers and
affiliates. GoTo.com intends to continue investing in its technology
infrastructure to maintain and enhance its competitive advantage.

     GoTo.com makes its services available to advertisers and consumers through
a combination of its own proprietary technology and commercially available
technology from industry leading providers such as Sun Microsystems, Cisco,
Oracle, Informix and Silknet. GoTo.com also relies upon GlobalCenter (formerly
Frontier Global Center), a third party located in Sunnyvale, California, to
provide Web hosting services, including hardware support and service and network
coordination. GoTo.com also maintains its data warehouse at this third party's
facilities. Any disruption in the Internet access or other services provided by
this third party could have a material adverse effect on our business.
Accordingly, our research and development efforts include the development and
implementation of business continuity and disaster recovery systems, improvement
of data retention, backup and recovery processes and systems and standardization
of technology platforms.

     GoTo.com intends to expand its matching capabilities and increase search
targetability. Consumers using the GoTo.com search service can access GoTo
Shopping as well. While using GoTo Shopping, consumers access a proprietary data
normalization technology, DDI. DDI is a parametric search engine that allows
consumers to comparison shop online by using everyday shopping terminology and
techniques. We believe DDI solves the difficult problem of integrating disparate
databases, enabling accurate, relevant product comparisons on price, product and
detailed product attributes. Consumers using GoTo Shopping can comparison shop,
educate themselves on product features and then find the Web sites that offer
the product with the specified features and price points.

                                       14
<PAGE>   15

COMPETITION

     The market for Internet products, services and advertising is new, rapidly
evolving and intensely competitive. Currently, GoTo.com has no direct
competition of any significant scale. That is, there are currently no other
meaningful companies providing Web site search results that are ordered by bid
price and set by advertisers bidding for priority placement in an ongoing
auction. However, GoTo.com potentially competes with many other providers of Web
directories, search and information services, as well as traditional media, for
consumer attention and advertising expenditures. We expect competition to
intensify in the future. Barriers to entry may not be significant, and current
and new competitors may be able to launch new Web sites at a relatively low
cost. Accordingly, we believe that our success will depend heavily upon
achieving significant market acceptance before our competitors and potential
competitors introduce competing services.

     GoTo.com competes with online services, other Web sites and advertising
networks such as DoubleClick Inc. and 24/7 Media, Inc., 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, GoTo.com may face increased
pricing pressure for the sale of advertisements and direct marketing
opportunities, which could adversely affect our business and operating results.

     GoTo.com also competes with providers of Web directories, search, shopping
and information services, all of whom offer services competitive with GoTo.com,
including, among others, AltaVista, Amazon.com, Inc. America Online, Inc.
(AOL.com, Netfind and Netscape Netcenter), Ask Jeeves, Inc., CNET, Inc. (NBCi
and mySimon Inc.), DealTime.com, Excite@Home, Inc. (including WebCrawler and
Magellan), Google, Inc., Inktomi Corporation, LookSmart, Ltd., Lycos, Inc.
(including HotBot), Microsoft Corporation (LinkExchange, Inc. and msn.com),
OpenDirectory, Inc., ShopNow.com Inc. (bottomdollar.com), The Walt Disney
Company (Go.com) and Yahoo! Inc. In addition, we expect that other companies
will offer directly competing services in the future.

     Many of these competitors, as well as potential entrants into our market,
have longer operating histories, larger customer or user bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do. Many of these current and potential competitors can devote
substantially greater resources to promotion and Web site and systems
development than we can. In addition, as the use of the Internet and other
online services increases, larger, well-established and well-financed entities
may continue to acquire, invest in or form joint ventures with providers of Web
directories, search and information services or advertising solutions, and
existing providers of Web directories, search and information services or
advertising solutions may continue to consolidate. In addition, providers of
Internet browsers and other Internet products and services who are affiliated
with providers of Web directories and information services in competition with
the GoTo.com service may more tightly integrate these affiliated offerings into
their browsers or other products or services. Any of these trends would increase
the competition we face and could adversely affect our business and operating
results.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

     Our services operate in part by making Internet services and content
available to our users. This creates the potential for claims to be made against
us, either directly or through contractual indemnification provisions with third
parties. These claims might, for example, be made for defamation, negligence,
copyright, trademark or patent infringement,

                                       15
<PAGE>   16

personal injury, invasion of privacy or other legal theories. Allegations are
made against us from time to time concerning these types of claims. Any claims
could result in costly litigation and be time consuming to defend, divert
management's attention and resources, cause delays in releasing new or upgrading
existing services or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on acceptable
terms, if at all. There can be no assurance that our services do not infringe
the intellectual property rights of third parties. A successful claim of
infringement against us and our failure or inability to license the infringed or
similar technology could adversely affect our business.

     GoTo.com seeks to protect its proprietary rights, but its actions may be
inadequate to protect its trademarks or other proprietary rights or to prevent
others from claiming violations of their proprietary rights. GoTo.com has filed
for patents to protect proprietary technology that it is using or developing;
however, we cannot be assured that we will be granted these patents or that we
will successfully defend them, should a claim arise. GoTo.com enters into
confidentiality agreements with its employees and consultants and generally
controls access to and distribution of its proprietary information. We also
enter into non-disclosure agreements with third parties to whom we disclose
confidential information. Despite GoTo.com's efforts to protect its proprietary
rights from unauthorized use or disclosure, parties may attempt to disclose,
obtain or use its proprietary information. Third parties may infringe or
misappropriate GoTo.com's proprietary rights, which could have a material
adverse effect on GoTo.com's business, results of operations and financial
condition.

     We seek to protect our copyrights, service marks, trademarks, trade dress
and trade secrets through a combination of laws and contractual restrictions,
such as confidentiality agreements. For example, we attempt to register our
trademarks and service marks in the United States. However, effective trademark,
service mark, copyright and trade secret protection may not be available in
every country in which our services are made available online. Because we are
devoting significant resources to building our brand, through media advertising
campaigns, if we are not granted registered status for the trade and service
marks for which we have applied, or if we are unable to defend our intellectual
property rights, our business may be materially and adversely affected.

     We are engaged in litigation that will be expensive to pursue and will be
distracting to our management and other employees. Any adverse developments
resulting from this litigation could seriously harm our business. We believe
that The Walt Disney Company and certain of its affiliates, including Infoseek
Corporation, are infringing our GoTo.com logo. On February 18, 1999, we sued
these companies and two affiliated companies in the United States District Court
for the Central District of California alleging violation of federal trademark
law and unfair competition. Our lawsuit is based on the use by these companies
of a "GO" design mark to provide Internet services, including a search engine in
connection with their "Go Network." We are seeking to prevent these companies
from using this "GO" design mark as well as other remedies. We cannot assure you
that the outcome of this litigation will be favorable to us. For example, we may
not prevail and be able to stop these companies from causing confusion among
consumers and advertisers through continued use of the "GO" design mark. The
defendants have asserted counterclaims against GoTo.com. GoTo.com believes that
the counterclaims are without merit and will defend against them vigorously. An
unfavorable result could affect the value of the GoTo.com logo or even prevent
us from using the GoTo.com logo.

     On November 12, 1999, the federal district court in Los Angeles
preliminarily enjoined The Walt Disney Company, Infoseek and related companies
from using their Go

                                       16
<PAGE>   17

Network logo. On November 18, 1999, the Ninth Circuit Court of Appeals granted
the defendants' motion for a stay of the preliminary injunction pending appeal
and the defendants were permitted to use the Go Network logo while the Ninth
Circuit reviewed the district court's preliminary injunction order. GoTo.com and
the defendants briefed the appeal during December, and the Ninth Circuit heard
oral arguments on the matter on January 19, 2000. On January 27, 2000, the Ninth
Circuit vacated the stay and reinstated the preliminary injunction. No trial
date has been set, and despite the issuance of the preliminary injunction, we
cannot assure you that we will ultimately prevail in this litigation.

EMPLOYEES

     GoTo.com had 317 full-time employees as of February 29, 2000. As of
February 29, 2000, GoTo.com's employees were comprised of 76 people who are
engaged in technical operations and product development, 138 in marketing, sales
and service, 69 in finance, administration and operations and 34 in GoTo
Shopping. Marketing, sales and service employees include customer service
representatives, salespeople, sales administration personnel, marketing and
communications personnel and creative services personnel.

ITEM 2. PROPERTIES

     GoTo.com leases approximately 58,000 square feet of office space in
Pasadena, California and approximately 12,000 square feet of office space in San
Mateo, California. With the exception of additional space in San Mateo for
operations associated with GoTo Shopping, GoTo.com believes its current
facilities in Pasadena will be adequate to sustain the anticipated increase in
headcount for the next fiscal year.

                                       17
<PAGE>   18


ITEM 3.  LEGAL PROCEEDINGS

     On February 18, 1999, GoTo.com sued The Walt Disney Company and certain of
its affiliates, including Infoseek Corporation, in the United States District
Court for the Central District of California, alleging violation of federal
trademark law and unfair competition. The lawsuit is based upon these companies'
use of a "GO" design mark to provide Internet services, including a search
engine in connection with their "Go Network." GoTo.com is seeking to prevent
these companies from using the "GO" design mark as well as other remedies.

     The defendants have asserted counterclaims against GoTo.com. GoTo.com
believes that the proposed counterclaims are without merit and will defend
against them vigorously.

     On November 12, 1999, the federal district court in Los Angeles
preliminarily enjoined The Walt Disney Company, Infoseek and related companies
from using their Go Network logo. On November 18, 1999, the Ninth Circuit Court
of Appeals granted the defendants' motion for a stay of the preliminary
injunction pending appeal and the defendants were permitted to use the Go
Network logo while the Ninth Circuit reviewed the district court's preliminary
injunction order. GoTo.com and the defendants briefed the appeal during
December, and the Ninth Circuit heard oral arguments on the matter on January
19, 2000. On January 27, 2000, the Ninth Circuit vacated the stay and reinstated
the preliminary injunction. No trial date has been set, and despite the issuance
of the preliminary injunction, we cannot assure you that we will ultimately
prevail in this litigation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required by Item 10 of Form 10-K with respect to executive
officers of the Company is set forth below. The following table sets forth
certain information with respect to the executive officers of GoTo.com as of
February 29, 2000.

<TABLE>
<CAPTION>

       NAME                                               AGE   POSITION
       ----                                               ---   --------
       <S>                                                <C>   <C>
       Jeffrey S. Brewer...............................   30    Executive Chairman of the Board
       Ted Meisel......................................   36    Chief Executive Officer and President
       Todd Tappin.....................................   38    Chief Financial Officer
       Harry Chandler..................................   46    Executive Vice President
       Stephanie A. Sarka..............................   36    Senior Vice President of Marketing
       James B. Gallinatti Jr..........................   43    Senior Vice President of Sales and Services

</TABLE>

----------

     Jeffrey S. Brewer has served as Executive Chairman of the Board since
February 2000 and as a Director since June 1998. From March 1998 to January
2000, he served as Chief Executive Officer, and from March 1998 to May 1999 he
also served as President. From August 1995 to January 1998, he was a founder and
served as Chief Technology Officer of Ticketmaster Online-CitySearch, Inc.
(formerly CitySearch, Inc.), an online provider of city guides and live-event
ticketing. From June 1994 to August 1995, he served as Manager of Online
Development at Knowledge Adventure, Inc., an educational software developer of
multimedia CD-ROMs for children. Mr. Brewer received his B.A. in Economics from
Southern Methodist University.

     Ted Meisel has served as a Director and as Chief Executive Officer since
February 2000 and he has served as President since May 1999. From December 1998
until January 2000, he also served as Chief Operating Officer. From April 1996
to November 1998, he served in a variety of roles at Ticketmaster
Online-CitySearch, Inc. (formerly CitySearch, Inc.), an online provider of city
guides and live-event ticketing, most recently as Vice President of the Products
and Technology Group. From November 1991 to March 1996, he worked at McKinsey &
Company, a management consulting firm, most recently as an Engagement Manager.
Mr. Meisel holds a B.A. in History from Dartmouth College and a J.D. from
Stanford Law School.

     Todd Tappin has served as Chief Financial Officer since October 1998. From
March 1992 to October 1998, Mr. Tappin served as Senior Vice President of
Finance for News Corp.-Twentieth Century Fox, where he oversaw all Finance,
Strategic Planning and Business Development for the Home Entertainment and
Interactive Divisions, and as the General Manager of Twentieth Century Fox's
Home Entertainment Division in Canada. Mr. Tappin began his professional career
as a certified public accountant at Deloitte, Haskins and Sells. He holds a B.S.
in Business from the University of Colorado.



                                       18
<PAGE>   19

     Harry Chandler has served as Executive Vice President since March 1999.
From April 1994 to March 1999, he served as Director of New Business Development
at the Los Angeles Times. From 1991 to 1994, he served as President of Dream
City Films. Mr. Chandler holds a B.A. in Communications from Stanford
University.

     Stephanie A. Sarka has served as Senior Vice President of Marketing since
March 1998. From March 1993 to September 1997, Ms. Sarka worked for Mark Cross,
the American luxury goods brand, where she served first as Senior Manager of
Product Management, then as Director of Merchandise Planning & Brand
Development, then as Divisional Vice President & General Manager. Ms. Sarka
holds a B.A. in Economics from Stanford University and a M.B.A. from Harvard
Business School.

     James B. Gallinatti Jr. has served as Senior Vice President of Sales and
Service since March 1998. From May 1996 to September 1997, Mr. Gallinatti served
as Vice President of Sales and Marketing at Austin James, Inc., a consumer
software company. From June 1986 to July 1995, he worked for Lotus Development
Corporation in a variety of roles, including West Coast Regional Director of
Sales from March 1990 to June 1994, and Director of Marketing for cc:Mail from
June 1994 to July 1995. Mr. Gallinatti received his B.A. in Human Biology from
Stanford University.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock has been quoted on the Nasdaq National Market under the
symbol "GOTO" since June 18, 1999. Prior to that time, there was no public
market for our common stock. According to records of our transfer agent, there
were approximately 651 stockholders of record as of February 29, 2000. The
following table sets forth the high and low per share prices of our common stock
as reported on the Nasdaq National Market for the periods indicated:

                                             High Price         Low Price
                                          ---------------     --------------
  Fiscal 1999:
     Fourth Quarter                           $  114.500        $  46.375
     Third Quarter                            $   69.875        $  20.625
     Second Quarter (from June 18, 1999)      $   28.500        $  20.000

     We have not paid dividends and do not anticipate declaring dividends on our
Common Stock in the foreseeable future.

     During the quarter ended December 31, 1999, we used approximately $5.9
million of the proceeds from our initial public offering to fund on-going
operations and capital expenditures for computer hardware, software and
leasehold improvements.

     On January 31, 2000, GoTo.com acquired Cadabra, an online comparison
shopping service. Pursuant to the Agreement and Plan of Reorganization, GoTo.com
acquired all of the outstanding shares of capital stock and assumed all
outstanding options to acquire shares of capital stock of Cadabra, for $8.0
million in cash and 3,283,672 shares of GoTo.com common stock, including 214,833
shares to be issued upon the exercise of options assumed. As of January 31,
2000, 3,068,840 shares of GoTo.com common stock were issued to Cadabra
stockholders. The remaining balance will be issued upon the exercise of options
to purchase GoTo.com common stock.


                                       19
<PAGE>   20

ITEM 6:                      SELECTED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

      The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements appearing elsewhere in this Form 10-K.
The statements of operations data set forth below for the years ended December
31, 1999 and 1998 and the period from September 15, 1997 (inception) to December
31, 1997 and the balance sheet data at December 31, 1999 and 1998 are derived
from our audited financial statements included elsewhere in this Form 10-K. The
balance sheet data at December 31, 1997 is derived from our audited financial
statements not included elsewhere in this Form 10-K. The statements of
operations data for the three-month periods ended December 31, 1999, September
30, 1999, June 30, 1999 and March 31, 1999 are derived from our unaudited
interim financial statements not included elsewhere in this Form 10-K. In our
opinion, these unaudited financial statements have been prepared on the same
basis as our audited financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of our results of operations and financial position for these
periods. The historical results are not necessarily indicative of results to be
expected for any future period.


<TABLE>
<CAPTION>
                                                             SEPTEMBER 15, 1997              THREE MONTHS ENDED
                                              YEAR ENDED       (INCEPTION) TO               ---------------------
                                             DECEMBER 31,        DECEMBER 31,   DEC. 31,    SEPT. 30,    JUNE 30,     MAR. 31,
                                          1999         1998         1997         1999         1999         1999         1999
                                        --------     --------     --------     --------     --------     --------     --------
<S>                                     <C>          <C>          <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
  Revenue ..........................  $ 26,809       $    822     $     22     $ 13,298     $  8,428     $  3,632     $  1,451
  Cost of revenue ..................     6,213          1,429            6        1,971        1,940        1,345          957
                                      --------       --------     --------     --------     --------     --------     --------
  Gross profit (loss) ..............    20,596           (607)          16       11,327        6,488        2,287          494
  Operating expenses:
    Marketing, sales and service ...    34,459          9,645           65       14,250        9,852        5,743        4,614
    General and administrative(a) ..    12,467          1,655           24        4,366        4,122        2,424        1,555
    Product development(a) .........     3,689          1,232           46        1,035        1,155          979          520
    Amortization of deferred
      compensation .................     3,585          1,199           --          599          586        1,103        1,297
                                      --------       --------     --------     --------     --------     --------     --------
  Total operating expenses .........    54,200         13,731          135       20,250       15,715       10,249        7,986
                                      --------       --------     --------     --------     --------     --------     --------
  Loss from operations .............   (33,604)       (14,338)        (119)      (8,923)      (9,227)      (7,962)      (7,492)
    Interest income ................     3,777            316           --        1,644        1,605          396          132
    Other income, net ..............       566             --           --           40           --          526           --
                                      --------       --------     --------     --------     --------     --------     --------
  Loss before provision for income
    taxes ..........................   (29,261)       (14,022)        (119)      (7,239)      (7,622)      (7,040)      (7,360)
  Provision for income taxes .......         1              1            1            1           --           --           --
                                      --------       --------     --------     --------     --------     --------     --------
  Net loss .........................  $(29,262)      $(14,023)    $   (120)    $ (7,240)    $ (7,622)    $ (7,040)    $ (7,360)
                                      ========       ========     ========     ========     ========     ========     ========
  Pro forma net loss per share .....  $  (0.77)      $  (0.75)          --     $  (0.17)    $  (0.18)    $  (0.20)    $  (0.24)
                                      ========       ========     ========     ========     ========     ========     ========
  Historical basic and diluted net
    loss per share .................  $  (1.04)      $  (1.36)    $  (0.01)    $  (0.17)    $  (0.18)    $  (0.46)    $  (0.68)
                                      ========       ========     ========     ========     ========     ========     ========
  Weighted average shares used to
    compute pro forma net loss per
    share(b) .......................    38,219         18,714           --       43,263       42,985       35,823       30,387
  Weighted average shares used to
    compute historical basic and
    diluted net loss per share(b) ..    28,207         10,296        9,869       43,263       42,985       15,264       10,894
</TABLE>


<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                       ------------------------------------
                                                                         1999          1998          1997
                                                                       ---------     --------      --------
                                                                                  (IN THOUSANDS)
<S>                                                                    <C>           <C>           <C>
BALANCE SHEET DATA:
  Cash, cash equivalents and short-term and long-term investments ..   $110,255      $ 16,357      $     87
  Working capital ..................................................     95,165        15,215            18
  Total assets .....................................................    129,512        19,969           214
  Long-term capital lease obligations ..............................        768           183            --
  Total stockholders' equity .......................................   $112,774      $ 16,397      $    123
</TABLE>

--------

(a)   Included in general and administrative and product development expenses
      are non-cash charges related to common stock and warrants issued as
      compensation to non-employees totaling $246,000, and $370,000 for the
      years ended December 31, 1999 and 1998, respectively.

(b)   See Note 1 of Notes to the Financial Statements for an explanation of the
      determination of the number of shares used in computing per share data
      for the years ended December 31, 1999 and 1998 and for the period from
      inception to December 31, 1997.


                                       20
<PAGE>   21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES," "PLANS,"
"EXPECTS," "FUTURE" AND "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY
FORWARD-LOOKING STATEMENTS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS DOCUMENT.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE IN OUR FORWARD-LOOKING
STATEMENTS FOR MANY REASONS, INCLUDING WITHOUT LIMITATION THE RISKS DESCRIBED IN
"RISKS THAT COULD AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
BELOW.

OVERVIEW

     GoTo.com operates an online marketplace that introduces consumers and
businesses who search the Internet to advertisers, who provide products,
services and information. Advertisers participating in our marketplace include
retail merchants, wholesale and service businesses and manufacturers. We
facilitate these introductions through our search service, which enables
advertisers to bid in an ongoing auction for priority placement in our search
results. Priority placement means that the search results appear on the page
ranked in descending order of bid price, with the highest bidder's listing
appearing first. Each advertiser pays GoTo.com the amount of its bid whenever a
consumer clicks on the advertiser's listing in our search results. Advertisers
pay GoTo.com for each click-through, so advertisers bid only on keywords
relevant to the products, services or information that they offer. Because each
advertiser chooses the bid amount and advertisement placement that is optimal
for its business, we believe the GoTo.com marketplace provides advertisers with
a cost-effective way to target consumers. Consumers access the GoTo.com search
service both at our Web site and through our affiliates, a network of Web sites
that have integrated the GoTo.com search service into their sites or that direct
consumer traffic to our site. On January 31, 2000, GoTo.com acquired Cadabra
Inc. (Cadabra), an online comparison shopping service that we now call "GoTo
Shopping." We believe GoTo Shopping further facilitates introductions between
consumers and advertisers. GoTo Shopping simplifies the consumers' process of
finding desired products by automating product comparison across multiple
attributes. By enabling consumers to search at the product level, GoTo Shopping
creates more targeted, and therefore highly valuable, advertising opportunities
for our advertisers. As with Web search, we will offer GoTo Shopping at our Web
site as well as through our affiliate network, providing consumers with multiple
points of access to, and advertisers with multiple points of distribution for,
the advertisers' products.

     A large and growing number of consumers using the GoTo.com search service
at our Web site and at our affiliates' Web sites across the Internet increases
the incentive for advertisers to bid in the GoTo.com marketplace. In turn, a
breadth of relevant advertiser links increases the value to consumers of using
the GoTo.com search service. Consequently, we believe a large and active base of
advertisers, consumers and affiliates in our marketplace can stimulate growth in
bidding, searches and paid introductions.

     Our revenue consists of search listing advertisements and banner
advertisements. The Company has no barter transactions. For the year ended
December 31, 1999, banner advertisement revenue constituted less than 10 percent
of our revenue. Search listing




                                       21
<PAGE>   22

advertisement revenue is determined by multiplying the number of click-throughs
on paid search results by the amounts bid for applicable keywords. Search
listing revenue is recognized when earned based on click-through activity to the
extent that the advertiser has deposited sufficient funds with us or collection
is probable. Banner advertisement revenue is recognized when earned under the
terms of the contractual arrangement with the advertiser or advertising agency,
provided that collection is probable.

     Our revenue is determined primarily by the number of paid introductions,
that is the result of the number of times consumers click on advertisers'
listings, multiplied by the bid price for those listings. The number of paid
introductions for each of the last six fiscal quarters is as follows:

<TABLE>
<CAPTION>
       NUMBER OF PAID INTRODUCTIONS          FOR THE QUARTER ENDED
       ----------------------------          ---------------------
<S>                                          <C>
73 million.................................  December 31, 1999
54 million.................................  September 30, 1999
31 million.................................  June 30, 1999
15 million.................................  March 31, 1999
 7 million.................................  December 31, 1998
 2 million.................................  September 30, 1998
</TABLE>

     The average price per paid introduction results from advertisers' online
bidding for priority placement in the search results. The average price per paid
introduction for each of the last six fiscal quarters is as follows:

<TABLE>
<CAPTION>
             AVERAGE PRICE PER
             PAID INTRODUCTION               FOR THE QUARTER ENDED
             -----------------               ---------------------
<S>                                          <C>
$0.17......................................  December 31, 1999
 0.14......................................  September 30, 1999
 0.11......................................  June 30, 1999
 0.08......................................  March 31, 1999
 0.05......................................  December 31, 1998
$0.03......................................  September 30, 1998
</TABLE>

     We believe the quarterly number of paid introductions and average price per
paid introduction listed above are not necessarily indicative of future results
and that the periods prior to the three-month period ended September 30, 1998
are not relevant because our service was only in its initial stage. It is
difficult to forecast the future growth of the average price per paid
introduction, as advertisers, rather than GoTo.com, determine the price paid. We
do not anticipate our historical growth rate to continue. Our growth rate and
results depend on our ability to continue to increase the number of advertisers
who use our service, the amount our advertisers spend on our service and the
number of consumers who use our service. We anticipate these variables to
fluctuate, affecting our growth rate and results.

     GoTo.com was incorporated in September 1997 and has a limited operating
history. We launched a proof-of-concept version of our search service in the
fiscal year ended December 31, 1997. Our pay-for-performance service was
announced in February 1998, and following further proof-of-concept testing, was
officially launched on June 1, 1998. We launched GoTo Shopping in February 2000.
GoTo.com has devoted significant resources to launching its search service,
including developing an infrastructure and building a management team.
GoTo.com's losses for the year ended December 31, 1999 and 1998 were
approximately $29.3 million and approximately $14.0 million, respectively.

                                       22
<PAGE>   23

     We believe that our search and shopping services will be more attractive to
advertisers as more consumers use it for their search needs and more attractive
to consumers as more advertisers bid for placement in our search and shopping
results. A significant component of our expenses consists of costs incurred to
attract consumers to our service. We primarily attract consumers through our
affiliate network, as well as through online and offline marketing, including
radio, print, television and outdoor advertising. We expect to continue to rely
upon these sources for a significant proportion of consumer searches conducted
on our service. Our future success is dependent upon increasing the revenue we
derive from this traffic.

     As a result of our acquisition of Cadabra and our pending acquisition of
AuctionRover.com, Inc., we believe our cost of revenue; marketing, sales and
service expenses; general and administrative expenses and product development
expenses will increase as we integrate and maintain our shopping service. In
addition, we will incur charges to operations with respect to the amortization
of goodwill and other intangible assets, and the expense related to in-process
research and development.

Acquisition of Cadabra

     On January 31, 2000, GoTo.com acquired Cadabra, an online comparison
shopping service. Pursuant to the Agreement and Plan of Reorganization, GoTo.com
acquired all of the outstanding shares of capital stock and assumed all
outstanding options to acquire shares of capital stock of Cadabra, for $8.0
million in cash and 3,283,672 shares of GoTo.com common stock, including 214,833
shares to be issued upon the exercise of options assumed by GoTo.com. The
acquisition was accounted for as a purchase. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values as determined by
GoTo.com at the date of the acquisition. The total purchase price of the
acquisition was approximately $263.1 million and consisted of cash of $8.0
million; GoTo.com common stock of $252.5 million valued at the closing price of
GoTo.com's common stock on the date the acquisition exchange ratio was set, net
of expected proceeds from the exercise of Cadabra stock options assumed by
GoTo.com; and acquisition costs of $2.6 million, primarily for investment
banking, legal and accounting costs. Of the purchase price, $7.6 million was
assigned to in-process research and development to be expensed immediately
following the consummation of the acquisition, $6.0 million was assigned to the
value of purchased technology and other intangibles and will be amortized on a
straight-line basis over three years and $4.4 million was allocated to the net
tangible assets. The excess purchase price over the estimated fair value of the
assets acquired and liabilities assumed has been allocated to goodwill in the
amount of $245.1 million and will be amortized on a straight-line basis over
three years. The projects identified as in-process research and development are
those that are currently underway, that will require additional effort to
establish technological feasibility and have no alternative future use. The
projects are expected to add features that will enhance the Web site scraping
ability and operating capabilities of the service. At the acquisition date,
these projects were approximately 80% complete and will require additional
expected costs of approximately $2.0 million to complete these projects,
consisting principally of personnel related costs. These projects are expected
to be completed during fiscal year 2000. To determine the value of in-process
research and development, the expected future cash flows, including costs to
reach technological feasibility, were discounted at an after-tax rate of 25%,
taking into account risks related to the characteristics and applications of the
technology, existing and future markets, and assessments of the life cycle stage
of the technology. GoTo.com obtained an independent appraisal to derive the
purchase price allocation.

                                       23
<PAGE>   24

Agreement to Acquire AuctionRover.com, Inc.

     On March 8, 2000, GoTo.com entered into an agreement to acquire all
outstanding shares of capital stock and assume all of the outstanding options of
AuctionRover.com, Inc., a one-stop resource for online auctions, for 3.47
million shares of GoTo.com common stock. The purchase would enable GoTo.com to
carry listings of numerous other auction sites. The acquisition is expected to
be accounted for under the purchase method. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed. The excess of the acquisition cost over the fair value of
the net tangible assets will be allocated to any identified intangible assets,
with the remaining balance allocated to goodwill. Goodwill and intangible assets
are expected to be amortized on a straight-line basis over three years. The
amount of goodwill is expected to be approximately $175 million without
accounting for net tangible assets. The transaction is expected to close by
April 2000. The consummation of the acquisition is subject to customary closing
conditions and there can be no assurance that the acquisition will close.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              1999                       1998
                                                            --------                   --------
                                                                     (IN THOUSANDS)

<S>                                                         <C>                        <C>
  Revenue .............................................     $ 26,809                   $    822
  Cost of revenue .....................................        6,213                      1,429
                                                            --------                   --------
  Gross profit (loss) .................................       20,596                       (607)
  Operating expenses:
    Marketing, sales and service ......................       34,459                      9,645
    General and administrative(a) .....................       12,467                      1,655
    Product development(a) ............................        3,689                      1,232
    Amortization of deferred compensation .............        3,585                      1,199
                                                            --------                   --------

  Total operating expenses ............................       54,200                     13,731
                                                            --------                   --------
  Loss from operations ................................      (33,604)                   (14,338)
    Interest income ...................................        3,777                        316
    Other income ......................................          566                       --
                                                            --------                   --------
  Loss before provision for income taxes ..............      (29,261)                   (14,022)

  Provision for income taxes ..........................            1                          1
                                                            --------                   --------
  Net loss ............................................     $(29,262)                  $(14,023)
                                                            ========                   ========
</TABLE>
--------

(a)  Included in general and administrative and product development expenses are
     non-cash charges related to common stock and warrants issued as
     compensation to non-employees totaling $246,000 and $370,000 during the
     years ended December 31, 1999 and 1998, respectively.

     Revenue. Revenue consists of search listing advertisements and banner
advertisements. GoTo.com has no barter transactions. For the year ended December
31, 1999, banner advertisement revenue constituted less than 10 percent of our
revenue. Revenue was approximately $26.8 million for the year ended December 31,
1999 compared to

                                       24
<PAGE>   25

approximately $822,000 for the year ended December 31, 1998. The increase was
the result of continued growth of our marketplace and the corresponding
participants, our advertisers and the number of consumers using our product. We
have experienced rapid growth from the quarter ended December 31, 1998 through
the quarter ended December 31, 1999, including an increase in revenue from
approximately $580,000 to approximately $13.3 million, respectively. We do not
anticipate our historical revenue growth rate to continue as a percentage of
growth as expressed on a year-to-year or quarter-to-quarter basis. Our growth is
dependent on obtaining additional traffic. For the quarter ended December 31,
1999, 40% of our overall traffic came from the browsers, Microsoft's Internet
Explorer and Netscape. Although we entered into a one-year agreement with
Microsoft on January 18, 2000 for continued traffic from their Internet Explorer
4 and Internet Explorer 5 browsers, we expect Microsoft to deliver a diminishing
level of traffic to us in 2000 compared to 1999, and anticipate that we
eventually will receive no traffic from Internet Explorer 4 and Internet
Explorer 5. In addition, our agreement with Netscape will expire on June 30,
2000, and there can be no assurance that we will be successful in renewing this
agreement or in entering into a new distribution agreement on commercially
acceptable terms. Even though we currently anticipate growth in traffic from
existing and new affiliates, we must renew our affiliate agreements or replace
this traffic with other sources and grow our advertising base, otherwise our
revenue may be materially, adversely affected.

     Cost of Revenue. Cost of revenue consists primarily of fees paid to outside
service providers that provide and manage our unpaid listings and costs
associated with maintaining our Web site. Costs associated with maintaining our
Web site include salaries of related personnel, depreciation of Web site
equipment, co-location charges for our Web site equipment and software license
fees. Cost of revenue was approximately $6.2 million for the year ended December
31, 1999 compared to approximately $1.4 million for the year ended December 31,
1998. The increase was primarily due to the increased fees paid to outside
service providers, increased database and hardware capacity requirements and an
increase in the number of personnel required to support our Web site. We
anticipate cost of revenue to continue to increase as our traffic and number of
advertisers increase.

     Marketing, Sales and Service. Marketing, sales and service expenses consist
primarily of our advertising and promotional expenditures, such as online links
from other Web sites associated with our affiliate network, banner
advertisements on other sites, offline media advertising and public relations,
as well as payroll and related expenses for personnel engaged in marketing,
customer service and sales functions. Marketing, sales and service expenses were
approximately $34.5 million for the year ended December 31, 1999 compared to
approximately $9.6 million for the year ended December 31, 1998. The increase
was primarily due to increased distribution of our search service, the hiring of
additional personnel for marketing, sales and service functions and our print
and television media advertising campaign in the fourth quarter of 1999. We
believe that continued investment in marketing, sales and service and in the
increased distribution of our search service is critical to attaining our
strategic objectives and, as a result, expect these costs to continue to
increase in the future.

     General and Administrative. General and administrative expenses consist
primarily of payroll and related expenses for executive and administrative
personnel; facilities; professional services, including legal; insurance and
other general corporate expenses. General and administrative expenses were
approximately $12.5 million for the year ended December 31, 1999 compared to
approximately $1.7 million for the year ended December 31, 1998. The increase
was the result of increased headcount and related

                                       25
<PAGE>   26

expenses associated with the hiring of additional personnel and increased
professional services. We expect general and administrative expenses to continue
to increase as we expand our staff and incur additional costs related to the
growth of our business. In addition, these expenses will vary based on the
outcome of our litigation with The Walt Disney Company and certain of its
affiliates.

     Product Development. Product development expenses consist primarily of
payroll and related expenses for personnel responsible for development of
features and functionality for our service, as well as costs incurred in the
preliminary project and post-implementation stage of computer software developed
for internal use. Product development expenses were approximately $3.7 million
for the year ended December 31, 1999 compared to approximately $1.2 million for
the year ended December 31, 1998. The increase was a result of increased
staffing and associated costs relating to enhancing features and functionality
to our Web site and search service. The increase was offset by capitalization of
software under Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" of approximately $2.0 million.
We believe our continued investment in product development is critical to
attaining our strategic objectives and, as a result, expect product development
expenses to continue to increase in the future.

     Amortization of Deferred Compensation. Certain stock options granted from
the inception of GoTo.com through our initial public offering have been
considered to be compensatory for financial accounting purposes. Total
compensation resulting from these stock options amounted to approximately $7.4
million. This amount represents the difference between the exercise price of the
stock options and the deemed fair value of our common stock at the time of the
grants or issuances, adjusted for the return of unvested options or the
repurchase of restricted stock resulting from employee terminations.
Compensation associated with these stock options is amortized and expensed over
the applicable vesting periods using a graded methodology. Approximately $3.6
million and $1.2 million were amortized and charged to operations for the years
ended December 31, 1999 and 1998, respectively.

     Interest Income. Interest income consists primarily of earnings on our
cash, cash equivalents and short-term and long-term investments, net of interest
expense attributable to leased equipment and debt. Interest income, net was
approximately $3.8 million for the year ended December 31, 1999 compared to
approximately $316,000 for the year ended December 31, 1998. The increase was
primarily due to increased earnings on cash, cash equivalents, and short-term
and long-term investments in available-for-sale securities, which increased as a
result of our initial public offering and Series D Preferred Stock issuance.

     Other Income. Other income of approximately $566,000 for the year ended
December 31, 1999 was primarily due from a non-recurring transaction, in which
we received a payment from an affiliate in settlement for the early termination
of a distribution agreement.

                                       26
<PAGE>   27

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE PERIOD FROM SEPTEMBER 15, 1997
(INCEPTION) THROUGH DECEMBER 31, 1997

<TABLE>
<CAPTION>

                                                    YEAR ENDED          INCEPTION TO
                                                DECEMBER 31, 1998     DECEMBER 31, 1997
                                                -----------------     -----------------
                                                           (IN THOUSANDS)
   <S>                                            <C>                   <C>
    Revenue ...............................        $    822              $     22
    Cost of revenue .......................           1,429                     6
                                                   --------              --------
    Gross profit (loss) ...................            (607)                   16
    Operating expenses:
      Marketing, sales and service ........           9,645                    65
      General and administrative(a) .......           1,655                    24
      Product development(a) ..............           1,232                    46
      Amortization of deferred compensation           1,199                   --
                                                   --------              --------

    Total operating expenses ..............          13,731                   135
                                                   --------              --------
    Loss from operations ..................         (14,338)                 (119)
      Interest income .....................             316                   --
                                                   --------              --------
    Loss before provision for income taxes          (14,022)                 (119)

    Provision for income taxes ............               1                     1
                                                   --------               --------
    Net loss ..............................        $(14,023)             $   (120)
                                                   ========              ========
</TABLE>

----------
(a)  Included in general and administrative and product development expenses are
     non-cash charges related to common stock and warrants issued as
     compensation to non-employees totaling $370,000 during the year ended
     December 31, 1998.

     Our fiscal year runs from January 1 through December 31. We were founded in
September 1997. We completed proof-of-concept testing and formally commenced
operations on June 1, 1998. As a result of these factors, comparisons between
the fiscal years ended December 31, 1998 and 1997 have limited meaning.

     Our revenue increased to approximately $822,000 for the twelve months ended
December 31, 1998 compared to approximately $22,000 for the period from
inception to December 31, 1997 as a result of our commencement of operations as
well as growth in our advertiser base and an increase in the number of consumers
using our product. Cost of revenue increased to approximately $1.4 million for
the twelve months ended December 31, 1998 from approximately $6,000 for the
period from inception to December 31, 1997 primarily due to increased database
and hardware capacity requirements as well as an increase in the number of
personnel required to support our Web site. Marketing, sales and service
expenses increased to approximately $9.6 million for the twelve months ended
December 31, 1998 from approximately $65,000 for the period from inception to
December 31, 1997, primarily as a result of increased distribution of our search
service and additional personnel for marketing, customer service and sales
functions. General and administrative expenses increased to approximately $1.7
million for the twelve months ended December 31, 1998 from approximately $24,000
for the period from inception to December 31, 1997 primarily due to increased
headcount and related expenses associated with the hiring of additional
personnel and increased professional services. Product development expenses
increased to approximately $1.2 million for the twelve months ended December 31,
1998 from approximately $46,000 for the period from inception to December 31,
1997 primarily due to increased staffing and associated costs relating to
enhancing features and functionality to our Web site, search experience and
customer service. Net interest income increased to approximately $316,000 for
the twelve

                                       27
<PAGE>   28

months ended December 31, 1998 from no interest income for the period from
inception to December 31, 1997 primarily due to earnings on cash and cash
equivalent balances.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities totaled approximately $16.9 million
and $11.2 million for the years ended December 31, 1999 and 1998, respectively.
The increase was due primarily to net losses for the period partially offset by
the increase in the accounts payable and the increase in amortization of
deferred stock option compensation. Net cash used in investing activities
totaled approximately $110.0 million and $1.6 million for the years ended
December 31, 1999 and 1998, respectively. The increase resulted from purchases
of short-term and long-term investments and capital expenditures for properties
and equipment. Net cash provided by financing activities totaled approximately
$122.4 million and $29.0 million for the years ended December 31, 1999 and 1998,
respectively. The increase was due primarily to the issuance of common stock
through our initial public offering and the issuance of preferred stock.

     On April 14, 1999, we issued 3,628,447 shares of Series D Preferred Stock
for $6.89 per share and received proceeds of approximately $25.0 million.

     On June 18, 1999, we issued 6.9 million shares of common stock through our
initial public offering for $15.00 per share and received approximately $94.8
million in cash, net of underwriting discounts, commissions and other offering
costs. Simultaneously with the closing of the initial public offering, each
outstanding share of Series A, B, C and D Preferred Stock was automatically
converted into common stock.

     Our principal sources of liquidity consisted of cash, cash equivalents and
short-term investments of approximately $105.3 million as of December 31, 1999
and approximately $16.4 million as of December 31, 1998. We also carry long-term
investments of approximately $4.9 million as of December 31, 1999, which we
believe is liquid. We believe that our cash reserves are sufficient to sustain
operations through the next 12 months, however, unknown factors may require us
to seek additional capital. Such unknown factors may include, among other
things, competitive pressure, higher cost of intellectual capital, higher costs
to accommodate increases in capacity and acquisitions.

     We may seek additional capital through the issuance of debt or equity
depending upon the results of operations, market conditions or unforeseen
opportunities. Our future liquidity and capital requirements will depend upon
numerous factors. The pace of expansion of our operations will affect our
capital requirements. Our forecast of the period of time through which our
financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties and actual
results could vary materially as a result of the factors described above. If we
require additional capital resources, we may seek to sell additional equity or
debt securities or obtain a bank line of credit. The sale of additional equity
or convertible debt securities could result in additional dilution to our
stockholders. There can be no assurance that any financing arrangements will be
available in amounts or on terms acceptable to us, if at all.

IMPACT OF YEAR 2000

     As a result of our planning and implementation efforts, we have experienced
no significant disruptions in mission critical information technology and
non-information technology systems to date and believe those systems
successfully respond to the Year 2000 date change. GoTo.com expensed an
insignificant amount during 1999 in connection with our remediation of our
systems. We are not aware of any material problems resulting


                                       28
<PAGE>   29

from Year 2000 issues, either with our products, our internal systems, or the
products and services of third parties. We will continue to monitor our mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.



                                       29
<PAGE>   30
    RISKS THAT COULD AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

WE HAVE A LIMITED OPERATING HISTORY.

     GoTo.com was founded in September 1997, officially launched its service on
June 1, 1998 and has a limited operating history. An investor in our common
stock must consider the risks and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets. These risks include our:

     - complete dependence on online advertising and consumer search services
       with only limited market acceptance;

     - need to develop and upgrade our infrastructure, including internal
       controls, transaction processing systems, data storage and retrieval
       systems and Web site;

     - need to manage changing operations;

     - dependence upon and need to hire and retain key personnel; and

     - ability to integrate acquisitions, including, but not limited to, the
       recent acquisition of Cadabra in January 2000.

     We cannot assure you that the GoTo.com service will retain its existing, or
attract new, advertisers, consumers and Web sites that include the GoTo.com
search service on their sites or that direct consumer traffic to the GoTo.com
Web site, which we call "affiliates." We also cannot assure you that GoTo.com
will achieve significant additional revenues or improve operating margins in
future periods. There can be no assurance that GoTo.com's service will achieve
commercial success and, if it does not, the price of our common stock will
decline.

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.

     We have not achieved profitability. We expect to incur net losses for the
foreseeable future and may never become profitable. We incurred a net loss of
approximately $29.3 million and $14.0 million for the years ended December 31,
1999 and 1998, respectively, and as of December 31, 1999, we had an accumulated
deficit of approximately $43.4 million.

     Our limited operating history makes it difficult to forecast our future
operating results. Although our revenue has grown in recent quarters, we cannot
be certain that this growth will continue. We expect to continue to increase our
marketing, sales and service, product development and general and administrative
expenses. In addition, the amortization of goodwill related to our acquisition
of Cadabra will be significant, and any similar expense for future acquisitions
could negatively affect our earnings. As a result we will need to generate
significant additional revenue and/or raise additional funds to achieve
profitability. If we do achieve profitability, we cannot be certain that we will
sustain or increase it.


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<PAGE>   31

OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS BECAUSE
OF MANY FACTORS, AND ANY OF THESE COULD ADVERSELY AFFECT OUR STOCK PRICE.

     We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of our future performance. It is likely that in some
future quarter our operating results may be below the expectations of public
market analysts and investors and, as a result of these or other factors, the
price of our common stock may fall. Our operating results have varied widely in
the past, and we expect that they will continue to vary significantly from
quarter to quarter due to a number of factors, including:

     - demand for our search services by advertisers and consumers, including
       the number of searches performed by consumers and the rate at which they
       click-through to paid search listing advertisements;

     - prices paid by advertisers using the GoTo.com service, which are not
       determined by GoTo.com;

     - our costs of attracting consumers to the GoTo.com Web site, including
       costs of receiving exposure on third-party Web sites and advertising
       costs;

     - costs related to agreements with suppliers of consumer traffic to our
       service and professional services;

     - loss of these agreements;

     - the mix of paying vs. non-paying search results on the GoTo.com service;

     - our ability to significantly increase our distribution channels;

     - the amount and timing of operating costs and capital expenditures
       relating to expansion of our operations;

     - costs and delays in introducing new GoTo.com services and improvements to
       existing services;

     - costs related to the integration of acquisitions, including the
       integration of Cadabra;

     - consumers may access advertisers through both our shopping service and
       our search service and, during the initial integration of Cadabra, the
       prices advertisers pay for shopping listings may be lower than those paid
       for Web search, which may result in lower revenue per each paid
       introduction;

     - changes in the growth rate of Internet usage and acceptance by consumers
       of electronic commerce;

     - technical difficulties, system failures or Internet downtime;

     - government regulations related to the Internet;

     - our ability to upgrade and develop our information technology systems and
       infrastructure;

     - costs related to acquisitions of technologies or businesses; and

     - general economic conditions, as well as those specific to the Internet
       and related industries.

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<PAGE>   32

     As a result of our limited operating history, it is difficult to accurately
forecast our revenue, and we have limited meaningful historical financial data
upon which to base planned operating expenses. We plan to significantly increase
our operating expenses to expand our marketing and sales operations, broaden our
customer support capabilities and fund greater levels of product development. We
base our current and future expense levels on our operating plans and estimates
of future revenue, and our expenses are relatively fixed. Revenue and operating
results are difficult to forecast because they generally depend upon the volume
of the searches conducted on our service, the amounts bid by advertisers for
keyword search listings on the service and the number of advertisers that bid on
the service, none of which are under our control. As a result, we may be unable
to adjust our spending in a timely manner to compensate for any unexpected
revenue shortfall. We also may be unable to increase our spending and expand our
operations in a timely manner to adequately meet user demand to the extent it
exceeds our expectations.

WE DEPEND ON A LIMITED NUMBER OF SOURCES TO DIRECT CONSUMERS TO OUR SERVICE TO
CONDUCT SEARCHES.

     The consumers who conduct searches on our service come from a limited
number of sources. Our sources for consumers conducting searches are members of
our affiliate network, including providers of Internet browsers such as Netscape
Communicator and Microsoft Internet Explorer, aggregators of search offerings of
various providers, Internet Service Providers, our Web site, and banner
advertising. We entered into a one-year agreement with Microsoft Corporation for
continued traffic from their Internet Explorer 4 and Internet Explorer 5
browser, which commenced on January 21, 2000. This source is expected to deliver
a diminishing level of traffic to us in 2000 compared to 1999, and we expect
that we will eventually receive no traffic from this source. In addition, our
agreement with Netscape will expire on June 30, 2000, and there can be no
assurance that we will be successful in renewing this agreement or in entering
into a new distribution agreement on commercially acceptable terms. Even though
we currently anticipate growth from other existing and new traffic sources, if
we are unable to renew our agreements or replace this traffic with other
sources, it may materially, adversely impact our revenue. Although sources of
consumer traffic to our service fluctuate, in any given month we typically
depend upon one or a few of these sources for a significant majority of traffic
and searches conducted on our service. For the quarter ended December 31, 1999,
approximately 90% of all of GoTo.com's traffic came from our affiliates. Of
GoTo.com's total traffic, approximately 40% of the total traffic came from the
browsers, Microsoft's Internet Explorer and Netscape, approximately 50% of the
total traffic came from other affiliates and the remaining 10% of the total
traffic came directly to the GoTo.com Web site. We generally obtain traffic from
these sources through short-term agreements. There can be no assurance that we
will be successful in renewing any of these agreements or entering into new
distribution agreements on commercially acceptable terms.

OUR SUCCESS DEPENDS UPON ACHIEVING A LARGE AND ACTIVE BASE OF ADVERTISERS AND
CONSUMERS.

     Our ability to increase the volume of transactions on our service and the
amounts bid by our advertisers is dependent upon achieving market acceptance
from more advertisers and consumers using our service. Most potential
advertisers have only limited experience advertising on the Internet and have
not devoted a significant portion of their advertising expenditures to Internet
advertising. Advertising through priority placement on our search service in
particular has been introduced only recently, and we cannot predict the level of



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<PAGE>   33

its acceptance as an advertising medium. Our service may not achieve significant
acceptance by consumers. Among other things, because our service prioritizes
search results based on advertising bids associated with keywords rather than on
algorithmic or other traditional search and retrieval technologies, consumers
may perceive our results to be less objective than those provided by traditional
search methods. Failure to achieve and maintain a large and active base of
advertisers and consumers would seriously harm our business.

OUR FUTURE SUCCESS IS DEPENDENT UPON FURTHER DEVELOPING AND ENHANCING THE
AFFILIATE NETWORK.

     We believe that our future success in penetrating our target markets
depends in part on our ability to further develop and maintain relationships
with affiliates, who provide their users with GoTo.com search capabilities on
their sites or direct their traffic to our Web site. We believe these
relationships are important in order to facilitate broad market acceptance of
our service and enhance our sales. Our future ability to attract consumers to
our service is dependent upon the growth of our affiliate network which is new
and unproven. Our agreements with affiliates are generally terminable at will by
either party at any time. The loss of our agreements with our existing
affiliates could damage our business. If we are unable to successfully develop
and maintain relationships with affiliates, our business will be damaged.

WE MAY HAVE DIFFICULTY IMPLEMENTING GOTO SHOPPING AND CONSUMERS AND ADVERTISERS
MAY NOT ADOPT GOTO SHOPPING.

     We intend to extend our pay-for-placement model for Web search to GoTo
Shopping, the comparison shopping service that we recently acquired as part of
our acquisition of Cadabra. This will permit advertisers to bid for placement in
search results generated from a consumer's search for products. We may not be
able to successfully implement this model for GoTo Shopping. Moreover,
advertisers may not accept this model as a means to sell their products. Failure
to successfully implement GoTo Shopping or achieve market acceptance of GoTo
Shopping on a cost-effective basis could have a significant adverse affect on
our results of operations and the price of our stock.

WE CANNOT ASSURE YOU THAT OUR STOCK PRICE WILL NOT DECLINE OR WILL NOT BE
EXTREMELY VOLATILE.

     The price of our common stock may decline or may be extremely volatile.
Since our initial public offering in June 1999, the per share closing price of
our common stock has ranged from a low of $20.00 as of June 21, 1999 to a high
of $114.50 as of November 15, 1999 (see Item 5). In addition, an active public
market for GoTo.com's common stock may not continue.

WE ARE DEPENDENT UPON OTHER COMPANIES WHO SUPPLY SERVICES TO US.

     We also depend on non-distribution related relationships. For example,
following the paid advertising search results offered to consumers on our
service, we offer search results provided by Inktomi Corporation. We currently
rely on Inktomi as the sole source of these additional search results, which
constitute a very high percentage of the search results displayed by GoTo.com.
For example, Inktomi results were shown on approximately 73% of December 1999
searches. Our agreement with Inktomi expires in April 2000. The loss of this or
any other key relationship could damage our business. If we are unable to
develop future key relationships or maintain and enhance our existing
relationships, our business will be damaged.


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<PAGE>   34

OUR INDUSTRY IS HIGHLY COMPETITIVE, AND WE CANNOT ASSURE YOU THAT WE WILL BE
ABLE TO COMPETE EFFECTIVELY.

     The market for Internet products, services and advertising is new, rapidly
evolving and intensely competitive. GoTo.com currently or potentially competes
with many other providers of Web directories, search, shopping and information
services, as well as traditional media, for consumer attention and advertising
expenditures. We expect competition to intensify in the future. Barriers to
entry may not be significant, and current and new competitors may be able to
launch new Web sites at a relatively low cost. Accordingly, we believe that our
success will depend heavily upon achieving significant market acceptance before
our competitors and potential competitors introduce competing services.

     GoTo.com competes with online services, other Web sites and advertising
networks such as DoubleClick Inc. and 24/7 Media, Inc., 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 substantially increased. Accordingly, GoTo.com may face increased
pricing pressure for the sale of advertisements and direct marketing
opportunities, which could adversely affect our business and operating results.

     GoTo.com also competes with providers of Web directories, search, shopping
and information services, all of whom offer services competitive with GoTo.com,
including, among others, AltaVista, Amazon.com, Inc., America Online, Inc.
(AOL.com, Netfind and Netscape Netcenter), Ask Jeeves, Inc., CNET, Inc. (NBCi
and mySimon Inc.), DealTime.com, Excite@Home, Inc. (including WebCrawler and
Magellan), Google, Inc., Inktomi Corporation, LookSmart, Ltd., Lycos, Inc.
(including HotBot), Microsoft Corporation (LinkExchange, Inc. and msn.com),
OpenDirectory, Inc., ShopNow.com Inc. (bottomdollar.com), The Walt Disney
Company (Go.com) and Yahoo! Inc. In addition, we expect that other companies
will offer directly competing services in the future.

     Many of these competitors, as well as potential entrants into our market,
have longer operating histories, larger customer or user bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do. Many of these current and potential competitors can devote
substantially greater resources to promotion and Web site and systems
development than we can. In addition, as the use of the Internet and other
online services increases, larger, well-established and well-financed entities
may continue to acquire, invest in or form joint ventures with providers of Web
directories, search and information services or advertising solutions, and
existing providers of Web directories, search, shopping and information services
or advertising solutions may continue to consolidate. In addition, providers of
Internet browsers and other Internet products and services who are affiliated
with providers of Web directories and information services in competition with
the GoTo.com service may more tightly integrate these affiliated offerings into
their browsers or other products or services. Any of these trends would increase
the competition we face and could adversely affect our business and operating
results.

WE ARE DEPENDENT UPON MAINTAINING AND EXPANDING OUR COMPUTER AND COMMUNICATIONS
SYSTEMS.

     Our failure to achieve or maintain high capacity data transmission without
system downtime and achieve improvements to our transaction processing systems
and network infrastructure would adversely affect our business and results of
operations. We believe that

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<PAGE>   35

our current transaction-processing systems and network infrastructure are
insufficient to support our future growth. Although we are enhancing and
expanding our transaction-processing systems and network infrastructure, we have
experienced occasional systems interruptions and infrastructure failures, which
we believe will continue to occur.

WE MUST MAINTAIN AND CONTINUE TO UPGRADE OUR NEW FINANCIAL AND ACCOUNTING
SYSTEMS.

     If we are not able to maintain or continue to automate our sales, financial
and accounting systems and processes, and upgrade those systems in accordance
with our growth, including the integration of any acquired companies' systems
and data, we may not have adequate, accurate or timely financial information.
Failure to have adequate, accurate or timely financial information would harm
our business and could lead to volatility in our stock price. If we grow
rapidly, we will face additional challenges in upgrading and maintaining these
systems.

A SIGNIFICANT PORTION OF OUR REVENUE IS CONCENTRATED AMONG A LIMITED NUMBER OF
ADVERTISERS.

     If our major advertisers were to substantially cut back advertising or stop
using our services, our business would be seriously harmed. A significant
majority of our total revenue is derived from a small proportion of our
advertisers. We believe that a substantial amount of revenue from advertising
sales in any given future period may come from a relatively small number of
advertisers. We do not have formal contractual relationships with many of our
advertisers and when we do have contracts, most are terminable at any time by
the advertiser. As a result, we cannot assure you that any of our advertisers
will purchase advertising from us in the future.

CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.

     The failure of the Internet to continue to develop as a commercial and
business medium would adversely affect our business. The widespread acceptance
and adoption of the Internet by traditional businesses for conducting business
and exchanging information is likely only if the Internet provides these
businesses with greater efficiencies and improvements.

FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT OUR FUTURE GROWTH.

     The recent growth in Internet traffic has caused frequent periods of
decreased performance, and if Internet usage continues to grow rapidly, the
Internet's infrastructure may not be able to support these demands and its
performance and reliability may decline. Consequently, the emergence and growth
of the market for our services depends upon improvements being made to the
entire Internet as well as to our individual advertisers' and consumers'
networking infrastructures to alleviate overloading and congestion.

INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR
SERVICES.

     Concerns over the security of transactions conducted on the Internet and
the privacy of consumers may also inhibit the growth of the Internet and other
online services generally, and online commerce in particular. Our failure to
prevent security breaches could significantly harm our business and results of
operations. Anyone who is able to

                                       35
<PAGE>   36

circumvent our security measures could misappropriate proprietary information,
cause interruptions in our operations or damage our brand and reputation. We do
not believe that our data repositories, financial systems and other technology
resources are secure from security breaches or sabotage and we occasionally
experience attempts at "hacking" or security breaches. We may be required to
incur significant costs to protect against security breaches or to alleviate
problems caused by breaches. Any well-publicized compromise of security could
deter people from using the Internet to conduct transactions that involve
transmitting confidential information or downloading sensitive materials, which
would adversely affect the business of our advertisers and, accordingly, our
business.

WE FACE THE RISKS OF SYSTEM FAILURES.

     We currently do not have a disaster recovery plan in effect and do not have
fully redundant systems for our services at an alternate site. A disaster such
as fire, flood, earthquake, power loss, telecommunications failure, break-in,
sabotage or a similar event could severely damage our business and results of
operations because our services could be interrupted for an indeterminate length
of time. Our operations depend upon our ability to maintain and protect our
computer systems, all of which are located in our principal headquarters in
Pasadena, California and at two offsite locations, both managed by third
parties. One is managed by GlobalCenter, in Sunnyvale, California and the other
by Qwest Communications International, Inc., in Burbank, California. Pasadena,
Sunnyvale and Burbank exist on or near known earthquake fault zones. The
occurrence of a natural disaster or unanticipated problems at our principal
headquarters or at the third-party facility could cause interruptions or delays
in our business, loss of data or render us unable to provide our services. In
addition, failure by the third-party facility to provide the data communications
capacity required by us, as a result of human error, natural disaster or other
operational disruptions, could cause interruptions in our service. The
occurrence of any or all of these events could adversely affect our reputation,
brand and business, which could cause the price of our common stock to decline.

WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS, AND
ANY FAILURE TO MANAGE THIS GROWTH COULD DAMAGE OUR BUSINESS.

     Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We have increased, and plan to continue to increase, the
scope of our operations. These expansion efforts could be expensive and put a
strain on management, and, if we do not manage growth properly, it could
adversely affect our business. We will need to expand our infrastructure, which
will include hiring certain key employees and continuing to increase our
headcount. Hiring key employees, in particular, has historically been difficult,
and we cannot assure you that we will be able to successfully attract and retain
a sufficient number of qualified personnel.

OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

     Our future success depends upon the continued service of our executive
officers and other key technology, marketing, sales and support personnel. None
of our officers or key employees is bound by an employment agreement for any
specific term. If we lost the services of one or more of our key employees, or
if one or more of our executive officers or employees decided to join a
competitor or otherwise compete directly or indirectly with us,

                                       36
<PAGE>   37

this could have a significant adverse effect on our business and could cause the
price of our stock to decline.

WE ARE EXPOSED TO RISKS ASSOCIATED WITH CREDIT CARD FRAUD.

     We have suffered losses and may continue to suffer losses as a result of
orders placed with fraudulent credit card data, even though the associated
financial institution approved payment of the orders. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions when, as
is the case with the transactions we process, that merchant does not obtain a
cardholder's signature. A failure to adequately control fraudulent credit card
transactions would adversely affect our business and could cause a decline in
our stock price.

WE FACE RISKS OF CLAIMS FROM THIRD PARTIES FOR INTELLECTUAL PROPERTY
INFRINGEMENT AND OTHER MATTERS THAT COULD ADVERSELY AFFECT OUR BUSINESS.

     Our services operate in part by making Internet services and content
available to our users. This creates the potential for claims to be made against
us, either directly or through contractual indemnification provisions with third
parties. These claims might, for example, be made for defamation, negligence,
copyright, trademark or patent infringement, personal injury, invasion of
privacy or other legal theories. Allegations are made against us from time to
time concerning these types of claims. Any claims could result in costly
litigation and be time consuming to defend, divert management's attention and
resources, cause delays in releasing new or upgrading existing services or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all.
There can be no assurance that our services do not infringe the intellectual
property rights of third parties. A successful claim of infringement against us
and our failure or inability to license the infringed or similar technology
could adversely affect our business.

WE ARE ENGAGED IN LITIGATION WITH THE WALT DISNEY COMPANY AND CERTAIN OF ITS
AFFILIATES THAT COULD SERIOUSLY HARM OUR BUSINESS.

     We are engaged in litigation that will be expensive to pursue and will be
distracting to our management and other employees. Any adverse developments
resulting from this litigation could seriously harm our business. We believe
that The Walt Disney Company and certain of its affiliates, including Infoseek
Corporation, are infringing our GoTo.com logo. On February 18, 1999, we sued
these companies and two affiliated companies in the United States District Court
for the Central District of California alleging violation of federal trademark
law and unfair competition. Our lawsuit is based on the use by these companies
of a "GO" design mark to provide Internet services, including a search engine in
connection with their "Go Network." We are seeking to prevent these companies
from using this "GO" design mark as well as other remedies. We cannot assure you
that the outcome of this litigation will be favorable to us. For example, we may
not prevail and be able to stop these companies from causing confusion among
consumers and advertisers through continued use of the "GO" design mark. The
defendants have asserted counterclaims against GoTo.com. GoTo.com believes that
the counterclaims are without merit and will defend against them vigorously. An
unfavorable result could affect the value of the GoTo.com logo or even prevent
us from using the GoTo.com logo.


                                       37
<PAGE>   38

     On November 12, 1999, the federal district court in Los Angeles
preliminarily enjoined The Walt Disney Company, Infoseek and related companies
from using their Go Network logo. On November 18, 1999, the Ninth Circuit Court
of Appeals granted the defendants' motion for a stay of the preliminary
injunction pending appeal and the defendants were permitted to use the Go
Network logo while the Ninth Circuit reviewed the district court's preliminary
injunction order. GoTo.com and the defendants briefed the appeal during
December, and the Ninth Circuit heard oral arguments on the matter on January
19, 2000. On January 27, 2000, the Ninth Circuit vacated the stay and reinstated
the preliminary injunction. No trial date has been set, and despite the issuance
of the preliminary injunction, we cannot assure you that we will ultimately
prevail in this litigation.

WE MAY NOT BE ABLE TO PROTECT OUR INTERNET DOMAIN NAME OR INTELLECTUAL PROPERTY
RIGHTS UPON WHICH OUR BUSINESS RELIES.

     The Internet domain name we use, "GoTo.com," is an extremely important part
of our business and we may not be able to protect it. We may be unable to
acquire or maintain relevant domain names in all countries in which we conduct
business. We may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. Third parties have acquired domain
names that include "goto" or varieties thereof both in the United States and
elsewhere.

     Our success and ability to compete also are substantially dependent upon
our internally developed technology and data resources, which we protect through
a combination of copyright, trade secret and trademark law. We have no patents
issued to date on our technology. There can be no assurance that we will
adequately be able to protect our technology and data resources.

     We are aware that certain other companies are using or may have plans to
use the terms "GoTo," "Go," "Go2" and variations of these terms as part of a
company name, domain name, trademark or service mark. In addition, we have
received notice from companies claiming superior rights to marks such as these.
We cannot assure you that additional companies will not claim such superior
rights or that we will not be subject to infringement claims. A successful
infringement claim by the owner of a mark including "GoTo" or a variation could
require us to change our name or our logo, which would be expensive and
disruptive to our business. Further, despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our services, technology and other intellectual property, and we cannot
be certain that the steps we have taken will prevent any misappropriation or
confusion among consumers and advertisers.

WE MAY NEED ADDITIONAL CAPITAL WHICH COULD DILUTE THE OWNERSHIP INTEREST OF
INVESTORS.

     We require substantial working capital to fund our business. If we raise
additional funds through the issuance of equity, equity-related or convertible
debt securities, these securities may have rights, preferences or privileges
senior to those of the rights of our common stock, and our stockholders may
experience additional dilution. We cannot be certain that additional financing
will be available to us on favorable terms when required, or at all. Since our
inception, we have experienced negative cash flow from operations and expect to
experience significant negative cash flow from operations in the future. We



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<PAGE>   39

currently anticipate that our available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditure through at least
the next 12 months. However, we may choose to raise additional funds prior to
the expiration of this period or at a later date.

THE ACQUISITION OF CADABRA COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.

     We recently completed the acquisition of Cadabra, a provider of product
search and comparison technology. We are in the process of integrating Cadabra's
products, technology and personnel, and the process may be delayed, disrupt our
ongoing business, cost more than expected and distract management. None of
Cadabra's personnel is subject to an employment agreement for any specific term.
If we lost the services of any of the key personnel of Cadabra, it could have a
significant adverse effect on our business and on the integration of Cadabra.

OTHER POTENTIAL ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.

     We may make investments in or acquire complementary products, technologies
and businesses. These acquisitions, including the pending acquisition of
AuctionRover.com and investments could disrupt our ongoing business, distract
our management and employees and increase our expenses. If we acquire a company,
we could face difficulties in assimilating that company's personnel and
operations. In addition, the key personnel of the acquired company may decide
not to work for us. Acquisitions of additional services or technologies also
involve risks of incompatibility and the need for integration into our existing
services and marketing, sales and support efforts. If we finance the
acquisitions by issuing equity securities, this could dilute our existing
stockholders. Any amortization of goodwill or other assets, or other charges
resulting from the costs of these acquisitions could adversely affect our
operating results.
IF THE CONDITIONS TO THE PENDING MERGER WITH AUCTIONROVER.COM ARE NOT MET,
THE MERGER WILL NOT OCCUR.

     Several conditions must be satisfied or waived to complete GoTo.com's
pending acquisition of AuctionRover.com. If the conditions are not satisfied or
waived, the merger will not occur or will be delayed, and GoTo.com may lose some
or all of the intended benefits of the merger.

IMPACT OF YEAR 2000

     As a result of our planning and implementation efforts, we have experienced
no significant disruptions in mission critical information technology and
non-information technology systems to date and believe those systems
successfully respond to the Year 2000 date change. GoTo.com expensed an
insignificant amount during 1999 in connection with our remediation of our
systems. We are not aware of any material problems resulting from Year 2000
issues, either with our products, our internal systems, or the products and
services of third parties. We will continue to monitor our mission critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.


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OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND OUR FUTURE SUCCESS WILL
DEPEND ON OUR ABILITY TO MEET THE CHANGING NEEDS OF OUR INDUSTRY.

     If new industry standards and practices emerge in the Internet and online
advertising industry, our existing services, technology and systems may become
obsolete. Our future success will depend on our ability to:

     - license and internally develop leading technologies useful in our
       business;

     - enhance our existing services;

     - develop new services and technologies that address the increasingly
       sophisticated and varied needs of prospective consumers; and

     - respond to technological advances and emerging industry standards and
       practices on a cost-effective and timely basis.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY DAMAGE OUR BUSINESS.

     The laws and regulations applicable to the Internet and our services are
evolving and unclear and could damage our business. There are currently few laws
or regulations directly applicable to access to, or commerce on, the Internet.
Due to the increasing popularity and use of the Internet, it is possible that
laws and regulations may be adopted, covering issues such as user privacy,
defamation, database protection, pricing, taxation, content regulation, quality
of products and services, and intellectual property ownership and infringement.
Such legislation could expose GoTo.com to substantial liability as well as
dampen the growth in use of the Internet, decrease the acceptance of the
Internet as a communications and commercial medium, or require GoTo.com to incur
significant expenses in complying with any new regulations.

WE MAY INCUR LIABILITIES FOR THE ACTIVITIES OF USERS OF OUR SERVICE.

     The law relating to the liability of providers of online services for
activities of their users is currently unsettled and could damage our business.
We do not carry insurance that will indemnify us for liability for activities of
our users. We cannot assure you that GoTo.com will successfully avoid civil or
criminal liability for unlawful activities carried out by users of our service.
The imposition upon GoTo.com of potential liability for unlawful activities of
users of our service could require us to implement measures to reduce our
exposure to such liability, which may require us, among other things, to spend
substantial resources or to discontinue certain service offerings. Any costs
incurred as a result of such liability or asserted liability could damage our
business.

WE HAVE BROAD DISCRETION TO OUR CAPITAL AND HOW WE INVEST THESE PROCEEDS MAY NOT
YIELD A FAVORABLE RETURN.

     Our management can spend our capital in ways with which the stockholders
may not agree.

FUTURE SALES OF OUR COMMON STOCK BY OUR STOCKHOLDERS MAY DEPRESS OUR STOCK
PRICE.

     If our stockholders sell substantial amounts of common stock in the public
market, including shares issued upon the exercise of outstanding options, the
market price of our common stock could fall. All of the approximately 45.5
million shares of common stock outstanding at December 31, 1999 are available
for sale in the public market, except for 3.7 million shares, which will come
available on April 14, 2000, and 2.2 million shares that

                                       40
<PAGE>   41

are subject to repurchase by GoTo.com and transfer restrictions as a result of
vesting agreements.

     Most of the shares that are available for sale will be subject to certain
volume limitations because they are held by affiliates of GoTo.com.

OUR CHARTER DOCUMENTS AND CHANGE OF CONTROL SEVERANCE AGREEMENTS WITH OUR
MANAGEMENT WILL MAKE IT MORE DIFFICULT TO ACQUIRE US.

     Provisions of our Amended and Restated Certificate of Incorporation and
Bylaws could make it more difficult for a third party to acquire us, even if
doing so would be beneficial to our stockholders. For example, our board of
directors is divided into three classes, with one class being elected each year
by our stockholders, which generally makes it more difficult for stockholders to
replace a majority of directors and obtain control of our board. In addition,
stockholder meetings may be called only by our board of directors, the chairman
of the board and the president, advanced notice is required prior to stockholder
proposals, and stockholders may not act by written consent. Further, we have
authorized preferred stock that is undesignated, making it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
GoTo.com.

     Delaware law also could make it more difficult for a third party to acquire
us. Specifically, Section 203 of the Delaware General Corporation Law may have
an anti-takeover effect with respect to transactions not approved in advance by
the board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by our
stockholders.

     We have entered into change of control severance agreements with members of
our senior management providing for certain benefits, including acceleration of
option vesting, to these members if they are terminated other than for cause
following an acquisition of GoTo.com. These agreements could make us less
attractive to a third party who may want to acquire us because they will make
any replacement of management more expensive.

     Furthermore, in March 2000, we entered into a Stockholder Agreement with
Bill Gross' idealab!, which limits Bill Gross' idealab!'s and its affiliates'
ability to beneficially own 35% or more of our outstanding common stock, to
transfer shares of our common stock or to knowingly assist or advise, or
knowingly provide or arrange financing to facilitate any other person or entity
to beneficially own 15% or more of our outstanding common stock.


                                       41
<PAGE>   42

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     GoTo.com's exposure to market risk for interest rate changes relates
primarily to its investment portfolio. GoTo.com has no derivative financial
instruments as of December 31, 1999 or December 31, 1998. GoTo.com places its
investment portfolio in high quality credit instruments, which are spread to
many issuers. GoTo.com's investments are principally confined to cash
equivalents and available-for-sale debt securities.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See item 14 (A).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.



                                       42
<PAGE>   43


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding the directors of GoTo.com is incorporated by
reference to the sections entitled "Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" appearing in the GoTo.com's Definitive Proxy
Statement for the Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission (the "Commission") within 120 days after the end of the
Company's fiscal year ended December 31, 1999. Certain information with respect
to persons who are or may be deemed to be executive officers of the Registrant
is set forth under the caption "Executive Officers of the Registrant" in Item 4
of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     Information regarding executive compensation is incorporated by reference
to the information set forth under the caption "Compensation of Executive
Officers and Other Matters" in GoTo.com's Definitive Proxy Statement for the
Annual Meeting of Stockholders to be filed with Commission within 120 days after
the end of the Company's fiscal year ended December 31, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information regarding security ownership of certain beneficial owners and
management is incorporated by reference to the information set forth under the
caption "Principal Ownership of GoTo.com Common Stock" in GoTo.com's Definitive
Proxy Statement for the Annual Meeting of Stockholders to be filed with the
Commission within 120 days after the end of GoTo.com's fiscal year ended
December 31, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information regarding certain relationships and related transactions are
incorporated by reference to the information set forth under the caption
"Certain Transactions" in GoTo.com's Definitive Proxy Statement for the Annual
Meeting of Stockholders to be filed with the Commission within 120 days after
the end of GoTo.com's fiscal year ended December 31, 1999.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)(1) INDEX TO FINANCIAL STATEMENTS



                                       43
<PAGE>   44
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                   <C>
         Report of Independent Auditors............................   F-2

         FINANCIAL STATEMENTS

         Balance Sheets............................................   F-3
         Statements of Operations..................................   F-4
         Statements of Stockholders' Equity........................   F-5
         Statements of Cash Flows..................................   F-6
         Notes to Financial Statements.............................   F-7
</TABLE>


                                      F-1
<PAGE>   45

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
GoTo.com, Inc.

      We have audited the accompanying balance sheets of GoTo.com, Inc. as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1999 and
1998 and for the period from September 15, 1997 (inception) through December 31,
1997. 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 auditing standards generally
accepted in the United States. 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 GoTo.com, Inc. at December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years ended December 31, 1999 and 1998 and for the period from September 15,
1997 (inception) through December 31, 1997, in conformity with accounting
principles generally accepted in the United States.


                                          /s/  ERNST & YOUNG LLP


Los Angeles, California
February 8, 2000



                                      F-2
<PAGE>   46

                                 GOTO.COM, INC.

                                 BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                     AS OF
                                                                  DECEMBER 31,
                                                           ------------------------
                                                              1999           1998
                                                           ---------      ---------
<S>                                                        <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ..........................     $  11,914      $  16,357
  Short-term investments .............................        93,409             --
  Accounts receivable, net of allowance of
    $250 and $86 for 1999 and 1998,
    respectively .....................................         2,927            356
  Prepaid expenses and other .........................           851            150
  Prepaid marketing expenses .........................         2,034          1,741
                                                           ---------      ---------
Total current assets .................................       111,135         18,604

Property and equipment:
  Furniture and fixtures .............................         1,923             17
  Computer hardware ..................................         9,036          1,302
  Computer software ..................................         4,234            292
                                                           ---------      ---------
                                                              15,193          1,611
  Accumulated depreciation and amortization ..........        (2,490)          (275)
                                                           ---------      ---------
                                                              12,703          1,336

Long-term investments ................................         4,932             --
Other assets .........................................           742             29
                                                           ---------      ---------
Total assets .........................................     $ 129,512      $  19,969
                                                           =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable ...................................     $  10,465      $   2,816
  Accrued expenses ...................................         2,562            282
  Deferred revenue ...................................         2,058            181
  Current portion of debt ............................           131             --
  Current portion of capital lease obligations .......           754            110
                                                           ---------      ---------
Total current liabilities ............................        15,970          3,389

Long-term capital lease obligations ..................           768            183
Commitments and contingencies

STOCKHOLDERS' EQUITY:
  Convertible Preferred Stock; $0.0001 par value,
    10,000 and 20,187 shares authorized as of
    December 31, 1999 and 1998, respectively
    Series A Preferred Stock; Shares issued and
      outstanding--none and 471 as of December 31,
      1999 and 1998, respectively ....................            --            212
    Series B and C Preferred Stock; Shares issued and
      outstanding--none and 19,022 as of December 31,
      1999 and 1998, respectively ....................            --         28,433
  Common Stock, $0.0001 par value, 200,000 and 45,000
    shares authorized as of December 31, 1999 and
    1998, respectively ...............................
  Shares issued and outstanding--45,519
    and 10,444 as of December 31, 1999 and 1998,
    respectively .....................................             5              1
  Additional paid-in capital on Common Stock .........       158,799          3,212
  Deferred compensation, net .........................        (2,584)        (1,318)
  Accumulated deficit ................................       (43,405)       (14,143)
  Unrealized losses on short-term and long-term
    investments ......................................           (41)            --
                                                           ---------      ---------
Total stockholders' equity ...........................       112,774         16,397
                                                           ---------      ---------
Total liabilities and stockholders' equity ...........     $ 129,512      $  19,969
                                                           =========      =========
</TABLE>



                                      F-3
<PAGE>   47

                                 GOTO.COM, INC.

                            STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  PERIOD FROM
                                                                 SEPTEMBER 15,
                                                                      1997
                                                                  (INCEPTION)
                                              YEAR ENDED            THROUGH
                                      DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                          1999          1998          1997
                                      ------------  ------------  ------------
<S>                                   <C>           <C>           <C>
Revenue ...........................     $ 26,809      $    822      $     22
Cost of revenue ...................        6,213         1,429             6
                                        --------      --------      --------
Gross profit (loss) ...............       20,596          (607)           16
Operating expenses:
  Marketing, sales and service ....       34,459         9,645            65
  General and administrative ......       12,467         1,655            24
  Product development .............        3,689         1,232            46
  Amortization of deferred
     compensation .................        3,585         1,199            --
                                        --------      --------      --------
                                          54,200        13,731           135
                                        --------      --------      --------
Loss from operations ..............      (33,604)      (14,338)         (119)
Other income:
  Interest income .................        3,777           316            --
  Other income ....................          566            --            --
                                        --------      --------      --------
Loss before provision for
  income taxes ....................      (29,261)      (14,022)         (119)
Provision for income taxes ........            1             1             1
                                        --------      --------      --------
Net loss ..........................     $(29,262)     $(14,023)     $   (120)
                                        ========      ========      ========


Pro forma net loss per share ......     $  (0.77)     $  (0.75)
Historical basic and diluted
  net loss per share ..............     $  (1.04)     $  (1.36)     $  (0.01)
Weighted average shares used to
  compute pro forma net loss
  per share .......................       38,219        18,714
Weighted average shares used to
  compute historical basic and
  diluted net loss per share ......       28,207        10,296         9,869
</TABLE>

                             See accompanying notes.



                                      F-4
<PAGE>   48

                                 GOTO.COM, INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                   SERIES A                SERIES B AND C             SERIES D
                                                  CONVERTIBLE                CONVERTIBLE             CONVERTIBLE
                                                PREFERRED STOCK            PREFERRED STOCK          PREFERRED STOCK
                                             ----------------------    ----------------------    ----------------------
                                               SHARES       AMOUNT       SHARES       AMOUNT       SHARES       AMOUNT
                                             ---------    ---------    ---------    ---------    ---------    ---------
<S>                                          <C>          <C>          <C>          <C>          <C>          <C>
 Issuance of Common Stock ................          --    $      --           --    $      --           --    $      --
 Issuance of Series A Convertible
   Preferred stock .......................          --           --           --           --           --           --
 Net loss ................................          --           --           --           --           --           --
                                             ---------    ---------    ---------    ---------    ---------    ---------
BALANCE AT DECEMBER 31, 1997 .............          --           --           --           --           --           --
 Issuance of Common Stock for cash and
   services...............................          --           --           --           --           --           --
 Issuance of Series A Convertible
   Preferred Stock........................         471          212           --           --           --           --
 Issuance of Series B Convertible
   Preferred Stock and capital
   contribution ..........................          --           --        8,312        6,281           --           --
 Issuance of Series C Convertible
   Preferred Stock .......................          --           --       10,710       22,152           --           --
 Issuance of warrants for services .......          --           --           --           --           --           --
 Stock option compensation ...............          --           --           --           --           --           --
 Amortization of deferred compensation ...          --           --           --           --           --           --
 Net loss ................................          --           --           --           --           --           --
                                             ---------    ---------    ---------    ---------    ---------    ---------
BALANCE AT DECEMBER 31, 1998 .............         471          212       19,022       28,433           --           --
 Issuance of Common Stock, net of
   issuance costs of $8,655 ..............          --           --           --           --           --           --
 Issuance of Series D Convertible
   Preferred Stock .......................          --           --           --           --        3,628       24,969
 Conversion of Preferred Stock to
   Common Stock ..........................        (471)        (212)     (19,022)     (28,433)      (3,628)     (24,969)
 Exercise of common stock options and
   warrants, net of repurchases ..........          --           --           --           --
 Issuance of warrants and options for
   services ..............................          --           --           --           --           --           --
 Stock option compensation ...............          --           --           --           --           --           --
 Amortization of deferred compensation ...          --           --           --           --           --           --
 Unrealized losses on short-term and
   long-term investments .................          --           --           --           --           --           --
 Net loss ................................          --           --           --           --           --           --
                                             ---------    ---------    ---------    ---------    ---------    ---------
BALANCE AT DECEMBER 31, 1999 .............          --    $      --           --    $      --           --    $      --
                                             =========    =========    =========    =========    =========    =========
</TABLE>



<TABLE>
<CAPTION>
                                                                      ADDITIONAL             UNREALIZED
                                                                       PAID-IN                 LOSSES
                                                 COMMON STOCK         CAPITAL ON             ON SHORT-TERM
                                             ---------------------     COMMON     DEFERRED   AND LONG-TERM  ACCUMULATED
                                               SHARES      AMOUNT       STOCK   COMPENSATION  INVESTMENTS    DEFICIT       TOTAL
                                             ---------   ---------    --------- ------------ -------------- -----------  ---------
<S>                                          <C>         <C>          <C>         <C>          <C>          <C>          <C>
 Issuance of Common Stock ................      10,017   $       1    $     242   $      --    $      --    $      --    $     243
 Issuance of Series A Convertible
   Preferred stock .......................          --          --           --          --           --           --           --
 Net loss ................................          --          --           --          --           --         (120)        (120)
                                             ---------   ---------    ---------   ---------    ---------    ---------    ---------
BALANCE AT DECEMBER 31, 1997 .............      10,017           1          242          --           --         (120)         123
 Issuance of Common Stock for cash and
   services...............................         427          --          286          --           --           --          286
 Issuance of Series A Convertible
   Preferred Stock........................          --          --           --          --           --           --          212
 Issuance of Series B Convertible
   Preferred Stock and capital
   contribution ..........................          --          --           77          --           --           --        6,358
 Issuance of Series C Convertible
   Preferred Stock .......................          --          --           --          --           --           --       22,152
 Issuance of warrants for services .......          --          --           90          --           --           --           90
 Stock option compensation ...............          --          --        2,517      (2,517)          --           --           --
 Amortization of deferred compensation ...          --          --           --       1,199           --           --        1,199
 Net loss ................................          --          --           --          --           --      (14,023)     (14,023)
                                             ---------   ---------    ---------   ---------    ---------    ---------    ---------
BALANCE AT DECEMBER 31, 1998 .............      10,444           1        3,212      (1,318)          --      (14,143)      16,397
 Issuance of Common Stock, net of
   issuance costs of $8,655 ..............       6,900           1       94,834          --           --           --       94,835
 Issuance of Series D Convertible
   Preferred Stock .......................          --          --           --          --           --           --       24,969
 Conversion of Preferred Stock to
   Common Stock ..........................      23,121           2       53,612          --           --           --           --
 Exercise of common stock options and
   warrants, net of repurchases ..........       5,054           1        2,044          --           --           --        2,045
 Issuance of warrants and options for
   services ..............................          --                      246          --           --           --          246
 Stock option compensation ...............          --          --        4,851      (4,851)          --           --           --
 Amortization of deferred compensation ...          --          --           --       3,585           --           --        3,585
 Unrealized losses on short-term and
   long-term investments .................          --          --           --          --          (41)          --          (41)
 Net loss ................................          --          --           --          --           --      (29,262)     (29,262)
                                             ---------   ---------    ---------   ---------    ---------    ---------    ---------
BALANCE AT DECEMBER 31, 1999 .............      45,519   $       5    $ 158,799   $  (2,584)   $     (41)   $ (43,405)   $ 112,774
                                             =========   =========    =========   =========    =========    =========    =========

</TABLE>

See accompanying notes.



                                      F-5
<PAGE>   49

                                 GOTO.COM, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               PERIOD FROM
                                                                               SEPTEMBER 15,
                                                                                  1997
                                                                               (INCEPTION)
                                                         YEAR ENDED              THROUGH
                                               DECEMBER 31,     DECEMBER 31,   DECEMBER 31,
                                                   1999            1998            1997
                                               ------------   --------------   ------------
<S>                                            <C>            <C>              <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net loss ................................     $ (29,262)      $ (14,023)      $    (120)
  Adjustments to reconcile net loss to
     net cash used in operating
     activities:
  Amortization of deferred compensation             3,585           1,199              --
  Accretion of discounts from the
     purchase of short-term and long-term
     investments ..........................        (1,990)             --              --
  Other common stock and warrants
     expense ..............................           246             370              --
  Depreciation and amortization ...........         2,247             294               5
  Changes in operating assets and
     liabilities:
    Accounts receivable ...................        (2,571)           (334)            (22)
    Prepaid expenses and other ............          (701)           (150)             --
    Prepaid marketing expenses ............          (293)         (1,741)             --
    Accounts payable and accrued expenses..         9,929           3,007              91
  Deferred revenues .......................         1,877             181              --
                                                ---------       ---------       ---------
  Net cash used in operating
     activities ...........................       (16,933)         (11,197)            (46)
CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Purchases of short-term and long-term
     investments, net .....................       (96,392)         (1,554)            (57)
  Capital expenditures for property and
     equipment ............................       (12,820)             --              --
  Other assets ............................          (745)             --             (53)
                                                ---------       ---------       ---------
  Net cash used in investing
     activities ...........................      (109,957)         (1,554)           (110)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  Proceeds from the issuance of Common
     Stock, net ...........................        96,880               6             243
  Proceeds from the issuance of
     Preferred Stock ......................        24,969          28,722              --
  Proceeds from lease line ................         1,203             330              --
  Repayments under lease line .............          (499)            (37)             --
  Repayment of debt .......................          (106)             --              --
                                                ---------       ---------       ---------
  Net cash provided by financing
     activities ...........................       122,447          29,021             243
  Net increase (decrease) in cash and
     cash equivalents .....................        (4,443)         16,270              87
  Cash and cash equivalents at
     beginning of period ..................        16,357              87              --
                                                ---------       ---------       ---------
  Cash and cash equivalents at end of
     period ...............................     $  11,914       $  16,357       $      87
                                                =========       =========       =========
  Supplemental disclosures:
  Income taxes paid .......................     $       1       $       2       $      --
  Interest paid ...........................     $     214       $      11       $      --
</TABLE>

      Non-Cash Investing and Financing Activities: During 1999, the Company
acquired approximately $525,000 of equipment under capital leasing arrangements
and approximately $237,000 of equipment under a debt arrangement.

                             See accompanying notes.



                                      F-6
<PAGE>   50

                                 GOTO.COM, INC.

                          NOTES TO FINANCIAL STATEMENTS

1.    SIGNIFICANT ACCOUNTING POLICIES

GENERAL

     GoTo.com operates an online marketplace that introduces consumers and
businesses who search the Internet to advertisers, who provide products,
services and information. Advertisers participating in our marketplace include
retail merchants, wholesale and service businesses and manufacturers. We
facilitate these introductions through our search service, which enables
advertisers to bid in an ongoing auction for priority placement in our search
results. Priority placement means that the search results appear on the page
ranked in descending order of bid price, with the highest bidder's listing
appearing first. Each advertiser pays GoTo.com the amount of its bid whenever a
consumer clicks on the advertiser's listing in our search results. Advertisers
pay GoTo.com for each click-through, so advertisers bid only on keywords
relevant to the products, services or information that they offer. Because each
advertiser chooses the bid amount and advertisement placement that is optimal
for its business, we believe the GoTo.com marketplace provides advertisers with
a cost-effective way to target consumers. Consumers access the GoTo.com search
service both at our Web site and through our affiliates, a network of Web sites
that have integrated the GoTo.com search service into their sites or that direct
consumer traffic to our site. On January 31, 2000, GoTo.com acquired Cadabra
Inc. (Cadabra), an online comparison shopping service that we now call "GoTo
Shopping." We believe GoTo Shopping further facilitates introductions between
consumers and advertisers. GoTo Shopping simplifies the consumers' process of
finding desired products by automating product comparison across multiple
attributes. By enabling consumers to search at the product level, GoTo Shopping
creates more targeted, and therefore highly valuable, advertising opportunities
for our advertisers. As with Web search, we will offer GoTo Shopping at our Web
site as well as through our affiliate network, providing consumers with multiple
points of access to, and advertisers with, multiple points of distribution for
the advertisers' products. The Company operates in one reportable business
segment.

     GoTo.com, Inc. (the Company or GoTo.com) was incorporated on September 15,
1997 in the state of Delaware and officially launched its service on June 1,
1998.

ESTIMATES AND ASSUMPTIONS

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ materially from those
estimates.

REVENUE RECOGNITION

      Revenue consists of search listing advertisements and banner
advertisements. Banner advertising arrangements are short-term in duration and
have no minimum guarantees. The Company has had no barter transactions.

      Search listing advertising enables the advertisers to determine their
placement within the GoTo.com search term results by placing a bid (the price
they will pay when a user clicks through to their site) for each keyword search
item that they select. The amount of the bid determines the placement of the
advertiser's site within the search results. Search listing advertisement
revenue is determined by multiplying the number of click-throughs on paid search
results by the price bid for the particular keyword listing at the time of the
click-through. Search listing advertising revenues are earned and recognized as
actual click-throughs occur to the extent the customer has deposited sufficient
funds with the Company or provided that the collection of any resulting
receivable is probable.

      Banner advertisement arrangements provide for the Company to receive
specified amounts each time a customer's banner advertisement is made visible to
a user (an impression) and/or each time a user clicks-through to the
advertiser's Web site. Banner advertisement revenue is recognized when earned
under the terms of the contractual arrangement with the advertiser or agency,
provided that collection of the resulting receivable is probable. Under the
terms of these arrangements, revenues are generally earned when the banner
advertisement is displayed or when the click-through occurs. For the year ended
December 31, 1999, banner advertisement revenue constituted less than 10 percent
of our revenue.

COMPREHENSIVE INCOME (LOSS)

      The Company accounts for comprehensive income (loss) using Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting comprehensive income and its
components in financial statements. Comprehensive income, as defined therein,
refers to revenues, expenses, gains and losses that are not included in net
income (loss) but rather are recorded directly in shareholders' equity. Total
comprehensive loss for 1999 approximated net loss.



                                      F-7
<PAGE>   51

COST OF REVENUE

      Cost of revenue consists primarily of fees paid to outside resources that
provide and manage unpaid listings and costs associated with maintaining our Web
site. Cost associated with serving the Web site includes salaries, depreciation
of Web site equipment, co-location charges for equipment, and software licensing
fees.

AFFILIATES

      The Company enters into short-term agreements with other Internet
companies (affiliates) whereby the Company provides search services within the
affiliates' Web sites or the affiliates provide a link to the Company's site. In
some cases, the Company pays the affiliates fees based on the term of the
agreement and the amount of traffic the Company receives from the Web sites.
Some of these fees are paid at the beginning of the contract resulting in
prepaid distribution affiliate fees and some of the fees are billed during the
term of the contracts resulting in accrued affiliate fees. The fees are charged
to marketing and sales expense ratably over the contract or based on actual
traffic received under the terms of the agreements. A significant portion of the
Company's traffic has been generated from a small number of the Company's larger
affiliates, such as Microsoft through its Internet Explorer browser, and
Netscape. The traffic from these affiliates converts to revenue when consumers
click on paid listings. Therefore, a large portion of the Company's revenue is
reliant on these few affiliates.

      The Company expenses advertising media costs as incurred and production
cost upon first airing or printing. For the years ended December 31, 1999 and
1998 and the period from inception through December 31, 1997, the Company
incurred advertising costs, including affiliate fees, of approximately $30.2
million, $8.8 million and $29,000, respectively.

PRODUCT DEVELOPMENT

      Product development expenses consist of expenses incurred by the Company
in the development, creation and enhancement of its Internet site and service.
Product development expenses include compensation and related expenses, costs of
computer hardware and software, and costs incurred in developing features and
functionality of the service. Product development costs are expensed as incurred
or capitalized in accordance with Statement of Position 98-1 "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" (SOP-98-1).
SOP 98-1 requires that cost incurred in the preliminary project and
post-implementation stages of an internal use software project be expensed as
incurred and that certain costs incurred in the application development stage of
a project be capitalized.

CASH, CASH EQUIVALENTS AND SHORT-TERM AND LONG-TERM INVESTMENTS

     The Company considers those investments that are highly liquid, readily
convertible to cash and which mature within three months from the original date
of purchase to be cash equivalents. All of the Company's cash equivalents,
short-term and long-term investments, consisting of commercial paper and
certificate of deposits, are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with unrealized gains
and losses included in "unrealized losses on short-term and long-term
investments" as a separate component of stockholders' equity net of applicable
income taxes. As of December 31, 1999, the fair value of these securities
approximated cost and the unrealized holding losses was approximately $41,000.
The realized gains and losses on sales of available-for-sale investments for the
year ended December 31, 1999 were not significant. All available-for-sale
investments generally mature within one year or less, except for one investment
with a fair value of approximately $4.9 million and original maturity of 28
months.

      The estimated fair value of cash, cash equivalents and short-term and
long-term investments, which approximates the carrying costs as of December 31,
1999, are as follows (in thousands):

<TABLE>
                                CASH AND CASH    SHORT-TERM     LONG-TERM
                                 EQUIVALENTS    INVESTMENTS    INVESTMENTS
                                -------------   -----------    -----------
<S>                             <C>             <C>            <C>
Cash ......................        $ 2,289        $    --        $    --
Commercial Paper ..........          9,625         65,751          4,932
Certificates of deposit ...             --         27,658             --
                                   -------        -------        -------
                                   $11,914        $93,409        $ 4,932
                                   =======        =======        =======
</TABLE>



                                      F-8
<PAGE>   52

ACCOUNTS RECEIVABLE

      The allowance for doubtful account activity for the periods indicated are
as follows (in thousands):

<TABLE>
<CAPTION>
                                                  ADDITIONS
                                     BALANCE AT  CHARGED TO  BALANCE AT
                                    BEGINNING OF  COSTS AND    END OF
                                       PERIOD     EXPENSES     PERIOD
                                    ------------ ----------  ----------
<S>                                 <C>          <C>         <C>
Allowance for doubtful accounts:
  December 31, 1997 ............        $ --        $ --        $ --
  December 31, 1998 ............        $ --        $ 86        $ 86
  December 31, 1999 ............        $ 86        $164        $250
</TABLE>

CONCENTRATION OF CREDIT RISK

      Accounts receivable are typically unsecured and are due from customers
primarily located in the United States. Credit losses have generally been within
management's expectations. At December 31, 1999, no customer represented more
than ten percent of total accounts receivable. At December 31, 1998, one
customer represented 13% of total accounts receivable.

PROPERTY AND EQUIPMENT

      Property and equipment is stated at cost. Property and equipment consists
of computer hardware, computer software, which includes costs incurred in the
application development stage for computer software developed for internal use,
and furniture and fixtures. Depreciation is provided using the straight-line
method based upon estimated useful lives of the assets, which range from 18
months to five years. Equipment under capital leases and leasehold improvements
are recorded at cost. Amortization is provided using the straight-line method
over the shorter of the term of the related lease or estimated useful lives of
the assets.

LONG-LIVED ASSETS

     The Company evaluates the recoverability of its long-lived assets in
accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The Company assesses the
impairment of long-lived assets and certain identifiable intangibles whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss would be recognized when estimated
future cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. No such impairment losses have
been identified by the Company.

DEFERRED REVENUE

      Deferred revenue represents all payments received from customers in excess
of revenue earned based on line-item click-through activity and will be
recognized as actual click-throughs occur.

INCOME TAXES

     Income taxes are accounted for under SFAS No. 109, "Accounting for Income
Taxes." Under SFAS No. 109, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Valuation reserves
against deferred tax assets are provided as necessary.

ACCOUNTING FOR STOCK-BASED COMPENSATION

      SFAS No. 123, "Accounting for Stock-Based Compensation," requires that
stock awards granted subsequent to January 1, 1995 be recognized as compensation
expense based on their fair value at the date of grant. Alternatively, a company
may account for granted stock awards under Accounting Principles Board Opinion
(APB) No. 25 "Accounting for Stock Issued to Employees," and disclose pro forma
income amounts which would have resulted from recognizing such awards at their
fair value. The Company has elected to account for stock-based compensation
expense under APB No. 25 and make the required pro forma disclosures for
compensation expense (see Note 4).



                                      F-9
<PAGE>   53

EARNINGS (LOSS) PER SHARE COMPUTATION

      Historical basic and diluted net loss per share is computed using the
weighted average number of shares of common stock outstanding excluding the
unvested portion of stock issued in connection with the exercise of such options
subject to repurchase. The effect of outstanding stock options, convertible
preferred stock and unvested stock are excluded from the calculation of
historical diluted net loss per share for the periods presented as their
inclusion would be antidilutive.

      Pro forma basic and diluted net loss per share is computed using the
historical weighted average number of shares of common stock outstanding plus
the weighted average number of shares resulting from the assumed conversion of
all outstanding convertible preferred stock as though such conversion occurred
at the beginning of the period or original date of issuance, if later. The
effect of outstanding stock options and unvested stock are excluded from the
calculation of pro forma diluted net loss per share for the periods presented as
their inclusion would be antidilutive.

      Options to purchase approximately 2.8 million and 5.0 million shares of
common stock were outstanding as of December 31, 1999 and 1998, respectively. In
addition, as of December 31, 1999, there were approximately 2.2 million shares
of unvested common stock outstanding that were issued in connection with the
exercise of options and are subject to repurchase.

      The following table sets forth the computation of historical basic and
diluted net loss per share and pro forma basic and diluted net loss per share
for the periods indicated (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                                        PERIOD FROM
                                                                                        SEPTEMBER 15,
                                                                                           1997
                                                                   YEAR ENDED           (INCEPTION)
                                                           ---------------------------    THROUGH
                                                           DECEMBER 31,   DECEMBER 31,  DECEMBER 31,
                                                              1999           1998           1997
                                                           ------------   ------------  ------------
<S>                                                        <C>            <C>           <C>
Numerator:
  Net loss ...........................................      $(29,262)      $(14,023)      $   (120)
                                                            ========       ========       ========
Denominator:
  Denominator for historical basic and diluted
     calculation--weighted average shares ............        28,207         10,296          9,869
Weighted average effect of pro forma securities:
  Series A Convertible Preferred Stock ...............           226            360
  Series B Convertible Preferred Stock ...............         3,994          5,403
  Series C Convertible Preferred Stock ...............         5,147          2,655
  Series D Convertible Preferred Stock ...............           645             --
                                                            --------       --------
  Denominator for pro forma calculation ..............        38,219         18,714
                                                            ========       ========
Net loss per share:
  Pro forma basic and diluted net loss per share .....      $  (0.77)      $  (0.75)      $     --
  Historical basic and diluted net loss per share ....      $  (1.04)      $  (1.36)      $  (0.01)
</TABLE>


RECLASSIFICATIONS

      Certain prior year balances have been reclassified to conform to current
year presentation.

2.    INCOME TAXES

      As a result of the net operating losses incurred since inception, no
income tax provision has been recorded except for state minimum taxes of
approximately $1,000 for 1999, 1998 and 1997. The following is a reconciliation
of the statutory federal income tax rate to the Company's effective income tax
rate:


<TABLE>
<CAPTION>
                                                                     SEPTEMBER 15,
                                                                         1997
                                                                      (INCEPTION)
                                          YEAR ENDED    YEAR ENDED       THROUGH
                                         DECEMBER 31,  DECEMBER 31,   DECEMBER 31,
                                              1999          1998           1997
                                         ------------  ------------   ------------
<S>                                      <C>           <C>           <C>
Statutory federal rate ..............         (34)%         (34)%         (34)%
</TABLE>


                                      F-10
<PAGE>   54

<TABLE>
<S>                                      <C>           <C>           <C>
State income taxes (net of
  federal benefit)...................          (6)           (5)           (5)
Valuation allowance .................          36            37            41
Nondeductible stock compensation ....           4             3            --
Other ...............................          --            (1)           (2)
                                              ---           ---           ---
                                               --%           --%           --%
                                              ===           ===           ===
</TABLE>

      The components of the deferred tax assets and related valuation allowance
at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                 DECEMBER 31
                                           -----------------------
                                             1999           1998
                                           --------       --------
                                               (IN THOUSANDS)
<S>                                        <C>            <C>
Net operating loss carryforwards ....      $ 16,739       $  4,955
Other ...............................           350            167
                                           --------       --------
Deferred tax assets .................        17,089          5,122
Valuation allowance .................       (17,089)        (5,122)
                                           --------       --------
                                           $     --       $     --
                                           ========       ========
</TABLE>

      Due to the uncertainty surrounding the timing of realizing the benefits of
its deferred tax assets in future tax returns, the Company has recorded a
valuation allowance against its deferred tax assets.

      At December 31, 1999, the Company had net operating loss carryforwards of
approximately $42.0 million available to reduce future federal and state taxable
income, which expire beginning in the years 2017 through 2019 for federal and in
2005 for state. Under Section 382 of the Internal Revenue Code, the utilization
of the net operating loss carryforwards can be limited based on changes in the
percentage of ownership of the Company.

3.    STOCKHOLDERS' EQUITY

COMMON AND PREFERRED STOCK

      GoTo.com issued shares of its preferred stock as described below:

      -     In March 1998, GoTo.com issued a total of 471,111 shares of Series A
            Preferred Stock to various investors at a purchase price of $0.45
            per share.

      -     In May 1998, GoTo.com issued a total of 8,311,688 shares of Series B
            Preferred Stock to various investors at a purchase price of $0.77
            per share.

      -     In July 1998, November 1998 and December 1998, GoTo.com issued a
            total of 10,710,348 shares of Series C Preferred Stock to various
            investors at a purchase price of $2.076 per share.

      -     In April 1999, GoTo.com issued a total of 3,628,447 shares of Series
            D Preferred Stock to various investors at a purchase price of $6.89
            per share.

      As part of the Series B Preferred Stock financing, Bill Gross, the
Company's founder, paid a consultant 111,111 shares of the Company's Common
Stock owned by him for services provided in connection with the Series B
Preferred Stock financing. The exchange of the founder's shares was recorded at
the fair market value of the Common Stock, on the date of the exchange, as a
contribution to capital and cost of the Series B Preferred financing.

      In June 1999, the Company completed its initial public offering and issued
6,900,000 shares of its common stock at a price to the public of $15.00 per
share. The Company received approximately $94.8 million in cash, net of
underwriting discounts, commissions and other offering costs. Simultaneously
with the closing of the initial public offering, each outstanding share of
Series A, B, C and D Preferred Stock was automatically converted into one share
of common stock.

      Upon completion of the Company's initial public offering the number of
common and undesignated preferred shares authorized for issuance changed to
200,000,000 and 10,000,000, respectively.

WARRANTS



                                      F-11
<PAGE>   55

      In September and November of 1998, the Company issued warrants in exchange
for certain consulting services to purchase an aggregate of 63,272 shares of the
Company's Common Stock at exercise prices ranging from $0.77 to $2.076 per
share. In February 1999, the Company issued additional warrants in exchange for
certain consulting and other services to purchase 41,699 shares of the Company's
Common Stock at exercise prices ranging from $2.076 to $5.00 per share. The
warrants were fully exercisable upon issuance and those warrants not exercised
by the warrant holders for Common Stock prior to our initial public offering on
June 18, 1999 were terminated. The deemed fair value of warrants issued in 1999
and 1998 was $180,000 and $90,000, respectively; these amounts were recorded in
general and administrative expenses in the respective periods.

DEFERRED STOCK OPTION COMPENSATION

      The excess of the deemed fair value of the Company's Common Stock over the
exercise price of options granted during the year ended December 31, 1999 and
1998 at the date of grant, adjusted for the return of unvested options or
repurchase of restricted stock resulting from employee terminations, amounted to
an aggregate of $4,851,000 and $2,517,000, respectively. The deemed fair value
of the Common Stock was determined by the Company based on the selling prices of
contemporaneous sales of each series of Preferred Stock considering the relative
rights and privileges of each security, the stages of development of the
Company's business and the inherent risks and perceived future potential of the
Company at the time of grant or issuance. The typical vesting period of the
options is 20%, 10% or zero immediately upon grant with the remaining balance
vesting evenly either annually or quarterly over the following four years. The
amortization of deferred compensation is charged to operations on a graded
methodology basis over the vesting period of the options. During the year ended
December 31, 1999 and 1998, deferred compensation amortization of $3,585,000 and
$1,199,000, respectively, was recorded. At December 31, 1999 and 1998, deferred
compensation of $2,584,000 and $1,318,000, respectively, was reflected as a
reduction of stockholders' equity. The deferred compensation amortization
relates only to stock options awarded to employees; the salaries and related
benefits of these employees are included in the applicable cost of revenue or
operating expense line item.

OTHER STOCK COMPENSATION

      The Company sold or issued 427,195 shares of Common Stock to various
consultants during 1998 at prices less than the deemed fair value of the Common
Stock on the day it was sold. The excess of the deemed fair value of the Common
Stock on the day it was sold aggregating $280,000 was recognized as consulting
expense.

4.    STOCK PLAN AND STOCK PURCHASE PLAN

      The Company's 1998 Stock Plan provides for the granting of options for the
purchase of up to 8,500,000 shares of the Company's Common Stock, plus an annual
increase to be added on the first day of the Company's fiscal year beginning in
2000 equal to the lesser of (i) 7,500,000 shares, (ii) 4% of the outstanding
shares on such date or (iii) a lesser amount determined by the Board. The
increase for fiscal 2000 was determined to be approximately 1.8 million shares.
Under terms of the plan, options may be granted to employees, nonemployee
directors or consultants at prices not less than the fair value at the date of
grant. Options granted to nonemployees are recorded at the value of negotiated
services received. All options are immediately exercisable, however, shares
issuable upon exercise of the option vest typically 20%, 10% or zero immediately
upon grant of the option with the remaining balance vesting evenly either
annually or quarterly over the following four years. The Company has the right
to repurchase unvested shares issued upon exercise of the option.

      Information relating to the outstanding stock options is as follows:

<TABLE>
<CAPTION>
                                                                WEIGHTED
                                                                 AVERAGE
                                              SHARES         EXERCISE PRICE
                                             --------        --------------
                                                   (IN THOUSANDS)
<S>                                           <C>                <C>
Outstanding at inception ............             --             $   --
  Granted ...........................            115               0.44
  Exercised .........................             --                 --
  Canceled ..........................             --                 --
                                              ------
Outstanding at December 31, 1997 ....            115               0.44
  Granted ...........................          4,888               0.15
  Exercised .........................             --                 --
  Canceled ..........................             (3)              0.15
                                              ------
Outstanding at December 31, 1998 ....          5,000               0.16
  Granted ...........................          2,979              19.62
</TABLE>



                                      F-12
<PAGE>   56
<TABLE>
<S>                                           <C>                 <C>
  Exercised .........................         (5,035)              0.37
  Cancelled .........................           (114)             11.58
                                              ------
Outstanding at December 31, 1999 ....          2,830            $ 19.87
                                              ======
</TABLE>

      The following table summarizes information regarding options outstanding
and options exercisable at December 31, 1999 (in thousands except per share
data):

<TABLE>
<CAPTION>

                                             OUTSTANDING AND EXERCISABLE
                                         -----------------------------------
                                                     WEIGHTED
                                                      AVERAGE        WEIGHTED
                                         NUMBER      REMAINING       AVERAGE
                                           OF       CONTRACTUAL      EXERCISE
RANGE OF EXERCISE PRICES                 SHARES       LIFE            PRICE
------------------------                 ------     -----------      --------
<S>                                      <C>        <C>              <C>
$ 0.15 -- $ 0.30 ...................       852            8.6        $  0.20
                                           ===        =======        =======
$ 0.75 -- $ 6.20 ...................       609            9.3        $  4.24
                                           ===        =======        =======
$ 12.00 ............................       861            9.4        $ 12.00
                                           ===        =======        =======
$ 39.38 -- $55.25 ..................       200            9.7        $ 47.10
                                           ===        =======        =======
$108.25 ............................       308            9.9        $108.25
                                           ===        =======        =======
</TABLE>

      Options available for future grant totaled 716,324 and 999,529 at December
31, 1999 and 1998, respectively. As of January 1, 2000 the Company added
approximately 1.8 million options available for future grant in accordance with
the Company's 1998 Stock Plan.

      The fair value of these options were estimated at the date of grant using
a Black-Scholes option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                                          PERIOD FROM
                                                                         SEPTEMBER 15,
                                                                             1997
                                                                          (INCEPTION)
                                   YEAR ENDED          YEAR ENDED          THROUGH
                               DECEMBER 31, 1999   DECEMBER 31, 1998   DECEMBER 31, 1997
                               -----------------   -----------------   -----------------
<S>                            <C>                 <C>                 <C>
Risk free interest rate ......        5.38%                5.14%                6.00%
Expected lives (in years) ....        2.5                  4                    4
Dividend yield ...............       --                   --                   --
Expected volatility ..........        0.80                --                   --
</TABLE>

      For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Under SFAS No.
123, the Company would have incurred an additional compensation expense of
approximately $2.4 million, $51,000 and zero for the years ended December 31,
1999 and 1998 and the period from inception through December 31, 1997,
respectively.

<TABLE>
<CAPTION>
                                                                       PERIOD FROM
                                                                       SEPTEMBER 15,
                                                                           1997
                                                                       (INCEPTION)
                                       YEAR ENDED        YEAR ENDED      THROUGH
                                       DECEMBER 31,     DECEMBER 31,    DECEMBER 31,
                                          1999              1998           1997
                                       -----------      ------------    ------------
<S>                                    <C>              <C>              <C>
Net loss, as reported ...........      $  (29,262)      $  (14,023)      $  (120)
Pro forma net loss ..............         (31,656)         (14,074)         (120)
Pro forma loss per share ........           (0.83)           (0.75)        (0.01)
Pro forma historical basic
  and diluted loss per share ....      $    (1.12)      $    (1.37)      $ (0.01)
</TABLE>


      Applying SFAS No. 123 in the pro forma disclosure may not be
representative of the effects on pro forma net income (loss) for future years as
options vest over several years and additional awards will likely be made each
year.

      In April 1999, the Board of Directors also approved the establishment,
upon the closing of the Company's initial public offering, of the 1999 Employee
Stock Purchase Plan (1999 Purchase Plan). The 1999 Purchase Plan initially
reserves 2,000,000 shares of Common Stock for future issuance which will
increase annually by the lesser of 1,000,000 shares, 3% of the outstanding
shares on such date, or a lesser amount determined by the Board. The 1999
Purchase Plan provides for successive six month offering periods and allows
eligible employees to participate in the plan through payroll deductions that
will be used to purchase Common Stock at the end



                                      F-13
<PAGE>   57

of each six month period for the lesser of 85% of the price of the Common Stock
at the beginning or the end of the six month offering period.

5.    RELATED PARTY TRANSACTIONS

      During 1997 and 1998, GoTo.com shared facilities and received certain
management services including certain accounting, payroll processing, access to
shared local area computer communications network, and general business
insurance from Bill Gross' idealab!, which, with its affiliate, idealab!
Holdings, L.L.C., is a significant stockholder of GoTo.com. Bill Gross' idealab!
charged a management fee for the use of its facilities and the services
provided. During 1998 and through January 1999, Bill Gross' idealab! provided
certain payroll processing services for GoTo.com and charged a fee for those
services. On February 1, 1999, GoTo.com entered into a lease with Bill Gross'
idealab! for office space. GoTo.com also uses a shared local area computer
communications network. In 1999, GoTo.com entered into a lease agreement with
Bill Gross' idealab! for additional office space. The term of the agreement is
from August 1999 through January 2000. The total management and leasing fee
associated with both facilities was approximately $364,000, $229,000 and $59,000
during the years ended December 31, 1999 and 1998 and the period from inception
through December 31, 1997, respectively. From inception through March 1, 1998,
Bill Gross, GoTo.com's founder and a principal of idealab! Holdings, L.L.C. and
Bill Gross' idealab!, was the President and Chief Executive Officer of GoTo.com
and received no compensation for his service. The value of these services was
not material to the financial statements. During March 1998, certain
stockholders provided temporary funding of $2.5 million to GoTo.com which
carried no interest. In early May 1998 this funding was contributed to GoTo.com
in return for Series B Preferred Stock. In December 1999, GoTo.com terminated
both leases in effect during 1999 and entered into an arrangement with Bill
Gross' idealab! for approximately 58,000 square feet of office space. The term
of the lease commenced on January 15, 2000 and will terminate on October 31,
2004 with total lease payments of approximately $7.1 million. Management
believes these amounts are materially representative of the fair value of
services recorded.

      During 1999, GoTo.com recorded approximately $53,000 of search listing
advertising revenue from Bill Gross' idealab!, which, with its affiliate,
idealab! Holdings, L.L.C., is a significant stockholder of GoTo.com. During
1999, GoTo.com also recorded approximately $112,000 of search listing and banner
revenue from Cadabra Inc. (Cadabra). Cadabra began listing on GoTo.com on
December 17, 1999 and ceased advertising on GoTo.com on January 13, 2000. On
January 31, 2000, GoTo.com acquired Cadabra (See Note 7). Management believes
these amounts are materially representative of the fair value of advertising
services provided.

6.    COMMITMENTS AND CONTINGENCIES

LEASES

      The Company leases office space under operating lease agreements expiring
in October 2004. The future minimum lease payments under non-cancelable
operating leases and present value of future minimum capital lease payments are
as follows (in thousands):

<TABLE>
<CAPTION>
                                                  OPERATING      CAPITAL
                                                    LEASE         LEASE
                                                  ---------      -------
<S>                                               <C>            <C>
2000 ........................................      $ 1,542       $   855
2001 ........................................        1,524           807
2002 ........................................        1,439            87
2003 ........................................        1,439            --
2004 ........................................        1,200            --
                                                   -------       -------
Total minimum lease payments ................      $ 7,144         1,749
                                                   =======
Less amount representing interest............                       (227)
                                                                  -------
                                                                  $1,522
                                                                  =======
</TABLE>

     Total rent expense was approximately $504,000, $116,000 and $2,000 during
the years ended December 31, 1999 and 1998 and the period from inception through
December 31, 1997, respectively.

EQUIPMENT FINANCING ARRANGEMENT

      At December 31, 1999, the Company had a line of credit arrangement with a
leasing institution that provides for a capital equipment lease line of up to a
maximum of $1,500,000. The terms of the agreement include a requirement for the
Company to keep an unrestricted cash balance of no less than $1.0 million at any
time. The Company was in compliance as of December 31, 1999 and 1998. Under this
agreement, $117,000 was available for future financing transactions at December
31, 1999.



                                      F-14
<PAGE>   58

      During 1999, the Company obtained an additional equipment financing line
of credit with a lender in the amount of $1.0 million. During 1999, the Company
did not use any of the available credit and accordingly $1.0 million was
available for future financing transactions as of December 31, 1999. As of
January 31, 2000, the Company did not use any of the available credit and did
not renew the financing line of credit.

OTHER DEBT

      During January 1999, the Company executed a licensing and consulting
agreement with a software vendor for the implementation of a new financial
reporting system. The cost has been financed by an affiliate of the vendor and
will be repaid in quarterly installments of $34,000 through the end of fiscal
2000. Implementation of the system was completed during the third quarter of
1999.

AFFILIATE COMMITMENTS

      The Company is obligated to make payments totaling $8.7 million and $5.0
million in 2000 and 2001, respectively, under contracts to provide search
services to its affiliates.

LITIGATION

      We are engaged in litigation that will be expensive to pursue and will be
distracting to our management and other employees. Any adverse developments
resulting from this litigation could seriously harm our business. We believe
that The Walt Disney Company and certain of its affiliates, including Infoseek
Corporation, are infringing our GoTo.com logo. On February 18, 1999, we sued
these companies and two affiliated companies in the United States District Court
for the Central District of California alleging violation of federal trademark
law and unfair competition. Our lawsuit is based on the use by these companies
of a "GO" design mark to provide Internet services, including a search engine in
connection with their "Go Network." We are seeking to prevent these companies
from using this "GO" design mark as well as other remedies. We cannot assure you
that the outcome of this litigation will be favorable to us. For example, we may
not prevail and be able to stop these companies from causing confusion among
consumers and advertisers through continued use of the "GO" design mark. The
defendants have asserted counterclaims against GoTo.com. GoTo.com believes that
the proposed counterclaims are without merit and will defend against them
vigorously. An unfavorable result could affect the value of the Goto.com logo or
even prevent us from using the GoTo.com logo.

      On November 12, 1999, the federal district court in Los Angeles
preliminarily enjoined The Walt Disney Company, Infoseek and related companies
from using their Go Network logo. On November 18, 1999, the Ninth Circuit Court
of Appeals granted the defendants' motion for a stay of the preliminary
injunction pending appeal, and the defendants were permitted to use the Go
Network logo while the Ninth Circuit reviewed the district court's preliminary
injunction order. GoTo.com and the defendants briefed the appeal during
December, and the Ninth Circuit heard oral arguments on the matter on January
19, 2000. On January 27, 2000, the Ninth Circuit vacated the stay and reinstated
the preliminary injunction. No trial date has been set, and despite the issuance
of the preliminary injunction, we cannot assure you that we will ultimately
prevail in this litigation.

7.    EVENTS SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT (UNAUDITED)

     On January 31, 2000, GoTo.com acquired Cadabra, an online comparison
shopping service. Pursuant to the Agreement and Plan of Reorganization, GoTo.com
acquired all of the outstanding shares of capital stock and assumed all
outstanding options to acquire shares of capital stock of Cadabra, for $8.0
million in cash and 3,283,672 shares of GoTo.com common stock, including 214,833
shares to be issued upon exercise of options assumed by GoTo.com. The
acquisition was accounted for as a purchase. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values as determined by
GoTo.com at the date of the acquisition. The total purchase price of the
acquisition was approximately $263.1 million and consisted of cash of $8.0
million; GoTo.com common stock of $252.5 million valued at the closing price of
GoTo.com's common stock on the date the acquisition exchange ratio was set, net
of expected proceeds from the exercise of Cadabra stock options assumed by
GoTo.com; and acquisition costs of $2.6 million, primarily for investment
banking, legal and accounting costs. Of the purchase price, $7.6 million was
assigned to in-process research and development to be expensed immediately
following the consummation of the acquisition, $6.0 million was assigned to the
value of purchased technology and other intangibles and will be amortized on a
straight-line basis over three years and $4.4 million was allocated to the net
tangible assets.





                                      F-15
<PAGE>   59


     On March 8, 2000, GoTo.com entered into an agreement to acquire all
outstanding shares of capital stock and assume all of the outstanding options of
AuctionRover.com, Inc., a one-stop resource for online auctions, for 3.47
million shares of GoTo.com common stock. The purchase would enable GoTo.com to
carry listings of numerous other auction sites. The acquisition is expected to
be accounted for under the purchase method. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed. The excess of the acquisition cost over the fair value of
the net tangible assets will be allocated to any identified intangible assets,
with the remaining balance allocated to goodwill. Goodwill and intangible assets
are expected to be amortized on a straight-line basis over three years. The
amount of goodwill is expected to be approximately $175 million without
accounting for net tangible assets. The transaction is expected to close by
April 2000. The consummation of the acquisition is subject to customary closing
conditions and there can be no assurance that the acquisition will close.






                                      F-16

<PAGE>   60

(A)(2) FINANCIAL STATEMENT SCHEDULES

     All financial statement schedules required by Item 14(A)(2) have been
omitted because they are inapplicable or because the required information has
been included in the Notes to the financial statements.

(B)    REPORTS ON FORM 8-K

     The Company filed a Form 8-K for the acquisition of Cadabra Inc. on January
31, 2000.

(C)    EXHIBITS

     The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Commission. The Company shall furnish
copies of exhibits for a reasonable fee (covering the expense of furnishing
copies) upon request.

<TABLE>
<CAPTION>

      EXHIBIT
       NUMBER
       ------
      <S>            <C>
      3.1**           Amended and Restated Certificate of Incorporation of GoTo.com to be in effect after the closing of the
                      offering made under this Registration Statement.
      3.2**           Amended and Restated Bylaws of GoTo.com to be in effect after the closing of the offering made under this
                      Registration Statement.
      4.1**           Specimen Common Stock Certificate.
     10.1**           Form of Indemnification Agreement between GoTo.com and certain of its officers and each of its directors.
     10.2**           Form of Change of Control Severance Agreement between GoTo.com and certain of its officers.
     10.3**           1998 Stock Plan and forms of option agreements thereunder.
     10.4**           1999 Employee Stock Purchase Plan and form of agreement thereunder.
     10.5**           Series A Preferred Stockholders' Rights Agreement among GoTo.com and certain investors.
     10.6**           Amended and Restated Series B Preferred Stockholders' Rights Agreement among GoTo.com and certain investors.
     10.7**           Series C Preferred Stockholders' Rights Agreement among GoTo.com and certain investors.
     10.8**           Series D Preferred Stockholders' Rights Agreement among GoTo.com and certain investors.
     10.9**           Sublease Agreement dated February 1, 1999 between GoTo.com and Bill Gross' idealab!.
     10.10**          Information Services Agreement dated April 30, 1998 between GoTo.com and Inktomi Corporation.
     10.11**          Premier Search Services Agreement dated September 16, 1998 between GoTo.com and Microsoft Corporation.
     10.12**          Letter of Agreement dated April 1, 1999 between GoTo.com and Pile, Inc.
     10.13**          GlobalCenter Master Service Agreement between GoTo.com, and GlobalCenter, Inc.
     10.14**          Distinguished Provider Agreement dated May 13, 1998 between GoTo.com and Netscape Communications Corporation
     10.15**          Distinguished Provider Agreement between GoTo.com and Netscape Communications Corporation
     10.16**          Amendment No. 1 to U.S. English Language Net Search Services  Agreement-- Distinguished Provider dated May 19,
                      1999 between GoTo.com and Netscape Communications Corporation
     10.17**          Insertion Order dated March 11, 1999 between GoTo.com and Netscape Communications Corporation
     10.18**          Amendment No. 1 to Bookmark Program Agreement dated August 1, 1999 between GoTo.com and Netscape
                      Communications Corporation
     10.19**          Amendment No. 1 to Netscape Communications Corporation U.S. English-Language Net Search Program Distinguished
                      Provider Services Agreement dated April 30, 1999 between GoTo.com and Netscape Communications Corporation
     10.20**          Insertion Order dated September 15, 1998 between GoTo.com and Warner Bros. Online 10.21 Sublease Agreement
                      dated December 14, 1999 between GoTo.com and Bill Gross' idealab!
     10.21            Sublease Agreement dated December 14, 1999 between GoTo.com and Bill Gross' idealab!.
     10.22            idealab! Stockholder Agreement dated March 3, 2000 between GoTo.com and Bill Gross' idealab!.
     23.1             Consent from Ernst & Young LLP.
     24.1**           Power of Attorney.
     27.1             Financial Data Schedule.

</TABLE>
----------
**   Incorporated by reference to the Registrant's Registration Statement in
     Form S-1 (Commission File No. 333-76415).




                                      F-17
<PAGE>   61

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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, on March 16, 2000.


                                       GoTo.com, Inc.


                                       By:  /s/ TED MEISEL
                                          -------------------------------------
                                          Ted Meisel
                                          President and Chief Executive Officer

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Ted Meisel and
Todd Tappin, each of them acting individually, as his or her attorney-in-fact,
each with full power of substitution, for him or her any and all capacities, to
sign any and all amendments to this Form 10-K, with all exhibits and any and all
documents required to be filed with respect thereto, with the Securities and
Exchange Commission or any regulatory authority, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
order to effectuate the same as fully to all intents and purposes as he or she
might or could do if personally present, hereby ratifying and confirming all
that such attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.

<TABLE>
<CAPTION>

                       SIGNATURE                                    TITLE                                              DATE
                       ---------                                    -----                                              ----
<S>                                                     <C>                                                        <C>

                 /s/   TED MEISEL                        President, Chief Executive Officer and Director            March 16, 2000
-----------------------------------------------------    (Principal Executive Officer)
                     (Ted Meisel)


                 /s/  TODD TAPPIN                        Chief Financial Officer (Principal                         March 16, 2000
-----------------------------------------------------    Financial Officer and Principal Accounting Officer)
                     (Todd Tappin)


              /s/  JEFFREY S. BREWER                     Executive Chairman of the Board                            March 16, 2000
-----------------------------------------------------
                  (Jeffrey S. Brewer)


               /s/  ROBERT M. KAVNER                     Chairman of the Board                                      March 16, 2000
-----------------------------------------------------
                  (Robert M. Kavner)


                /s/  WILLIAM GROSS                       Director                                                   March 16, 2000
-----------------------------------------------------
                    (William Gross)


                /s/ TIMOTHY DRAPER                       Director                                                   March 16, 2000
-----------------------------------------------------
                   (Timothy Draper)


             /s/ LINDA FAYNE LEVINSON                    Director                                                   March 16, 2000
-----------------------------------------------------
                (Linda Fayne Levinson)


                /s/  WILLIAM ELKUS                       Director                                                   March 16, 2000
-----------------------------------------------------
                    (William Elkus)

</TABLE>




                                      F-18