<PAGE>   1

================================================================================
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                      ------------------------------------
                                   FORM 10-K
                      ------------------------------------

<TABLE>
<C>              <S>
   (MARK ONE)
      [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
                 DECEMBER 31, 1997.
                                              OR
      [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
                 FROM ____________ TO ____________.
</TABLE>

                         COMMISSION FILE NUMBER 0-28064
                                  EXCITE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                         <C>
                        CALIFORNIA                                         77-0378215
     (STATE OR OTHER JURISDICTION OF INCORPORATION OR       (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
                        ORGANIZATION)
</TABLE>

                  555 BROADWAY, REDWOOD CITY, CALIFORNIA 94063
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                 (650) 568-6000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

   Securities registered under Section 12(b) of the Exchange Act:       NONE

   Securities registered under Section 12(g) of the Exchange Act:       COMMON
STOCK, NO PAR VALUE
     Check whether the registrant: (1) 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.

                     Yes      X               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 the 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.  [ ]
     As of February 27, 1998 there were 22,084,297 shares of the Registrant's
Common Stock, no par value, outstanding, which is the only class of common or
voting stock of the registrant issued as of that date. The Aggregate market
value of the voting stock held by non-affiliates computed by reference to the
closing price for the common stock as quoted by the Nasdaq National Market as of
February 27, 1998 was approximately $406,611,000.

                      DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the definitive Proxy Statement to be delivered to shareholders
in connection with the Annual Meeting of Stockholders to be held in June 1998
are incorporated by reference into Part III.
================================================================================
<PAGE>   2

                                  EXCITE, INC.

                                   FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1997

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
<S>        <C>                                                           <C>
PART I
ITEM 1:    Business....................................................    1
ITEM 2:    Properties..................................................   11
ITEM 3:    Legal Proceedings...........................................   11
ITEM 4:    Submission of Matters to a Vote of Security Holders.........   12
PART II
ITEM 5:    Market for Registrant's Common Equity and Related
           Stockholder Matters.........................................   13
ITEM 6:    Selected Consolidated Financial Data........................   13
ITEM 7:    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................   15
ITEM 7A:   Quantitative and Qualitative Disclosures about Market
           Risk........................................................   29
ITEM 8:    Financial Statements and Supplemental Data..................   30
ITEM 9:    Changes In and Disagreements With Accountants on Accounting
           and Financial Disclosure....................................   30
PART III
ITEM 10:   Directors and Executive Officers of the Registrant..........   31
ITEM 11:   Executive Compensation......................................   32
ITEM 12:   Security Ownership of Certain Beneficial Owners and
           Management..................................................   32
ITEM 13:   Certain Relationships and Related Transactions..............   32
ITEM 14:   Exhibits, Financial Statement Schedules and Reports on Form
           8-K.........................................................   33
           Signatures..................................................   62
</TABLE>

                                        i
<PAGE>   3

                                     PART I

ITEM 1:  BUSINESS

SUMMARY

     This Annual Report on Form 10-K ("Report") contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, without limitation, the
failure of the Company to achieve increases in advertising revenues, the failure
of the Company to maintain premier positions on certain high traffic World Wide
Web ("Web") access points such as those maintained by America Online, Inc.
("AOL"), Microsoft Corporation ("Microsoft") and Netscape Communications
Corporation ("Netscape"), the inability of the Company to meet minimum
guaranteed impressions under sponsorship agreements, the inability of the
Company to maintain and increase levels of traffic on the Excite and WebCrawler
brands ("the Excite Network"), development of equal or superior services or
products by competitors, the failure of the market to adopt the Web as an
advertising medium, reductions in market prices for Web-based advertising as a
result of competition or otherwise, the ability of the Company to achieve higher
rates for targeted advertising as well as the inability of the Company to
increase the percentage of its advertising inventory sold, the inability of the
Company to effectively integrate the technology and operations of Netbot, Inc.
("Netbot") and MatchLogic, Inc. ("MatchLogic") or any other subsequently
acquired businesses or technologies with its operations, the inability of the
Company to maintain and enhance revenue growth from sponsorship advertising due
to limited availability of exclusive sponsorships on the Excite Network or
otherwise, the inability of the Company to expand its international operations,
particularly in light of the fact that the Company has limited operating
experience in the international market, the inability of the Company to
identify, attract, retain and motivate qualified personnel, general economic
conditions and those risk factors set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk Factors that
May Affect Future Results" and the consolidated financial statements and notes
thereto, appearing elsewhere in this Report. Unless the context otherwise
requires, the term "Company" or "Excite" refers to Excite, Inc. and its
wholly-owned subsidiaries.

THE COMPANY

     Excite, Inc., formerly Architext Software, Inc., which was formed in June
1994, is a global media company offering consumers and advertisers comprehensive
Internet navigation services with extensive personalization capabilities. The
Excite Network consists of the Excite (www.excite.com) and WebCrawler
(www.webcrawler.com) brands, which provide a gateway to the Web that organizes,
aggregates and delivers information to meet the needs of individual consumers.
Designed to help consumers navigate the Web, the Excite Network contains a suite
of specialized information services, organized under numerous topical channels,
which combine proprietary search technology, editorial Web reviews, aggregated
content from third parties, bulletin boards and chat and personalization
capabilities.

     The Company first launched its Excite search and directory service in
October 1995. In April 1997, the Company launched a channels-based format for
its service and content on the Excite brand to provide consumers with an
interface that reflects the way they navigate through other forms of media and
enables advertisers to more effectively reach target consumers. The Excite brand
currently includes 12 channels of topical interest such as Entertainment, Sports
and Business & Investing. In September 1997, the Company launched a similar
channels-based format for its WebCrawler brand, which currently includes 16
topical channels. Localized versions of Excite are available in the Australia,
France, Germany, Japan, the Netherlands, Sweden, and the United Kingdom. The
Company derives a substantial portion of its revenues from selling banner and
sponsorship advertising on its Web sites to customers in various industries.

     The Company has incurred significant operating losses to date and incurred
a net loss of approximately $30.2 million for the year ended December 31, 1997.
The Company believes that its available resources will provide sufficient
funding to enable the Company to meet its obligations through at least December
31, 1998. If anticipated operating results are not achieved, management has the
intent and believes it has the ability to

                                        1
<PAGE>   4

delay or reduce expenditures so as not to require additional financial resources
if such resources are not available.

     On November 24, 1997, the Company acquired Netbot, a Seattle-based Internet
software developer of advanced search technology. The transaction was accounted
for as a pooling of interests. The Company issued approximately 854,000 shares
of the Company's Common Stock to former stockholders of Netbot and assumed
options and warrants to purchase approximately 211,000 shares of the Company's
Common Stock. On August 30, 1996, the Company acquired The McKinley Group, Inc.
("McKinley"), the creator of the Magellan On-Line Guide. The transaction was
effected through the issuance of 850,000 shares of the Company's Common Stock
and was accounted for as a pooling of interests. All financial information for
dates and periods prior to the merger with McKinley have been restated to
reflect the combined operations of the Company and McKinley. Financial
information for dates and periods prior to the acquisition of Netbot have not
been restated to reflect the combined operations of the Company and Netbot as
Netbot's results of operations were not material to the Company's consolidated
financial statements. See Note 2 of Notes to Consolidated Financial Statements.
In addition, in March 1997, the Company completed the acquisition of the
WebCrawler search and directory technology (the "WebCrawler Acquisition") from
America Online, Inc. ("AOL") for an aggregate of 1,950,000 shares of the
Company's Convertible Preferred Stock. For accounting purposes, the Company
recorded the WebCrawler Acquisition as of December 1, 1996. The transaction was
accounted for as an acquisition of rights to developed and purchased in-process
technology and distribution rights. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Risk Factors that May Affect
Future Results -- Acquisition Strategy; Integration of Past and Future
Acquisitions," and Notes 1 and 2 of Notes to Consolidated Financial Statements"
appearing elsewhere in this Report.

     On February 2, 1998 the Company acquired MatchLogic, a provider of
solutions for the management and optimization of Internet advertising campaigns.
The transaction was accounted for as a pooling of interests. The Company issued
approximately 3.1 million shares of the Company's Common Stock to former
stockholders of MatchLogic and assumed options and warrants to purchase
approximately 524,000 shares of the Company's Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Risk
Factors that May Affect Future Results -- Acquisition Strategy; Integration of
Past and Future Acquisitions" and Note 14 of Notes to Consolidated Financial
Statements' appearing elsewhere in this Report.

THE EXCITE NETWORK

  Excite Services

     As the Web has evolved, the Company has grown from being a provider of a
single-function Web search utility to offering a branded Internet media network
consisting of the Excite and WebCrawler brands. The Company's services consist
of: navigation services, such as Excite Search and Excite Channels, which help
consumers more easily find relevant information; community services, such as
chat, email, bulletin board and instant messaging services, which help consumers
connect and communicate; and personalization services, such as My Excite
Channel, a personalized topical channel, which can be customized simply and
easily by a consumer to satisfy his or her personal interests.

     Excite Search. The Company maintains an extensive index of Web documents
which is refreshed by the Company's automatic spider technology on a regular
basis. Excite's search technology allows consumers to search the Web in multiple
ways, including by keyword, phrase, concept, Boolean logic or proper name.
Excite's More Like This feature, which utilizes query-by-example technology,
allows users who find a document of interest to find similar documents with the
click of a button. In addition, Excite's automatic abstract technology provides
consumers with a brief and accurate abstract of each document returned by a
search. Excite Search also permits users to search news articles, Usenet
newsgroups, the Excite City.net travel index or Excite's Web Guide of over
100,000 Web sites.

     Excite Channels. In April 1997, the Company launched a channels-based
format for its services and content to provide consumers with a more intuitive
interface that reflects the way they navigate through other

                                        2
<PAGE>   5

forms of media, such as television, and enables advertisers and retailers to
more effectively reach target consumers. The entire suite of Excite services can
be accessed from each channel. By combining existing services with specialized
information and services from leading content providers, Excite provides
channel-specific content including topical news, links to related Web sites,
products and services and directories, bulletin boards, chat and search
capabilities.

     The Excite brand includes the following channels of topical interest:

<TABLE>
<S>                                            <C>
Autos                                          Lifestyle
Business & Investing                           News
Careers & Education                            People & Chat
Computers & Internet                           Shopping
Entertainment                                  Sports
Games                                          Travel
</TABLE>

     My Excite Channel. My Excite Channel enables consumers to personalize their
home page Web interface and choose what information they want delivered to their
personal page, thereby delivering a personalized Web experience for each
consumer. After registering with Excite, consumers create a personal profile
which selects and automatically updates information of interest such as
personalized stock quotes, news stories, local and national sports scores,
horoscopes, local and national weather, television listings and special
reminders. As of March 15, 1998, the Company had approximately 1.8 million
registered users of My Excite Channel.

     Excite Shopping. The Excite Shopping Channel offers a safe and convenient
online shopping service for consumers. This channel is arranged around 16
departments, including: automobiles, books, clothes, computers and software,
flowers and gifts, music and movies and other items. The Shopping Channel
features links to a number of leading retailers' Web sites, including
Amazon.com, J. Crew, the Disney Store and Music Boulevard, and also offers
"Excite Shopping Search, powered by Jango," which is based on technology Excite
acquired in its acquisition of Netbot. After the customer enters a product
request, Excite Shopping Search, powered by Jango determines the best sources of
information. The service then assembles the relevant information and displays
the final shopping results in an easy-to-browse report that typically includes
product reviews, specifications, pricing, secure transaction information and
other essential shopping details. When a consumer is ready to buy, the purchase
is completed on the merchant's Web site. In addition to simplifying shopping on
the Web for consumers, the Excite Shopping Channel also provides online
retailers a unique opportunity to market products to shoppers at the point of
decision. The Company also offers its "Excite Safe Shopping Guarantee' program.
Under this program, merchants which meet Excite's requirements for secure Web
transactions become an "Excite Certified Merchant" and link to an Excite
Certified Merchant's Web site display an "Excite Guaranteed" logo. If an Excite
consumer suffers a loss resulting from fraudulent use of his or her credit card
as a result of an online transaction from an Excite Certified Merchant, Excite
will reimburse the cardholder for any fraud liability not covered by the credit
card issuer up to a maximum of $50.

     Excite Communities. The Company offers a number of services which allow
users to connect and communicate with each other. The Company believes that
users who habitually check their email on Excite Mail or their instant messages
on Excite PAL are more likely to visit more frequently, spend more time on the
Excite Network and use other Excite services as well. Community-building
services, such as Excite Boards and Excite Chat, allow users to join communities
of other users with similar interests or needs, thereby enhancing the user
experience within the Excite Network with the goal of improving customer
retention.

  WebCrawler Services

     WebCrawler, which was created in early 1994 at the University of
Washington, was one of the first Internet search engines. WebCrawler was
acquired by AOL in April 1995 to be its exclusive Internet search engine. In
November 1996, Excite agreed to acquire the WebCrawler service from AOL and
WebCrawler became one of Excite's flagship brands.

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<PAGE>   6

     The Company believes that WebCrawler still maintains a large and loyal
following on the Web. In March 1998, the Company redesigned the WebCrawler
service to focus on speed, simplicity and practicality. The new WebCrawler
features daily thematic programming and links to tips, information, chat rooms
and shopping services. The topical themes, which change daily, include: Health
and Fitness; Career; Kids & Family; Personal Finance; Computing; Entertainment;
and Travel. WebCrawler also features The Daily ToolBox, a call-out box of
Web-based consumer tools useful in daily life situations. Tools featured include
a baby name finder and a calorie counter, among many others. Users can also
access their favorite tools through a ToolBox archive.

     The WebCrawler Search service helps consumers find information on the Web
by searching through WebCrawler's index of Web documents. WebCrawler Search
enables consumers to search the Web in multiple ways by keyword, Boolean logic,
phrase, example or document similarity. Search results can be listed by title
only or by full listing with an abstract. Listings which have been reviewed are
identified and consumers can easily click to the review. WebCrawler also
features a "Shortcuts" section. When search results are displayed, a series of
links to a related area within the service, such as related Usenet groups,
classified ads, content pages on one of the channels or to a retail Web site are
prominently displayed on the right side of the search results page. The Company
believes that this feature enables it to more effectively direct targeted
traffic from Web search services into a WebCrawler channel or service or into
the Web pages of sponsors.

     Similar to the Excite brand, content on WebCrawler is organized within
topical channels which include:

<TABLE>
<S>                                       <C>
Arts & Books                              Home & Family
Auto                                      News
Business & Investing                      People & Chat
Careers & Education                       Reference
Computers & Internet                      Relationships
Entertainment                             Shopping
Games                                     Sports & Recreation
Health & Fitness                          Travel
</TABLE>

     WebCrawler offers all of the community features offered throughout the
Excite brand. WebCrawler users can also create a personalized home page with the
My Page feature, which, like the My Excite Channel, selects and delivers
information of interest such as stock quotes and news headlines.

ADVERTISING AND COMMERCE

     The Company currently derives substantially all of its revenues from the
sale of advertisements on the Excite Network though banner advertisements,
sponsorships and, through its MatchLogic subsidiary, database and direct
marketing arrangements. See "-- MatchLogic." In the future, the Company intends
to pursue revenues from online transactions.

     Banner Advertisements. Banner advertisements are prominently displayed
throughout the Excite Network and as the consumer interacts with the Excite
Network, new advertisements are displayed. From each advertisement banner,
consumers can hyperlink directly to an advertiser's own Web site, thus enabling
the advertiser an opportunity to directly interact with an interested consumer.
The Company believes that because consumers view advertisements only after they
request a new page, the focus of the consumer's attention to the advertisement
is likely to be higher than it is in other forms of media.

     The Company offers a variety of banner advertising programs that enable
advertisers to target their audiences at various levels of market segmentation.
Mass market placements deliver general rotation banner advertisements throughout
the Excite Network but do not have any particular market segmentation. With the
introduction of the Excite Network's channels format in April 1997, advertisers
can purchase targeted advertising for an audience with a specific content
interest as they do in traditional media. Advertisers can target general
interest topics such as "sports" or can target advertisements to more specific
subcategories such as "college basketball" or a particular team. The Company
charges higher per impression fees for advertising

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products based upon the specificity of the target audience. The Company's
standard rate card rates for advertising currently range from $24 per thousand
impressions ("CPMs") for general rotation across undifferentiated users to up to
$65 per thousand impressions for targeted affinity or keyword packages. The
Company's banner advertising agreements generally are for a relatively short
term and provide for a minimum number of guaranteed impressions for a fixed fee.
Accordingly, actual CPM rates depend upon a variety of factors, including,
without limitation, the duration of the advertising contract and the number of
impressions purchased, and are often negotiated on a case-by-case basis. Because
of these factors, actual CPM rates experienced by the Company have been lower
than its standard rate card rates. Currently, a substantial majority of the
number of banner advertising placements on the Excite Network are general
rotation advertisements. The Company's strategy is to migrate advertisers to
more targeted advertisement placements such as on its channels pages and on My
Excite Channel pages.

     Sponsorship Advertising and Online Transaction Revenue. During the second
quarter of 1997, the Company began selling advertising placements and links
outside of the space normally reserved for banner advertisements. These
arrangements are known as sponsorships because they typically involve the
placement of an advertisement or link in a topical channel as though the
advertiser was sponsoring the content on a specific page. The ad or link is
programmed to appear prominently on the same spot on the page, each time that
page of channel content is called for by the user. Some of these sponsorships
include relationships with Amazon.com, Inc., Barnes & Noble, Inc., Preview
Travel, Inc., N2K Inc. and CDnow, Inc.

     Sponsorships have a longer duration than the Company's banner advertisement
agreements and typically have a two or three year term. In some instances, the
Company has entered into exclusive sponsorship arrangements for certain
channels. Some sponsorship arrangements provide that the Company will
participate in the revenue or profit margin from a purchase made by a consumer
who responded to an ad placed on the Excite Network. While Excite has not
received any online transaction revenues to date from these sponsorship
arrangements, and does not anticipate receiving a significant amount of online
transaction revenues in 1998, the Company believes these arrangements provide an
additional revenue opportunity if online purchasing continues to grow. Through
March 15, 1998, the Company had entered into over 80 sponsorship arrangements,
of which approximately 21 included some form of transaction revenue or margin
sharing arrangement.

     Through the Company's various advertising programs, advertisers can combine
multiple advertising packages in order to develop a complete advertising plan
that reaches many audience types and that is designed to maximize reach,
frequency of exposure and consumer response. For example, an airline company
might utilize a general rotation advertisement as a base of mass exposure. The
advertising campaign could be enhanced by using a topical affinity consumer
targeting approach, by either sponsoring a section of the Travel Channel or
purchasing keywords such as "travel" or "airfare" on any of the Company's
related services.

     No customer accounted for more than 10% of revenues during 1997.

DISTRIBUTION AND CONTENT

  Distribution

     The Company believes that maintaining a presence on Web access points and
other high-traffic Web sites, known as gateways, is an important factor in
obtaining traffic and attracting advertisers. The Company seeks to obtain new
consumers by providing multiple gateways into the Excite Network, thereby
increasing its visibility on Web access points. The Company has established
premier positions on Web sites operated by Microsoft and Netscape, two of the
most highly trafficked Web sites, and has entered into a co-branding
relationship with AOL, the leading online service provider. In addition, the
Company has established a number of distribution relationships under which the
Excite brand is typically featured as the default Web navigation network. The
Company has distribution relationships with ISPs and OSPs, such as Prodigy
Services Corporation and PointCast Inc., and hardware distribution relationships
with companies such as Apple Computers, Inc., Sega Enterprises and WebTV
Networks, Inc. ("WebTV"). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risk Factors that May Affect Future
Results -- Dependence on Third-Party Relationships; Uncertain Renewal of
Netscape Agreements."

                                        5
<PAGE>   8

     The Company's Excite brand is featured as one of four "Premier Providers"
and the WebCrawler brand is featured as one of five "Marquee Providers" on
Netscape's Web site. These agreements expire on April 30, 1998. Although the
Company believes that less than 15% of its daily user traffic is directed from
Netscape, if the Company were unable to renew its agreements with Netscape, if
Netscape were to offer a competitive "gateway" site or if Netscape were to enter
into an exclusive arrangement with one of the Company's competitors, the Excite
Network could lose a portion of its traffic, traffic on competing services could
substantially increase or the Excite Network could otherwise become less
attractive to advertisers, which would have a material and adverse effect on the
Company's business, results of operation and financial condition. In addition,
even if the Company were able to renew these agreements with Netscape, if any
replacement agreements are on materially worse terms than those of the Company's
current agreements, there could be a material adverse effect on the Company's
business, results of operations and financial condition.

     The Company's Excite brand is also featured as one of five services on the
"Search the Web" section of the Microsoft Search page and the WebCrawler brand
and Magellan guide are also listed on the Microsoft Search page. The Company's
agreement with Microsoft expires in June 1998. Although to date the Company has
not derived a significant portion of its traffic from Microsoft, there can be no
assurance that the Company will be able to renew its agreement with Microsoft on
favorable terms, if at all, or that Microsoft will not enter into an exclusive
arrangement with one of the Company's competitors, the occurrence of any of
which could also have a material adverse effect on the Company's business,
results of operations and financial condition.

     The Company also has a five-year distribution agreement with AOL which
expires in November 2001 under which a co-branded version of the Excite search
and directory service, AOL NetFind Powered by Excite, is designated as the
exclusive Web search and directory service for the AOL service for an initial
two-year period ending in November 1998. If the exclusive period is not extended
by AOL beyond the initial two year term, the co-branded service would become the
"default" search and directory service of AOL, however, AOL could enter into a
strategic relationship with a competitor of the Company or offer its own
competing services, which could have a material adverse effect on the Company's
business, results of operations and financial condition.

  Content

     The Company has entered into, and plans to pursue in the future,
relationships with third-party information providers. These relationships enable
the Company to increase the breadth of content on the Excite Network without
incurring significant development or maintenance costs. These content
relationships include relationships with: Reuters and UPI to provide news
stories; Charles Schwab to provide stock quotes; Sports Ticker to provide sports
quotes; The National Enquirer to provide entertainment gossip news; The Tribune
Company to provide horoscopes; and GTE New Media Services, Inc. to provide
Yellow Pages information.

     In October 1997, the Company launched a channel with Intuit Inc. called
Excite Business & Investing by Quicken.com, that offers integrated tools and
content designed to help consumers make the most of their money. This channel
helps users with their investments and covers other areas of their financial
lives, including banking, mortgages, taxes, planning and insurance.

SALES AND MARKETING

     As of February 28, 1998, the Company had a direct sales organization of 55
professionals located in San Francisco, New York, Los Angeles and Chicago. This
direct sales force sells to advertisers and advertising agencies and is
responsible for selling banner advertisements and sponsorships on the Excite
Network. The Company believes that an internal sales force dedicated to selling
advertising only on the Excite Network provides a higher level of customer
service and satisfaction to advertisers during both the buying and reporting
process. Because the Company's direct sales organization is focused and educated
on the Excite Network, they can best match high value advertising opportunities
with companies who can benefit from them. In addition, the Company has a
dedicated group of professionals focused on advertising reporting and
measurement and because of the campaign management expertise of MatchLogic,
advertisers on the Excite

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<PAGE>   9

Network can receive up-to-date information on the placement and effectiveness of
their advertisements. The Company believes that in order to be a leader in Web
advertising and provide the highest level of service, it must continue to
develop technologies for the precise and timely placement, targeting and
measurement of advertising.

     The Company's marketing goal is to build the brands of the Excite Network,
Excite and WebCrawler, into well-recognized consumer brands. The Company
utilizes a variety of marketing programs, including traditional "off-Web"
programs such as joint marketing programs with strategic partners and
television, print, radio and billboard promotions as well as online advertising.
During the fourth quarter of 1996, the Company launched a national
brand-building campaign for its Excite brand centered around the Jimi Hendrix
song, "Are You Experienced?" and in the fourth quarter of 1997, launched another
national print campaign for Excite, which it refers to as the "Signature
Campaign." The Company believes that the WebCrawler brand has significant
consumer awareness today and the Company will make selective marketing
investments to increase that awareness. To this end, the Company recently began
a national marketing campaign designed to increase awareness of the redesigned
WebCrawler Service.

MATCHLOGIC

     In February 1998, the Company acquired MatchLogic, an online advertising
services firm. MatchLogic has expertise in the areas of Internet advertising
campaign management and database and direct marketing, which the Company
believes are important for its future growth.

     Campaign Management. Today, there are two methods of delivering advertising
messages on the Web: one is via the Web sites themselves, the other is via
"third party" ad servers such as MatchLogic. Prior to third-party ad serving,
ads were delivered exclusively by Web sites, such as the Excite Network. For
large advertisers planning to place advertisements on multiple sites, this
process was inefficient and ineffective, because a single Web site can only
provide information about its own activity and cannot provide consistent
reporting of advertising results from multiple Web sites. MatchLogic provides
campaign management services directly to large advertisers and agencies who are
planning ad campaigns across multiple sites. Using MatchLogic services,
individual advertisers or advertising agencies can deliver ads based on
particular demographic traits, geographic location or other traits or based on
keywords. MatchLogic serves ad messages simultaneously to multiple Web sites,
measures results immediately, produces consolidated results, reports on the
success of the entire campaign and analyzes these results to enable advertisers
to quickly assess the effectiveness of the campaign. Changes to the campaign can
then be made quickly and centrally by MatchLogic in order to maximize the
effectiveness of the advertiser's investment.

     Database and Direct Marketing. The principal challenge for direct marketers
is to continually increase response rates. In order to accomplish this goal,
direct marketers need to have access to a robust, continually refreshed consumer
database, which provides them with current, relevant demographic information.
MatchLogic acquires, packages and distributes consumer data through digital and
land-based data channels. Unlike land-based data channels, such as warranty
cards, which may take longer periods of time to collect and assemble, and which
can become obsolete in a short period of time, the digital Web-based data
channels are a new and emerging market from which current demographic
information and data on purchase intentions can be gathered and analyzed online
and on a real-time basis. The Company believes that the Internet audience is
relatively affluent and well-educated, placing a premium on audience data
acquired via the Internet. The Company also believes that the currency of this
data places it at an even higher premium. Furthermore, since the results of
database and direct marketing programs can be more effectively measured as
compared to traditional brand advertising, the Company believes that database
and direct marketing will become more attractive to advertisers and therefore
present significant opportunities for revenue in the future.

     MatchLogic operates as an independent subsidiary of Excite with its own
sales force, research and development and operations departments, however, the
Company intends to utilize the ad serving and targeting technology of MatchLogic
to improve results for advertisers on the Excite Network. The Company believes
that over time, the expertise and technology acquired with MatchLogic will
provide it with the opportunity to generate superior advertising response rates
for its advertising customers, thereby justifying

                                        7
<PAGE>   10

higher rates for its advertising. The Company also believes that MatchLogic's
relationship with large advertisers and advertising agencies will provide
opportunities for Excite to promote advertising on the Excite Network to these
large customers.

     MatchLogic maintains five data centers in the U.S. and Europe which serve
advertisements on behalf of its customers, including large advertisers such as
General Motors Corporation and AT&T Corp., and leading advertising agencies such
as Grey Advertising, Inc., DDB Needham Worldwide Communications Group, Inc. and
Thunderhouse Online Marketing Communications.

INTERNATIONAL

     The Company believes that there are significant opportunities to leverage
the Excite Network internationally. The Company offers, either independently or
in conjunction with local content providers, localized versions of the Excite
Service in Australia, France, Germany, Japan, the Netherlands, Sweden and the
United Kingdom. The Company has an agreement with Netscape under which it is
producing a local navigation service with topical channels and other features
for Netscape's International Netscape Guide for Australia, France, Germany and
the United Kingdom. The Company also has international distribution
relationships with Microsoft and NETCOM On-Line Communications Services, Inc.

     Because the Company believes that the Japanese Internet market is currently
the largest Internet market outside of the U.S., the Company will offer, through
a joint venture with Excite Japan, Itochu Corporation and certain affiliated
entities (collectively "Itochu"), comprehensive localized Excite services in
Japan. Advertising sales will be made through CTC Create Corporation, a
wholly-owned subsidiary of Itochu. The Company currently holds 50% of the
outstanding capital stock of Excite Japan. The Company may seek to enter into
similar joint ventures with respect to other international markets, although it
is not currently in negotiations to do so.

     During 1996 and 1997, less than 10% of the Company's user traffic and less
than 10% of the Company's total revenues were derived from international
sources. There can be no assurance that the Company's services will achieve
commercial success in international markets. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk Factors that
May Affect Future Results -- Risks Associated with International Operations."

RESEARCH AND DEVELOPMENT

     As of February 28, 1998, there were 154 employees on the Company's research
and development staff. Excluding charges for purchased in-process technology,
product development costs were $2.8 million, $8.0 million and $13.4 million in
1995, 1996 and 1997 respectively. The Company believes that developing new and
enhanced services and technology is necessary to remain competitive.
Accordingly, the Company intends to continue to make investments in research and
development, including developing, licensing or acquiring new technologies.

USER SUPPORT

     The Company offers user support via telephone and also offers a
comprehensive online help guide which offers searching tips and provides a
complete guide to the Excite Network. As of February 28, 1998, the Company had
12 customer support personnel. The Company also offers a "New to the Net"
section of its help service for Web novices. This service offers an overview of
the Web and Excite as well as Excite Seeing Tours, which is a "how to" service
designed to instruct a consumer how to perform a particular task using
information from the Web. In addition, the Company offers Web and email-based
support for its Excite Mail, Excite Chat and Excite PAL services.

COMPETITION

     The market for Web services and Web advertising is intensely competitive.
There are no substantial barriers to entry in these markets and the Company
expects competition to intensify. The Company believes

                                        8
<PAGE>   11

that the number of companies relying on fees from Web-based advertising has
increased substantially during the past year. Accordingly, the Company may face
increased pricing pressure for the sale of advertisements on its network, which
would have a material adverse effect on the Company's business, results of
operations and financial condition.

     The Company's primary competitors are Web search and retrieval companies
such as Infoseek Corporation, Lycos, Inc. and Yahoo!, Inc. ("Yahoo!") and
specific search and retrieval services and products offered by other companies,
including Digital Equipment Corporation's Alta Vista, HotWired Ventures and
Inktomi's HotBot, and CNET, Inc.'s search.com. The Company also competes
indirectly with Web content broadcasting services, such as PointCast Inc.'s
PointCast Network, and with services from other database vendors, such as
Lexis/Nexis and other companies that offer information search and retrieval
capabilities with their core database products. As the Company increases the
content offerings and services on the Excite Network, it will face competition
from a large number of businesses which offer Web services such as e-mail, stock
quotes, news and chat features and who publish information and content on the
Web, including large OSPs such as America Online and the Microsoft Network.

     In the future, the Company may encounter competition from ISPs, OSPs, Web
site operators, providers of Web browser software (such as Netscape or
Microsoft) and other Internet services and products that incorporate search and
retrieval features into their offerings. These potential competitors could take
actions that make it more difficult for consumers to find and use the Excite
Network. For example, Microsoft announced that it will offer Internet search
engine services provided by Inktomi in the Microsoft Network and other Microsoft
online properties. Such search services could be tightly integrated with the
Microsoft operating system, the Internet Explorer Web browser and other software
applications, and Microsoft may promote such services within the Microsoft
Network or through other end-user services such as WebTV. Insofar as Microsoft's
search services may be more conveniently accessed, this may provide Microsoft
with significant competitive advantages that could have a material adverse
effect on the Company's user traffic. In addition, Microsoft and Netscape, both
of which have significantly greater financial, technical and marketing resources
than the Company, have announced an intention to introduce Web sites offering
services which are similar to those currently offered by the Company in
combination with Internet navigation features. Many large media companies have
announced that they are contemplating developing Internet navigation services
and are attempting to become Web "gateway" sites for Web users. For example,
both Time Inc. and CBS Worldwide, Inc. have announced initiatives to develop Web
services in order to have their Web sites become the starting point for users
navigating the Web. In the event such companies develop such "portal" sites, the
Company could lose a substantial portion of its user traffic, which would have a
material adverse effect on the Company's advertising revenues and on its
business, results of operations and financial condition.

     Many providers of Web services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other strategic
partnering arrangements with ISPs, OSPs, providers of Web browsers, operators of
high traffic Web sites and other businesses in an attempt to increase traffic
and page views, and thereby making their Web sites more attractive to Web
advertisers while also making it more difficult for consumers to utilize the
Company's services. For example, Yahoo! and MCI Telecommunications Corporation
("MCI") entered into an agreement to offer an online service to be called
"Yahoo! Online powered by MCI Internet" under which Yahoo!'s services will be
made easily available to MCI Internet customers. To the extent that direct
competitors or other Web site operators are able to enter into successful
strategic relationships, these competitors and Web sites could experience
increases in traffic and page views, or the Company's traffic and page views
could remain constant or decline which could have the effect of making these Web
sites appear more attractive to advertisers which could have a material adverse
effect on the Company's business, results of operations and financial condition.

     As a result of its recent acquisition of MatchLogic, the Company expects
that a portion of its revenues will be derived from providing advertisers and
advertising agencies with services designed to manage targeted Internet
advertising campaigns. This market is also a new and evolving market which is
increasingly competitive and in which there are no substantial barriers to
entry. The Company competes in this area primarily with IMGIS, Inc., and
competes indirectly in this area with DoubleClick Inc., which offers Internet
advertising solutions for advertisers and Web sites, and NetGravity, Inc., which
provides advertising

                                        9
<PAGE>   12

management software. The Company expects to face competition in this area from
additional companies in the future.

     Many of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories in the Web market,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. Such competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees, distribution partners, advertisers and content providers. Further,
there can be no assurance that the Company's competitors will not develop Web
search and retrieval services or other online services that are equal or
superior to those of the Company or that achieve greater market acceptance than
the Company's offerings.

     The Web in general, and the Company specifically, also must compete with
traditional advertising media such as print, radio and television for a share of
advertisers' total advertising budgets. To the extent that the Web is not
perceived as an effective advertising medium, advertisers may be reluctant to
devote a significant portion of their advertising budget to Web-based
advertising. There can be no assurance that the Company will be able to compete
successfully against its current or future competitors or that competition will
not have a material adverse effect on the Company's business, results of
operations and financial condition.

INTELLECTUAL PROPERTY

     The Company regards its technology as proprietary and attempts to protect
it with copyrights, trademarks, trade secret laws, restrictions on disclosure
and transferring title and other methods, and has been issued a patent with
respect to certain aspects of its searching and indexing technology. The Company
has filed two patent applications with respect to other aspects of its
technology. There can be no assurance that the patent that has been issued is,
or that any patents that may issue from these pending applications will be,
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any patents that have been issued or that may be issued
will not be challenged, invalidated or circumvented, or that any rights granted
thereunder would provide proprietary protection to the Company. The failure of
any patents to protect the Company's technology may make it easier for the
Company's competitors to offer technology equivalent to or superior to the
Company's technology. The Company also generally enters into confidentiality or
license agreements with its employees and consultants, and generally controls
access to and distribution of its documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Company's services or technology without
authorization, or to develop similar technology independently. In addition,
effective copyright, trademark and trade secret protection may be unavailable or
limited in certain foreign countries, and the global nature of the Web makes it
virtually impossible to control the ultimate destination of the Company's
products. Policing unauthorized use of the Company's technology is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its technology. In addition, litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, results of operations and financial condition.

     Many parties, including competitors of the Company, are actively developing
search, indexing and related Web technologies. Some of these parties have and
the Company believes that others will take steps to protect these technologies,
including seeking patent protection. As a result, the Company believes that
disputes regarding the ownership of such technologies are likely to arise in the
future. In addition, from time to time, the Company has received, and may
receive in the future, notice of claims of infringement of other parties'
proprietary rights, including claims for infringement resulting from the
downloading of materials by the service operated by the Company. Although the
Company investigates claims and responds as it deems appropriate, there can be
no assurance that infringement or invalidity claims (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company or that any assertions or prosecutions will not
materially and adversely affect the Company's business, results of operations
and financial condition. Irrespective of the validity or the successful
assertion of such claims, the Company would

                                       10
<PAGE>   13

incur significant costs and diversion of resources with respect to the defense
thereof, which could have a material adverse effect on the Company's business,
results of operations and financial condition. If any claims or actions were
asserted against the Company, the Company might seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that under such circumstances a license would be available on commercially
reasonable terms, or at all.

     The Company currently owns and also licenses from third parties certain of
its technologies. As it continues to introduce new services that incorporate new
technologies, it anticipates that it may be required to license additional
technologies from others. There can be no assurance that these third-party
technology licenses will be available to the Company on commercially reasonable
terms, if at all. The inability of the Company to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or could materially and adversely affect the performance of its
services until equivalent technology could be identified, licensed and
integrated. Any such delays or reductions in the introduction of services or
adverse impact on service quality could materially and adversely affect the
Company's business, results of operations and financial condition.

EMPLOYEES

     As of February 28, 1998, the Company had 434 full-time employees, including
154 in research and development, 186 in marketing and sales, 63 in finance and
administration and 31 in operations and support. The Company's future success
will depend, in part, on its ability to continue to attract, retain and motivate
highly qualified technical and management personnel, particularly highly skilled
technical personnel and engineers involved in development, and upon the
continued service of its senior management and key sales and technical
personnel, none of whom is bound by an employment agreement. From time to time,
the Company also employs independent contractors to support its research and
development, marketing, sales and support and administrative organizations.
Competition for such qualified personnel in the Company's industry and primary
geographical location is intense, particularly for engineering and management
personnel. The Company's employees are not represented by any collective
bargaining unit, and the Company has never experienced a work stoppage. The
Company believes its relations with its employees are good.

ITEM 2: PROPERTIES

     The Company's headquarters are located in, and substantially all of its
operations are conducted out of, a leased facility in Redwood City, California,
consisting of approximately 88,000 square feet of office space under a ten-year
lease expiring in March 2007 with a renewal option for an additional five years.
The Company has also leased an additional 23,000 square feet of office space
under a ten-year lease expiring in March 2007 adjacent to its headquarters,
which has been subleased through June 1999. The Company also plans to lease
approximately 46,000 square feet of office space for its MatchLogic subsidiary
(acquired in February 1998) in Westminster, Colorado. MatchLogic is currently
located in approximately 11,000 square feet of office space in Louisville,
Colorado. The Company also maintains offices in London, New York, and other
cities in the United States. The Company believes that its existing facilities
and offices are adequate to meet its requirements for the foreseeable future.
There can be no assurance that a system failure at operations facilities would
not adversely affect the performance of the Company's services. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk Factors that May Affect Future Results -- Risk of Capacity
Constraints; System Failures."

ITEM 3: LEGAL PROCEEDINGS

     On November 18, 1996, Kristine Paaso and Laura Lindsey filed a complaint in
the California Superior Court, Santa Clara County, against the Company and
certain of its founders alleging breach of an alleged oral agreement, breach of
fiduciary duty and fraud. The plaintiffs allege that they participated in the
creation of the Company's business plan and were entitled to participate as
officers and shareholders of the Company. The complaint seeks an unspecified
amount of damages, including punitive damages. In February 1998, the Court
granted the Company a motion for summary judgement to this complaint and entered
judgement in favor of the Company and the individual defendants on all claims.
The plaintiffs have subsequently filed a notice of

                                       11
<PAGE>   14

appeal from the judgment. The Company intends to continue to defend this action
vigorously. Although it not possible to ascertain the definitive outcome of this
litigation at this time, an unfavorable outcome could have an adverse effect on
the Company's business, results of operations and financial condition.

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

     There were no submissions of matters to a vote of security holders during
the quarter ended December 31, 1997.

                                       12
<PAGE>   15

                                    PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     Excite's Common Stock has been traded on The Nasdaq Stock Market(SM) under
the symbol "XCIT" since April 4, 1996. The following table sets forth the high
and low closing sales prices of the Company's Common Stock for the periods
indicated and are as reported on The Nasdaq Stock Market(SM).

<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                             ------    ------
<S>                                                          <C>       <C>
Year Ended December 31, 1996
  Second Quarter (from April 4, 1996)....................    $20.00    $ 8.25
  Third Quarter..........................................      8.38      5.13
  Fourth Quarter.........................................     15.25      5.50
Year Ended December 31, 1997
  First Quarter..........................................    $21.13    $ 8.75
  Second Quarter.........................................     15.88      7.88
  Third Quarter..........................................     34.25     14.25
  Fourth Quarter.........................................     34.38     21.13
</TABLE>

     As of December 31, 1997, there were approximately 220 stockholders of
record of the Company's Common Stock, although the Company believes that there
is a larger number of beneficial owners of its Common Stock. The Company has
never paid cash dividends on its stock, and anticipates that it will continue to
retain its earnings, if any, to finance the growth of its business. In addition,
the Company's bank line of credit prohibits the payment of cash dividends on
capital stock without the bank's prior written consent. (See Note 4 of Notes to
Consolidated Financial Statements in Part IV, Item 14 of this Report.)

     The market price of the Company's Common Stock is highly volatile and is
subject to wide fluctuations in response to a wide variety of factors including,
quarterly variations in operating results, announcements of technological
innovations or new services by the Company or its competitors, conditions
affecting the Internet industry, changes in financial estimates by securities
analysts, or other events or factors. For example, during the 12 month period
ended March 15, 1998, the Company's Common Stock closed as low as $7.88 and as
high as $55.88 per share. In addition, the stock market has experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many high technology companies and that
often have been unrelated to the operating performance of such companies. These
broad market fluctuations may adversely affect the market price of the Company's
Common Stock. In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against such a company. If brought against the Company, such
litigation could result in substantial costs and a diversion of management's
attention and resources, which would have a material adverse effect on the
Company's business, results of operations and financial condition.

ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations' appearing elsewhere in this Annual Report on Form 10-K. During 1996,
Excite acquired McKinley in a transaction accounted for as a pooling of
interests. All financial information has been restated to reflect the combined
operations of Excite and McKinley. The consolidated statements of operations
data for each of the years in the three year period ended December 31, 1997 and
the consolidated balance sheet data at December 31, 1996 and 1997, are derived
from, and are qualified by reference to, the audited consolidated financial
statements of the Company included elsewhere in this Report and should be read
in conjunction with those financial statements and notes thereto. The
consolidated statements of operations data for the year ended December 31, 1994,
and the consolidated balance sheet data at

                                       13
<PAGE>   16

December 31, 1994 and 1995 are derived from audited financial statements of the
Company not included in this Report.

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                     ------------------------------------------
                                                     1994(1)     1995        1996        1997
                                                     -------    -------    --------    --------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>        <C>        <C>         <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.........................................    $  293     $   953    $ 14,757    $ 50,151
Cost of revenues.................................        88         228       4,149      19,937
                                                     ------     -------    --------    --------
Gross profit.....................................       205         725      10,608      30,214
Operating expenses:
  Research and development.......................       415       2,810       8,030      13,427
  Sales and marketing............................        37       1,648      21,103      27,599
  Distribution license fees......................        --          --      11,878       7,615
  General and administrative.....................       399       2,326       7,081       8,057
  Charge for purchased in-process technology.....        --         331       3,500          --
  Other merger and acquisition related costs,
     including amortization of goodwill and other
     purchased intangibles.......................        --          --       3,134       3,389
                                                     ------     -------    --------    --------
          Total operating expenses...............       851       7,115      54,726      60,087
                                                     ------     -------    --------    --------
Operating loss...................................      (646)     (6,390)    (44,118)    (29,873)
Equity share of losses of affiliated company.....        --          --          --        (477)
Interest income (expense) and other..............        (4)        (45)      1,001         191
                                                     ------     -------    --------    --------
Net loss.........................................    $ (650)    $(6,435)   $(43,117)   $(30,159)
                                                     ======     =======    ========    ========
Basic and diluted net loss per share(2)..........    $(1.88)    $ (6.15)   $  (4.75)   $  (2.18)
                                                     ======     =======    ========    ========
Shares used in computing net loss per share(2)...       346       1,046       9,076      13,851
                                                     ======     =======    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                       --------------------------------------
                                                       1994      1995       1996       1997
                                                       -----    -------    -------    -------
                                                                   (IN THOUSANDS)
<S>                                                    <C>      <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
  investments......................................    $  12    $ 1,118    $20,834    $31,772
Working capital (deficit)..........................     (442)      (878)     8,124     27,035
Total assets.......................................      157      3,801     47,698     73,430
Long-term obligations..............................      100        995      3,985      9,402
Redeemable convertible preferred stock.............       --      3,847         --         --
Total shareholders' equity (net capital
  deficiency)......................................     (542)    (4,034)    25,097     36,739
</TABLE>

---------------

(1) The year ended December 31, 1994 includes the results of operations from
    Inception to December 31, 1994. The inception date is June 9, 1994 for
    Excite and December 7, 1993 for McKinley. The operating results for McKinley
    from December 7, 1993 through December 31, 1993 were immaterial.

(2) The loss per share amounts prior to 1997 have been restated as required to
    comply with Statement of Financial Standards No. 128, "Earnings Per Share"
    and Staff Accounting Bulletin No. 98. For further discussion of loss per
    share and the impact of Statement No. 128 and Staff Accounting Bulletin No.
    98, see Note 1 of Notes to Consolidated Financial Statements.

                                       14
<PAGE>   17

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

FORWARD LOOKING STATEMENTS

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, without limitation, the failure of the Company to
achieve increases in advertising revenues, the failure of the Company to
maintain premier positions on certain high traffic World Wide Web ("Web") access
points such as those maintained by America Online, Inc. ("AOL"), Microsoft
Corporation ("Microsoft") and Netscape Communications Corporation ("Netscape"),
the inability of the Company to meet minimum guaranteed impressions under
sponsorship agreements, the inability of the Company to maintain and increase
levels of traffic on the Excite and WebCrawler brands ("the Excite Network"),
development of equal or superior services or products by competitors, the
failure of the market to adopt the Web as an advertising medium, reductions in
market prices for Web-based advertising as a result of competition or otherwise,
the inability of the Company to achieve higher rates for targeted advertising as
well as the ability of the Company to increase the percentage of its advertising
inventory sold, the inability of the Company to effectively integrate the
technology and operations of Netbot, Inc. ("Netbot") and MatchLogic, Inc.
("MatchLogic") or any other subsequently acquired businesses or technologies
with its operations, the inability of the Company to maintain and enhance
revenue growth from sponsorship advertising due to limited availability of
exclusive sponsorships on the Excite Network or otherwise, the inability of the
Company to expand its international operations, particularly in light of the
fact that the Company has limited operating experience in the international
market, the inability of the Company to identify, attract, retain and motivate
qualified personnel, general economic conditions and those risk factors set
forth under "Risk Factors that May Affect Future Results" included in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations. The following discussion should also be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Report.

OVERVIEW

     The Company operates the Excite Network and provides a gateway to the Web
that organizes, aggregates and delivers information to meet the needs of
individual consumers. Excite, Inc., formerly Architext Software, Inc., was
formed in June 1994 and, from its inception to September 1995, its operating
activities related primarily to recruiting personnel, raising capital,
purchasing operating assets, providing custom product development and consulting
services. The Company first launched its Excite search and directory service in
October 1995. In April 1997, the Company launched a channels-based format for
its service and content on the Excite brand to provide consumers with an
interface that reflects the way they navigate through other forms of media and
enables advertisers to more effectively reach target consumers. The Excite brand
currently includes 12 channels of topical interest such as Entertainment, Sports
and Business & Investing. In September 1997, the Company launched a similar
channels-based format for its WebCrawler brand which currently includes 16
topical channels.

     Historically, advertising revenues have been derived principally from
short-term advertising contracts in which the Company guarantees a minimum
number of impressions (a view of an advertisement banner by a consumer) for a
fixed fee. Such banner advertising revenue is dependent upon both the number of
impressions and the rate per thousand impressions ("CPMs") charged. Higher rates
can be charged for advertisements focused on targeted groups, either by key-word
associations or affiliations with specific content, than for general rotation
advertisements on the Excite Network. In 1997, the Company began entering into
longer-term advertising and commerce sponsorship agreements. These agreements
generally involve more integration with the Excite Network and provide for more
varied sources of revenue to Excite over the term of the agreements, which
average from two to three years. Under these agreements, Excite earns fees for
initial programming, initiation of service and access to the Excite Network, and
for generating impressions which in some instances are guaranteed by the
Company. A number of these agreements also provide that revenues or gross
margins from advertising and electronic commerce transactions are to be shared
between the advertiser and Excite as realized. Revenues or margin sharing
recognized from such electronic commerce transactions

                                       15
<PAGE>   18

were insignificant in 1997, and are expected to be insignificant in 1998 as
well. Sponsorship customers accounted for approximately 26% of advertising
revenues in 1997. Although the Company does not anticipate revenue growth from
sponsorship advertising to increase at the rate experienced in 1997, the Company
believes that revenue relating to sponsorship advertising revenue will increase
in absolute dollars in future periods. Revenues are generally recognized ratably
over the term of the advertising agreement, provided that the Company does not
have any significant remaining obligations and collection of the resulting
receivable is probable. To the extent that impression deliveries are falling
short of the guarantees, the Company defers recognition of the corresponding
revenues. See "Risk Factors that May Affect Future Results -- Risks Related to
Sponsorships" and "-- Risks Associated with Banner Advertising."

     The Company has incurred significant operating losses since inception. As
of December 31, 1997, the Company had an accumulated deficit of approximately
$84.9 million. Although the Company has experienced significant revenue growth
during 1996 and 1997, there can be no assurance that this growth rate will be
sustained, that revenues will continue to grow, or that historical operating
results will be indicative of future operating results. In addition, the Company
has increased, and plans to increase further, its operating expenses in order to
increase its sales and marketing efforts, fund greater levels of research and
development and increase its general and administrative costs to support a
larger organization. To the extent that revenues do not grow at anticipated
rates or that increases in operating expenses precede or are not subsequently
followed by commensurate increases in revenues, or that the Company is unable to
adjust operating expense levels accordingly, the Company's business, results of
operations and financial condition will be materially and adversely affected. As
a result of various asset acquisitions, operating results will be negatively
affected by approximately $1.1 million of amortization in 1998, assuming no
additional acquisitions and no significant adjustments to the economic lives of
the underlying intangible assets. The extent of the future losses will be
contingent on a variety of factors, including, without limitation, the factors
set forth under "Risk Factors that May Affect Future Results" included in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

     On February 2, 1998 the Company acquired MatchLogic, a private company
which began operations in May 1997 and provider of solutions for the management
and optimization of Internet advertising campaigns. The transaction was
accounted for as a pooling of interests. The Company issued approximately 3.1
million shares of the Company's Common Stock to former stockholders of
MatchLogic and assumed options and warrants to purchase approximately 524,000
shares of the Company's Common Stock. In connection with the transaction, the
Company incurred approximately $700,000 in merger related expenses primarily for
legal and other professional fees. See "Risk Factors that May Affect Future
Results -- Acquisition Strategy; Integration of Past and Future Acquisitions,"
and Note 14 of Notes to Consolidated Financial Statements.

     On November 24, 1997, the Company acquired Netbot, a Seattle-based Internet
software developer of advanced search technology. The Netbot merger was
accounted for as a pooling of interests. The Company issued approximately
854,000 shares of the Company's Common Stock to former stockholders of Netbot
and assumed options and warrants to purchase approximately 211,000 shares of the
Company's Common Stock. Financial information for dates and periods prior to the
merger has not been restated to reflect the combined operations of the Company
and Netbot as Netbot's results of operations were not material to the Company's
consolidated financial statements.

     On August 30, 1996, the Company acquired The McKinley Group, Inc.
("McKinley"), the creator of the Magellan On-Line Guide. The transaction was
effected through the issuance of 850,000 shares of the Company's Common Stock
and was accounted for as a pooling of interests. All financial information for
dates and periods prior to the merger was restated to reflect the combined
operations of the Company and McKinley. In March 1997, the Company completed its
acquisition of the WebCrawler search and directory technology (the "WebCrawler
Acquisition") from AOL for an aggregate of 1,950,000 shares of the Company's
Convertible Preferred Stock. For accounting purposes, the Company recorded the
WebCrawler Acquisition as of December 1, 1996. The transaction was accounted for
as an acquisition of rights to developed and purchased in-process technology and
distribution rights. See "Risk Factors that May Affect Future
Results -- Acquisition Strategy; Integration of Past and Future Acquisitions"
and Notes 1 and 2 of Notes to Consolidated Financial Statements.

                                       16
<PAGE>   19

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain items from the Company's Consolidated
Statement of Operations. The Company believes that period-to-period comparisons
of its financial results are not necessarily meaningful because of its limited
operating history, the evolving nature of its business and its acquisitions.
Results for 1995 were not comparable to 1996 and 1997 because the Company did
not begin selling advertising space on its network until October 1995.

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                                --------------------------
                                                                 1995      1996      1997
                                                                ------    ------    ------
<S>                                                             <C>       <C>       <C>
Revenues:
  Advertising revenues......................................       15%       95%      100%
  Contract and other revenues...............................       85         5        --
                                                                 ----      ----      ----
     Total revenues.........................................      100       100       100
                                                                 ----      ----      ----
Cost of revenues:
  Hosting costs.............................................        7        22        16
  Royalties and other cost of revenues......................       17         5         8
  Amortization of purchased technology......................       --         1        16
                                                                 ----      ----      ----
     Total cost of revenues.................................       24        28        40
                                                                 ----      ----      ----
Gross profit................................................       76        72        60
Operating expenses:
  Research and development..................................      295        54        27
  Sales and marketing.......................................      173       143        55
  Distribution license fees.................................       --        81        15
  General and administrative................................      244        48        16
  Charge for purchased in-process technology................       35        24        --
  Other merger and acquisition related costs, including
     amortization of goodwill and other purchased
     intangibles............................................       --        21         7
                                                                 ----      ----      ----
     Total operating expenses...............................      747       371       120
                                                                 ----      ----      ----
Operating loss..............................................     (671)     (299)      (60)
Equity share of losses of affiliated company................       --        --        --
Interest income (expense) and other.........................       (4)        7        --
                                                                 ----      ----      ----
Net loss....................................................     (675)%    (292)%     (60)%
                                                                 ====      ====      ====
</TABLE>

  Revenues

     The Company began selling advertising space on its network in October 1995.
Prior to that date, contract and other revenues consisted primarily of revenues
derived from custom product development, licensing of the McKinley database,
royalties from sales of the McKinley Internet Yellow pages and consulting fees.
Revenues increased from $953,000 for 1995 to $14.8 million for 1996, and to
$50.2 million for 1997. These increases were primarily the result of increases
in the number of advertisements sold, increases in sales of targeted
advertisements with higher rates, increases in the number of advertisers
purchasing advertisements on the Company's Web sites and, in 1997, an increase
in sponsorship advertising revenue. The Company expects to continue to derive a
substantial majority of its revenue from selling advertisements on its network.
Because the market for advertising on the Web is intensely competitive,
advertising rates could be subject to pricing pressures in the future. If the
Company is forced to reduce its advertising rates or experiences lower CPMs as a
result of such competition or otherwise, future revenues could be adversely
affected.

     Two customers accounted for 26% and 16%, respectively, of total revenues
for 1995. One customer accounted for approximately 12% of total revenues for
1996. No customer accounted for more than 10% of

                                       17
<PAGE>   20

total revenues in 1997. Revenues generated from international operations for
1997 were not significant. See Note 10 of Notes to Consolidated Financial
Statements.

  Cost of Revenues

     Cost of revenues includes hosting costs, royalties and other cost of
revenues, and amortization of purchased technology. Hosting costs relate to the
maintenance and technical support of the Excite Network, which are comprised
principally of personnel costs, telecommunications costs, equipment
depreciation, and overhead allocations. Royalties and other cost of revenues
include expenses related to royalties, license agreements and revenue sharing
agreements for content and other services such as email and chat room services.
In 1996 and 1997, the Company recognized, as a component of total cost of
revenues, amortization of purchased technology of $186,000 and $8.2 million,
respectively, related to the WebCrawler Acquisition. As of December 31, 1997,
this purchased technology has been fully amortized. Total cost of revenues
increased by $15.8 million from $4.1 million, or 28% of total revenues for 1996,
to $19.9 million, or 40% of total revenues for 1997. This increase was primarily
the result of increased amortization expense, as well as increased hosting cost
to support higher revenues and increased royalties and margin sharing
obligations from distribution and content agreements that were entered into in
1997. Cost of revenues for 1995 was not comparable to 1996 and 1997 as the
nature of the Company's revenues changed significantly with the launch of the
Company's services in October 1995.

     Excluding amortization of purchased technology, cost of revenues increased
in absolute dollars by $7.7 million from $4.0 million, or 27% of total revenues
for 1996, to $11.7 million, or 23% of total revenues for 1997. This increase in
absolute dollars was due primarily to increased personnel expenses and equipment
costs relating to hosting the Company's Web sites and increased royalties and
margin sharing costs. Excluding amortization, cost of revenues in future periods
is expected to increase in absolute dollars and may increase as a percentage of
revenues as the Company increases costs to support expanded services and
content.

  Gross Profit

     Gross profit as a percentage of total revenues was 76%, 72% and 60% for
1995, 1996 and 1997, respectively. The decline in the gross profit as a
percentage of revenues was due primarily to the amortization of purchased
technology discussed above, as well as increased hosting costs to support
expanded Web site offerings and increased royalties and margin sharing costs,
offset in part by increased revenues. Excluding the amortization of purchased
technology in 1996 and 1997, gross profit as a percentage of total revenues was
73% and 77%, respectively. The types of advertisements sold and revenue sharing
provisions of distribution and content agreements have negatively affected gross
profit in the past and may continue to negatively affect it in the future.
Furthermore, pursuant to the provisions of certain agreements with operators of
Web access points and with content providers, the Company shares advertising
revenues based upon the number of consumers directed to its network. A low level
of targeted advertising as a percentage of total advertising sold, a decrease in
targeted or mass Web advertising rates or an increase in the Company's revenue
sharing obligations could adversely affect gross profit.

  Operating Expenses

     The Company's operating expenses have significantly increased in absolute
dollars since inception. This trend reflects the Company's rapid transition from
the research and development stage to marketing and offering its services. The
Company believes that continued expansion of operations is essential to
achieving and maintaining market leadership. Consequently, the Company intends
to continue to increase operating expenses in the foreseeable future. The
Company also expects operating expenses to increase ratably as a result of the
acquisition of Netbot and MatchLogic.

     Research and Development. Research and development expenses consist
principally of engineering and editorial personnel costs, allocation of
overhead, equipment depreciation, consulting fees and supplies. Costs related to
research, design and development of products have been charged to research and
development expenses as incurred. Research and development expenses increased
from $2.8 million, or 295% of total

                                       18
<PAGE>   21

revenues for 1995, to $8.0 million, or 54% of total revenues for 1996, and to
$13.4 million, or 27% of total revenues for 1997. The increase in absolute
dollars in 1996 was primarily due to increased engineering and editorial staff
required to develop and enhance the Company's services as well as increased
research and development activities resulting from the WebCrawler Acquisition
and the merger with McKinley. The increase in absolute dollars for 1997 was due
to an increase in engineering headcount to support the Company's channels format
and personalization capabilities for the Excite Network. The Company believes
that a significant level of research and development expenses is required to
remain competitive and, accordingly, the Company anticipates that it will
continue to devote substantial resources to research and development and that
these costs will continue to increase in absolute dollars in future periods.

     Sales and Marketing. Sales and marketing expenses consist principally of
sales and marketing personnel costs, agency and consulting fees, commissions,
promotional and advertising expenses and allocation of overhead. Sales and
marketing expenses increased in absolute dollars from $1.6 million, or 173% of
total revenues for 1995, to $21.1 million, or 143% of total revenues for 1996,
and to $27.6 million, or 55% of total revenues for 1997. The 1996 increase was
mainly due to the launch of a significant media advertising campaign during the
fourth quarter of 1996, and to increased sales personnel costs as a result of
the transition from the use of outside advertising sales agencies for the sales
of advertisements to a direct sales force. The 1997 increase was primarily due
to the continuation of the media campaign discussed above into the first quarter
of 1997, the hiring of additional sales and marketing personnel and the
launching of the WebCrawler brand. In order to promote its brands, the Company
may find it necessary in the future to increase its marketing budget or
otherwise increase its financial commitment to creating and maintaining brand
loyalty among customers. The Company expects to continue to incur significant
promotional and advertising expenses and anticipates that these costs will
increase in absolute dollars in future periods.

     Distribution License Fees. Distribution license fees decreased from $11.9
million for 1996 to $7.6 million for 1997. There were no distribution license
fees for 1995. In 1996, distribution license fees included a one-time, non-cash
charge of approximately $1.6 million related to the issuance of a warrant to AOL
during the first quarter of 1996, and a $10.0 million charge relating to the
Company's Premier Provider Agreements with Netscape in the second quarter of
1996. In May 1997, the Company entered into a new agreement with Netscape to
continue the Premier Provider arrangement for the Excite brand, and entered into
a Marquee Provider Agreement for the WebCrawler brand. Under the terms of these
agreements, the Company is committed to make minimum payments of approximately
$8.3 million in exchange for a guaranteed number of impressions. Of the $8.3
million minimum, a portion is being applied towards advertising by Netscape on
the Excite Network over the term of the agreements based upon delivery of such
advertising, with the remainder being paid in cash at intervals over the term of
the agreements. The Company is currently negotiating with Netscape to renew
these agreements before they expire on April 30, 1998. Although the percentage
of daily traffic directed from Netscape declined significantly from
approximately 40% to less than 15% over the course of 1997, if the Company were
not able to enter into replacement agreements with Netscape at the end of the
term, the Excite Network could lose a significant amount of its traffic, and
advertising revenue could be adversely affected. There can be no assurance that
Netscape will continue to offer these programs after April 30, 1998. Even if the
Company is able to enter into replacement agreements with Netscape, to the
extent that any such replacement agreements are on materially worse terms than
those of the Company's current agreements, there could be a material adverse
effect on the Company's business, results of operations and financial condition.
In the future, high traffic Web sites, internet service providers, providers of
Web browsers or other distribution channels could require cash payments or other
types of consideration as compensation for listing or promoting the Excite
Network, which could result in increased distribution license fees. See "Risk
Factors that May Affect Future Results -- Dependence on Third-Party
Relationships; Uncertain Renewal of Netscape Agreements."

     In June 1997, the Company entered into a Co-Marketing Services Agreement
and a Trademark License Agreement with Netscape. Under these agreements, the
Company is responsible for the programming, production, operations and
advertising sales of "International Netscape Guide by Excite," a new service
being made available in Japan, Germany, France, the United Kingdom and
Australia. In connection with these

                                       19
<PAGE>   22

agreements, the Company made a payment of $4.0 million to Netscape in July 1997,
which is being amortized over the terms of these agreements to distribution
license fees expense.

     General and Administrative. General and administrative expenses consist
principally of administrative and executive personnel costs, provision for
doubtful accounts, allocation of overhead and fees for professional services.
General and administrative expenses increased in absolute dollars from $2.3
million, or 244% of total revenues for 1995, to $7.1 million, or 48% of total
revenues for 1996, and to $8.1 million, or 16% of total revenues for 1997. The
increase in absolute dollars was primarily due to increased personnel,
professional service fees, provision for doubtful accounts and, in 1997,
relocation to new facilities to support the Company's growth. The Company
anticipates that general and administrative expenses will continue to increase
in absolute dollars as the Company expands its administrative and executive
staff, adds infrastructure and assimilates acquisitions of acquired technologies
and businesses.

     Charge for Purchased In-Process Technology. The Company recognized a charge
of $331,000 for 1995 related to the acquisition of City.Net Express
("City.Net"). The $3.5 million charge for purchased in-process technology for
1996 related to the WebCrawler Acquisition. There were no charges for purchased
in-process technology for 1997. See Note 2 of Notes to Consolidated Financial
Statements.

     Other Merger and Acquisition Related Costs, Including Amortization of
Goodwill and Other Purchased Intangibles. Other merger and acquisition related
costs, including amortization of goodwill and other purchased intangibles
totaled $3.1 million and $3.4 million in 1996 and 1997, respectively. The 1996
charge included approximately $2.3 million associated with the merger with
McKinley, and approximately $769,000 related to the amortization of goodwill and
other intangible assets resulting from the WebCrawler Acquisition and the
acquisition of City.Net. In 1997, the Company incurred other merger and
acquisition costs of $1.8 million resulting from the amortization of other
WebCrawler intangible assets and $1.5 million from the Netbot merger. There were
no other merger and acquisition related costs for 1995.

     Interest Income (Expense) and Other. Interest income was $5,000, $1.4
million and $1.2 million for 1995, 1996 and 1997, respectively. The increase in
1996 reflected interest earned on investments from cash received from the
Company's Series D Preferred Stock financing and initial public offering. The
decrease in 1997 was primarily the result of the use of cash received from the
Company's initial public offering to fund operations, offset in part by interest
earned on the proceeds of approximately $38.4 million from the sale of Common
Stock to Intuit Inc. ("Intuit") in the second quarter of 1997. Interest expense
increased from $50,000 for 1995 to $409,000 for 1996, and to $1.1 million for
1997. This increase was due primarily to increased expenses associated with an
increased amount of capital lease obligations and bank borrowings.

     Equity share of Losses of Affiliated Company. In October 1997, the Company
and Itochu Corporation and certain affiliated entities (collectively "Itochu")
entered into a joint venture agreement with respect to the Company's
wholly-owned subsidiary, Excite Japan, in order to provide Web-based information
services to the Japanese market. The Company currently holds, and intends to
retain a 50% equity interest in Excite Japan. Advertising sales responsibilities
will be assumed by CTC Create Corporation, a wholly-owned subsidiary of Itochu
Corporation. For the year ended December 31, 1997, Excite's share of the losses
of the joint venture was $477,000. The Company expects that it will record
increased losses from Excite Japan for at least the next year. See Notes 6 and
11 of Notes to Consolidated Financial Statements.

  Income Taxes

     At December 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $66.3 million and $43.4 million, respectively.
The federal net operating loss carryforwards will expire beginning in 2009
through 2012, if not utilized. The state net loss operating carryforwards will
expire at various dates beginning in 1999 through 2002. An ownership change, as
defined in the Tax Reform Act of 1986, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the realization of the asset
due to the lack of earnings history of the Company. See Note 9 of Notes to
Consolidated Financial Statements.

                                       20
<PAGE>   23

  Year 2000 Implications

     Many existing computer programs use only two digits to identify a year in
the date field. These programs, which were developed without considering the
impact of the upcoming change in the century, could fail or create erroneous
results by or at the year 2000. The Company has reviewed its internal programs,
and has determined that there are no significant year 2000 issues within the
Company's systems or services. However, the Company cannot be certain that its
customers, vendors or financial services providers will not have year 2000
issues. Should such issues arise with any of these parties, it could have a
material adverse effect on the Company's business, operating results and
financial condition.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1997 the Company had $31.8 million in unrestricted cash,
cash equivalents and short-term investments, an increase of $10.9 million from
December 31, 1996. In June 1997, the Company sold 2,900,000 shares of the
Company's Common Stock to Intuit at a price of $13.50 per share. Proceeds from
this offering were approximately $38.4 million net of offering costs. The
Company maintains its cash and cash equivalents in short-term and medium-term
investment-grade interest-bearing securities until required for other purposes.

     In March 1997, the Company entered into a line of credit for $6.0 million
that will mature in June 1998. This line of credit bears interest at rates
ranging from the bank's prime rate to prime plus .25% and is collateralized by a
security interest in substantially all of the Company's assets. This line of
credit agreement contains certain financial covenants, including minimum
requirements for tangible net worth, quick ratio and accounts receivable
balances, as well as prohibiting the declaration and payment of cash dividends
on capital stock without the prior written consent of the bank. As of December
31, 1997, the Company had outstanding borrowings against this line of credit of
$6.0 million, and was in compliance with all financial covenants. The Company is
currently in negotiations to renew this line of credit.

     The joint venture agreement with respect to Excite Japan obligates Excite
and Itochu to make capital contributions in the aggregate amount of $10.0
million by March 31, 1999. In October 1997, the Company obtained $5.0 million
from Itochu under a convertible promissory note in order to fund the Company's
capital contribution obligation. This note bears interest at the London
InterBank Offered Rate plus 1% and may be convertible into shares of the
Company's Common Stock at market value at its maturity date in October 2002, or
earlier in the event the Company desires to prepay such note.

     The Company's operating activities used cash of $4.7 million, $26.1 million
and $31.9 million for 1995, 1996 and 1997, respectively. The increased use of
cash in 1996 was primarily attributable to increased operating losses and
increases in accounts receivable and prepaid expenses, reduced in part by
increases in accounts payable and other accrued liabilities. The increased use
of cash in 1997 was primarily attributable to the payment of previously accrued
expenses, including but not limited to, payments to Netscape and to the
Company's advertising agency for an advertising campaign launched during the
fourth quarter of 1996, a $4.0 million license fee payment to Netscape in July
1997 (see Note 12 of the Notes to Consolidated Financial Statements) and an
increase in accounts receivable resulting from the sales of sponsorship
advertising contracts, offset in part by a decrease in net losses. The Company
has in the past, and may in the future, acquire businesses which result in
significant increases in headcount and overhead, as well as the assumption and
payment of additional liabilities, resulting in an increase in the use of cash
to support operations. See "Risk Factors that May Affect Future
Results -- Acquisition Strategy; Integration of Past and Future Acquisitions."

     Investing activities used cash of $1.3 million, $19.4 million and $3.1
million for 1995, 1996 and 1997, respectively. The 1996 increase was primarily
attributable to net purchases of short-term investments as well as property and
equipment from cash proceeds of the initial public offering in April 1996. The
decreased cash used in 1997 was primarily the result of cash being invested in
cash equivalents rather than short-term investments and net sales of short-term
investments, partially offset by increased purchases of property and equipment.

                                       21
<PAGE>   24

     Financing activities generated cash of $6.7 million, $48.7 million and
$46.4 million in 1995, 1996 and 1997, respectively. Financing activities in 1996
primarily consisted of the sale of Redeemable Convertible Preferred Stock and
debt securities totaling $12.3 million and the sale of the Company's Common
Stock in its initial public offering totaling $35.4 million. Financing
activities in 1997 primarily consisted of a bank line of credit borrowing of
$6.0 million, a convertible promissory note of $5.0 million, and the sale of
Common Stock for net proceeds of $38.4 million.

     The Company's principal commitments at December 31, 1997 consisted of
obligations under operating leases, capital leases and other non-lease
financings of $22.7 million, $6.3 million and $3.1 million, respectively, as
well as bank and other borrowings. See Notes 4, 5 and 6 of Notes to Consolidated
Financial Statements.

     To date, the Company has had limited international operations and its
exposure to foreign currency exchange rate fluctuations has been minimal. The
Company evaluates its foreign currency exchange rate exposure on an ongoing
basis.

     Capital expenditures have been, and future expenditures are anticipated to
be, primarily for facilities and equipment to support expansion of the Company's
operations and management information systems. The Company expects that its
capital expenditures will increase as its employee base grows. As of December
31, 1997, the Company did not have any material commitments for capital
expenditures, although the Company anticipates that its planned purchases of
capital equipment and leasehold improvements will require additional
expenditures in 1998, a substantial portion of which is expected to be financed
through equipment leases. At December 31, 1997, the Company has $2.2 million
available on an equipment lease line, and believes that additional lease
financing will be available to it if necessary.

     The Company believes the existing working capital balance together with
cash flows generated from advertising revenues will be sufficient to meet its
anticipated cash needs for working capital, capital expenditures and business
expansion for at least the remainder of 1998. Thereafter, the Company may need
to raise additional funds. The Company may need to raise additional funds sooner
in order to fund more rapid expansion, to develop new or enhanced services or
products, to respond to competitive pressures or to acquire complementary
products, businesses or technologies. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
the shareholders of the Company will be reduced, shareholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the holders of the Company's Common Stock. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available or are
not available on acceptable terms, the Company may not be able to fund its
expansion, take advantage of unanticipated acquisition opportunities, develop or
enhance services or products or respond to competitive pressures. Such inability
could have a material adverse effect on the Company's business, results of
operations and financial condition.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

     This Report contains forward-looking statements which involve risks and
uncertainties. The Company's actual revenues and results of operations could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth in the following risk
factors and elsewhere in this Report.

     Limited Operating History; No Assurance of Profitability; Certain Forward
Looking-Statements. The Company was founded in June 1994 and generated only
limited revenues prior to 1996. Accordingly, the Company has a limited operating
history upon which an evaluation of the Company and its current business can be
based. In addition, the Company's business model is evolving and relies
substantially upon the sale of advertising on the Web. The Company's business
must be considered in light of the risks, expenses and problems frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as the Web and Web-based
advertising. Specifically, such risks include, without limitation, the inability
of the Company to maintain premier positions on high traffic Web access points
or to maintain or enter into additional distribution relationships with Internet
Service Providers

                                       22
<PAGE>   25

("ISPs") or Online Service Providers ("OSPs"); the inability of the Company to
maintain and increase levels of traffic on the Excite Network; the inability of
the Company to effectively integrate the technology and operations of acquired
businesses or technologies with its operations, the inability of the Company to
expand its international operations, particularly in light of the Company's
limited operating experience in the international market; the failure by the
Company to continue to develop and extend the Excite and WebCrawler brands; the
inability of the Company to successfully integrate sponsored services or to meet
minimum guaranteed impressions under sponsorship agreements; the inability of
the Company to develop or acquire content for its services; the failure of
consumers to accept the Company's personalized Web services, such as My Excite
Channel, email or chat room services; the inability of the Company to generate
commerce-related revenues; the failure of the Company to anticipate and adapt to
a developing market; the introduction and development of equal or superior
services or products by competitors, particularly in light of the fact that
Microsoft and Netscape, operators of two of the most heavily-trafficked Web
sites, have announced that they will be offering competitive services; the
failure of the market to adopt the Web as an advertising and commercial medium;
reductions in market prices for Web-based advertising as a result of competition
or otherwise; the inability of the Company to achieve higher cost per thousand
impressions ("CPM") rates for targeted advertising or to increase the percentage
of its advertising inventory sold; the inability of the Company to identify,
attract, retain and motivate qualified personnel; and general economic
conditions. There can be no assurance that the Company will be successful in
addressing such risks, and any failure to do so could have a material adverse
effect on the Company's business, results of operations and financial condition.

     The Company has incurred significant operating losses since inception, and
as of December 31, 1997, the Company had an accumulated deficit of approximately
$84.9 million. Although the Company experienced significant revenue growth
during 1997, there can be no assurance that this growth rate will be sustained
or that revenues will continue to grow or that historical operating results will
be indicative of future operating results. As the Company has grown, its
operating expenses have increased, and the Company expects that its operating
expenses will continue to increase as a result of its acquisitions and in
connection with its sales and marketing efforts, its increased funding for
development activities and the increased general and administrative staff needed
to support the Company's growth. To the extent that revenues do not grow at
anticipated rates or that increases in operating expenses precede or are not
subsequently followed by commensurate increases in revenues, or that the Company
is unable to adjust operating expense levels accordingly, the Company's
business, results of operations and financial condition will be materially and
adversely affected. There can be no assurance that in the future the Company
will be profitable on a quarterly or annual basis.

     Certain executive officers of the Company have made certain forward-looking
statements regarding the Company's future prospects, which statements have been
published in a variety of news articles. These statements include statements
regarding the Company's prospects for revenues and profitability in the future,
the amount of revenues that may be generated by MatchLogic, which the Company
acquired in February 1998, the rate at which the Company's revenues will
increase and the ability of the Company to increase its advertising rates. The
occurrence or achievement of any of the events described in these statements is
subject to numerous risks and uncertainties. In particular, risks and
uncertainties relating to forward-looking statements as to the Company's
revenues, profitability and advertising rates include, without limitation: the
need for continued increases in the number of companies advertising on the
Excite Network as well as on the Web generally; the Company's ability to
increase sales of targeted advertisements and advertisers' willingness to pay
higher CPM rates for advertisements on the Excite Network; the increasingly
competitive environment for Web advertising sales; the need for increases in the
amount of traffic on the Excite Network; the increased amount of expenses and
negative cash flows resulting from the Company's acquisitions of Netbot and
MatchLogic; the Company's dependence on third parties to attract traffic to the
Excite Network; the ability of the Company to develop and achieve consumer and
advertiser acceptance for the Excite Network in the international market;
general economic conditions; and the risks relating to the acquisition of
MatchLogic described below. See "-- Acquisition Strategy; Integration of Past
and Future Acquisitions," and "--Developing Market; Dependence on Continued
Growth in Use of the Web."

                                       23
<PAGE>   26

     Risks and uncertainties relating to forward-looking statements regarding
MatchLogic's contribution to revenues and other operating results of Excite in
1998 include without limitation: risks involved in assimilating MatchLogic while
maintaining MatchLogic as a separate operating unit; risks that MatchLogic
personnel, who are not subject to non-competition agreements, will leave; risks
inherent in MatchLogic's business, including privacy concerns arising out of
MatchLogic's database marketing activities, which account for a majority of
MatchLogic's revenues; risks in the extremely limited operating history of
MatchLogic on which to base any revenue projections; the likely fluctuations in
operating results of MatchLogic due to factors beyond MatchLogic's or Excite's
control; reliance by MatchLogic on a limited number of customers for a
substantial percentage of its projected revenues; the acceptance by MatchLogic's
advertising customers of MatchLogic being owned by Excite (from which MatchLogic
purchases advertising); and the willingness by other Web sites from which
MatchLogic purchases advertising (particularly those which are direct
competitors of Excite) to accept future advertising placements from MatchLogic
as a result of the acquisition by Excite.

     Potential Fluctuations in Quarterly Results; Unpredictability of Future
Revenues. As a result of the Company's limited operating history, the evolving
nature of its business and its acquisitions, the Company has limited meaningful
historical financial data upon which to base planned operating expenses.
Accordingly, the Company's expense levels are based in part on its expectations
as to future advertising revenues and to a large extent are fixed. There can be
no assurance that the Company will be able to accurately predict the levels of
future advertising revenues, particularly in light of the intense competition
for the sale of Web-based advertisements, the Company's limited operating
history and the uncertainty as to the viability of the Web as an advertising
medium. The failure by the Company to accurately make such predictions would
have a materially adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company derives a
significant portion of its revenues from the sale of advertising under
short-term advertising contracts. The cancellation or deferral of existing
advertising contracts or the failure to obtain new advertising contracts in any
quarter could materially and adversely affect the Company's business, results of
operations and financial condition for that quarter. Furthermore, the Company
derives advertising revenue based on the amount of traffic, or page views, on
the Excite Network. Accordingly, any significant shortfall of traffic on the
Excite Network in relation to the Company's expectations or the expectations of
existing or potential advertisers, would have an immediate material adverse
effect on the Company's business, results of operations and financial condition.
See "-- Risks Associated with Banner Advertising."

     The Company's operating results have varied on a quarterly basis during its
limited operating history and the Company expects to experience significant
fluctuations in future quarterly operating results. Such fluctuations have been
and may in the future be caused by numerous factors, many of which are outside
the Company's control, including: specific economic conditions relating to the
Internet and the Web; usage of the Web; demand for advertising on the Excite
Network as well as demand for Web-based advertising in general; changes in
advertising rates as a result of competition or otherwise; seasonal trends in
advertising sales; the advertising budgeting cycles of advertisers; incurrence
of charges in connection with, or the modification or expiration of, the
Company's distribution relationships with Netscape, AOL and other ISPs and OSPs
or other third parties; demand for the Company's services; incurrence of costs
relating to acquisitions of businesses or technologies; introduction or
enhancement of services by the Company and its competitors; market acceptance of
new services; delays in the introduction of services or enhancements by the
Company or its competitors; mix of types of advertisements sold, such as the
amount of targeted advertising sold as a percentage of total advertising sold;
capacity constraints and dependencies on computer infrastructure; and general
economic conditions.

     During its limited operating history, the Company has experienced seasonal
fluctuations in the amount of banner advertisements purchased on its network,
with advertisers historically purchasing fewer advertisements in the first
calendar quarter of each year. Because the market for Web advertising is an
emerging market, additional seasonal patterns in Web advertising may develop in
the future as the market matures.

     Due to all of the foregoing factors, the Company's quarterly revenues and
operating results are difficult to forecast. The Company believes that
period-to-period comparisons of its results of operations will not necessarily
be meaningful and should not be relied upon as an indication of future
performance. Also, it is

                                       24
<PAGE>   27

likely that in some future quarter or quarters the Company's operating results
will be below the expectations of public market analysts and investors. In such
event, the price of the Company's Common Stock would be materially and adversely
affected.

     Acquisition Strategy; Integration of Past and Future Acquisitions. The
Company has in the past and may in the future acquire businesses, technologies,
services, product lines, content databases, or access to content databases that
are complementary to the Company's business. For example, the Company acquired
MatchLogic in February 1998, Netbot in November 1997, the assets relating to the
WebCrawler service in March 1997 and McKinley in August 1996. Acquisitions
involve a number of special risks, including, among other things, the difficulty
of assimilating the technologies, operations and personnel of acquired companies
with those of the Company, the potential disruption of the Company's business,
the diversion of resources, the incurrence of acquisition-related expenses, the
write-off or amortization of intangible assets, the assumption of unknown
liabilities, the inability to maintain uniform standards, controls, procedures
and policies and the impairment of relationships with employees and strategic
partners as a result of such acquisitions or the integration of new personnel.
For example, the assimilation of prior acquisitions required, among other
things, the integration of service offerings, coordination of the research and
development and sales and marketing efforts, the assumption by the Company of
liabilities under distribution agreements and loan agreements, and the addition
of a significant number of additional personnel. The Company could face similar
integration issues with respect to certain of its recent or future acquisitions,
and there can be no assurance that the Company will be successful in addressing
these risks. Any failure to successfully address these acquisition-related risks
could have a material adverse effect on the Company's business, results of
operations and financial condition.

     Risks Related to Sponsorships. The Company has recently entered into
sponsorship arrangements with third parties to provide sponsored services and
placements on the Excite Network in addition to traditional banner advertising.
In connection with these arrangements, the Company may receive sponsorship fees
as well as a portion of transaction revenues received by such third party
sponsors from users originated through the Excite Network, in return for minimum
levels of user impressions to be provided by the Company. To the extent
implemented, these arrangements expose the Company to potentially significant
financial risks, including the risk that the Company fails to deliver required
minimum levels of user impressions (in which case, these agreements are
typically subject to termination) and that third party sponsors do not renew the
agreements at the end of their term. These arrangements also require the Company
to integrate sponsors' content with the Company's services, which requires the
dedication of resources and significant programming and design efforts to
accomplish. There can be no assurance that the Company will be able to attract
additional sponsors or that it will be able to renew existing sponsorship
arrangements when they expire. In addition, the Company has granted exclusivity
provisions to certain of its sponsors, and may in the future grant additional
exclusivity provisions. Such exclusivity provisions may have the effect of
preventing the Company, for the duration of such exclusivity arrangements, from
accepting advertising or sponsorship arrangements within a particular subject
matter with respect to portions of a channel, an entire channel, across an
entire service or over the whole Excite Network. The inability of the Company to
enter into further sponsorship or advertising arrangements as a result of its
exclusivity arrangements could have a material adverse effect on the Company's
business, results of operations and financial condition.

     Risks Associated with Banner Advertising. The Company derives substantially
all of its revenues from the sale of advertising, including banner
advertisements and sponsorship arrangements, on the Excite Network. A majority
of the Company's customers purchasing banner advertisements purchase these
advertisements on a short-term basis, and many of these customers may terminate
their advertising commitments at any time without penalty. Consequently, there
can be no assurance that these customers will continue or increase their level
of advertising on the Excite Network or that these customers will not move their
advertising to competing Web sites or to other traditional media. Therefore,
there can be no assurance that the Company will be successful in maintaining or
increasing the amount of advertising on the Excite Network, and the failure to
do so could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Advertising and
Commerce."

                                       25
<PAGE>   28

     Developing Market; Dependence on Continued Growth in Use of the Web. The
market for the Company's services has recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed services and products for use on the Web or who
seek to derive significant revenues from the sale of advertisements on the Web.
The Company is highly dependent upon the increased use of the Web for
information, publication, distribution and commerce, and there can be no
assurance that the use of the Web for these purposes will continue to grow at
its current rate or at all. The growth of the use of the Web may be inhibited
for a number of reasons, including, but not limited to, potentially inadequate
development of network infrastructure, security concerns, inconsistent quality
of service and lack of availability of cost-effective, high-speed service. To
the extent that use of the Web does continue to grow, there can be no assurance
that the Internet infrastructure will continue to support the demands placed on
it by such continued growth or that the performance or reliability of the
Internet will not be adversely affected. In addition, the Web as an advertising
medium has not been available for a sufficient period of time to gauge its
effectiveness as compared with traditional advertising media, and therefore the
Web is an unproven medium for advertising-supported services. Accordingly, the
Company's future operating results will depend substantially upon the increased
use of the Web for information, publication, distribution and commerce and the
emergence of the Web as an effective advertising medium.

     The Company's ability to generate significant advertising revenues will
also depend on, among other things, the development of a large base of users of
the Company's services possessing demographic characteristics attractive to
advertisers, the ability of the Company to accurately measure its user base and
the ability of the Company to develop or acquire effective advertising delivery
and measurement systems. Many of the Company's advertisers have only limited
experience with the Web as an advertising medium, have not yet devoted a
significant portion of their advertising expenditures to Web-based advertising,
and may not find such advertising to be effective for promoting their products
and services relative to traditional print and broadcast media. The adoption of
Web advertising, particularly by those entities that have historically relied
upon traditional media for advertising, requires the acceptance of a new way of
conducting business and exchanging information. Entities that already have
invested substantial resources in other methods of conducting business may be
reluctant to adopt a new strategy that may limit or compete with their existing
efforts. There can be no assurance that the market for Web advertising will
continue to emerge or become sustainable. If the market fails to develop or
develops more slowly than expected, the Company's business, results of
operations and financial condition could be materially and adversely affected.
No standards have been widely accepted for the measurement of the effectiveness
of Web-based advertising, and there can be no assurance that such standards will
develop sufficiently to support the Web as an effective advertising medium.
There can be no assurance that advertisers will continue to accept the Company's
or other third-party measurements of impressions, or that such measurements will
not contain errors. In such event, the Company's advertising revenues could be
materially and adversely affected, which could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, there is intense competition in the sale of advertising on the Web,
resulting in a wide range of rates quoted and a variety of pricing models
offered by different vendors for a variety of advertising services, which makes
it difficult to project future levels of advertising revenues and rates. It is
also difficult to predict which pricing models will be adopted by the industry
or advertisers. For example, advertising rates based on the number of "click
throughs," or user requests for additional information made by clicking on the
advertisement from the Company's network to the advertiser's Web pages, instead
of rates based solely on the number of impressions, would materially and
adversely affect the Company's revenues. As a result of these risks, there can
be no assurance that the Company will be successful in generating significant
future advertising revenues from Web-based advertising, and the failure to do so
would have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business -- Competition."

     Further, there can be no assurance that advertisers will determine that
banner advertising, the delivery of which currently comprises a substantial
portion of the Company's revenues, is an effective or attractive advertising
medium, and there can be no assurance that the Company will effectively
transition to any other forms of Web advertising should they develop and achieve
market acceptance. Moreover, "filter" software programs that limit or prevent
advertising from being delivered to a Web user's computer are available.
Widespread adoption of such software by users could have a material adverse
effect upon the commercial

                                       26
<PAGE>   29

viability of Web advertising, which would have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business -- Industry Background" and "-- Advertising and Commerce".

     Dependence on Third-Party Relationships; Uncertain Renewal of Netscape
Agreements. The Company is currently, and will be in the future, dependent on a
number of third-party relationships for user traffic and to provide content on
the Excite Network and to make it more attractive to advertisers and consumers.
These relationships include arrangements relating to the positioning of the
Excite Network on Web browsers such as those offered by Netscape and Microsoft,
agreements with ISPs and OSPs such as AOL and Microsoft and arrangements for
providing content for the Excite Network such as stock quotes and news stories.
For example, the Company's Excite brand is featured as one of four "Premier
Providers" and the WebCrawler brand is featured as one of several "Marquee
Providers" on Netscape's Web site. The termination of, or the failure of the
Company to renew on reasonable terms, its position on a Web browser or its
relationship with an ISP, OSP or key content provider could significantly reduce
traffic on the Excite Network or could otherwise adversely affect the Company's
advertising revenues, which would also have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
could also incur expenses relating to distribution license fees as a result of a
new agreement with a third party, including Netscape. These distribution license
fees could have a material adverse effect on the Company's business, results of
operations and financial condition.

     The Company's agreements with Netscape expire on April 30, 1998. While the
Company is currently negotiating with Netscape regarding new agreements,
Netscape has expressed its intention to limit the number of companies that will
be listed as "Premier Providers" or "Marquee Providers" on its Web site, and
there can be no assurance that the Company will be selected as one of those
companies. Furthermore, Netscape has recently announced its intention to launch
its own "portal" Web site, which will offer services which are similar to those
currently offered by the Company, which services are expected to compete with
the Company's services. Even if Netscape elects to continue to feature one or
more third party providers of navigation services, it could select one of the
Company's competitors as an exclusive provider. If the Company were unable to
renew its agreements with Netscape, if Netscape were to offer a competitive Web
"gateway" site or if Netscape were to enter into an exclusive arrangement with
one of the Company's competitors, the Excite Network could lose a portion of its
traffic, traffic on competing services could substantially increase or the
Excite Network could otherwise become less attractive to advertisers, which
would have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, if any replacement agreements
with Netscape are on materially worse terms than those of the Company's current
Premier Provider Agreement or Marquee Provider Agreement, there would be a
material adverse effect on the Company's business, results of operations and
financial condition.

     The Company is also generally dependent on other Web site operators that
provide links to the Excite Network. Most of these arrangements do not require
future minimum commitments to use the Company's services to provide access or
links to the Excite Network or to provide content to the Company, are often not
exclusive and are often short-term or may be terminated at the convenience of
the other party. There can be no assurance that these third parties regard their
relationship with the Company as important to their own respective businesses
and operations, that they will not reassess their commitment to the Excite
Network at any time in the future, or that they will not develop their own
competitive services or products. Further, there can be no assurance that the
services of those companies that provide access to the Excite Network will
achieve market acceptance or commercial success and therefore there can be no
assurance that any significant amount of traffic will be directed to the Excite
Network as a result of these third party relationships. Accordingly, there can
be no assurance that the Company's existing relationships will result in
sustained business partnerships, successful service offerings, the generation of
significant traffic on the Excite Network or significant revenues for the
Company.

     The Company also has a five-year distribution agreement with AOL which
expires in November 2001 under which a co-branded version of the Excite search
and directory service is designated as the exclusive Web search and directory
service for the AOL service for an initial two-year period ending in November
1998. If the exclusivity period is not extended by AOL, the co-branded service
would become the "default" search

                                       27
<PAGE>   30

and directory service of AOL. However, AOL could enter into a strategic
relationship with a competitor of the Company or offer its own competing
services, which could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business -- Distribution and
Content."

     Management of Growth. The Company's rapid growth has placed, and is
expected to continue to place, a significant strain on the Company's managerial,
operational and financial resources. As of February 28, 1998, the Company had
grown to 434 employees from 191 employees at February 1, 1997. Further, as the
number of the Company's users, advertisers and other business partners has
grown, the Company has been required to manage multiple relationships with
various customers, strategic partners and other third parties. These
requirements will be exacerbated in the event of further growth in the Company
or in the number of its strategic relationships or sponsorship arrangements.
There can be no assurance that the Company's systems, procedures or controls
will be adequate to support the Company's operations or that Company management
will be able to achieve the rapid execution necessary to successfully offer its
services and implement its business plan. The Company's future operating results
will also depend on its ability to expand its sales and marketing organization
and expand its support organization commensurate with the growth of its business
and the Web. If the Company is unable to manage growth effectively, the
Company's business, results of operations and financial condition will be
materially and adversely affected. See "Business -- Employees."

     Risks Associated with International Operations. A key component of the
Company's strategy is to expand its international operations and its
international sales and marketing activities by offering localized versions of
the Excite Network through joint venture arrangements or other strategic
agreements. Expansion into these markets has required and will continue to
require management attention and resources and may require the Company to
localize its services for a particular market. The Company has limited
experience in localizing its services and many of the Company's competitors are
also undertaking to expand into foreign markets. There can be no assurance that
the Company will be successful in expanding into international markets. In
addition to the uncertainty regarding the Company's ability to generate revenues
from foreign operations and expand its international presence, there are certain
risks inherent in doing business on an international basis, including, among
others, regulatory requirements, legal uncertainty regarding liability, tariffs
and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, different accounting practices, problems in
collecting accounts receivable, political instability, seasonal reductions in
business activity and potentially adverse tax consequences, any of which could
adversely affect the success of the Company's international operations. To the
extent the Company expands its international operations and has additional
portions of its international revenues denominated in foreign currencies, the
Company could become subject to increased risks relating to foreign currency
exchange rate fluctuations. There can be no assurance that one or more of the
factors discussed above will not have a material adverse effect on the Company's
future international operations and, consequently, on the Company's business,
results of operations and financial condition. See "Business -- International."

     Risk of Capacity Constraints; System Failures. The Company is dependent on
its ability to generate a high volume of traffic to the Excite Network.
Accordingly, the performance of the Excite Network is critical to the Company's
reputation, its ability to attract advertisers and to achieve market acceptance
of the network. Any system failure that causes interruptions in the availability
of or that increases response time of the Company's services could reduce user
satisfaction and traffic to the Excite Network and, if sustained or repeated,
would reduce the attractiveness of the Excite Network to advertisers and
consumers. An increase in the volume of searches conducted through the Excite
Network could strain the capacity of the software or hardware deployed by the
Company, which could lead to slower response time or system failures. In
addition, as the amount of Web pages and traffic increases, there can be no
assurance that the Excite Network will be able to scale proportionately. The
Company is also dependent upon Web browsers, ISPs, OSPs and other Web site
operators, which have experienced significant outages in the past, for access to
its network, and Web consumers have experienced outages, delays and other
difficulties due to system failures unrelated to the Company's systems and
services. Additional difficulties could also materially and adversely affect
consumer and advertiser satisfaction. To the extent that the capacity
constraints described above are not effectively addressed by the Company, such
constraints would have a material adverse effect on the Company's business,
results of operations and financial condition.

                                       28
<PAGE>   31

     Substantially all of the Company's communications hardware and certain of
its computer hardware operations are located at leased facilities in Redwood
City, California, an area susceptible to earthquakes. The Company has
experienced system failures or outages from time to time in the past, which have
disrupted the operation of the Excite Network. There can be no assurance that a
system failure at this location would not adversely affect the performance of
the Excite Network. These systems are also vulnerable to damage from fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events. The Company does not presently have a formal disaster recovery
plan. Although the Company carries property and business interruption insurance,
its low coverage limits may not be adequate to compensate the Company for all
losses that may occur. The Company's servers are also vulnerable to computer
viruses, physical or electronic break-ins and similar disruptive problems.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruptions, delays or cessations in service to users of the Excite
Network. The occurrence of any of these risks could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Business -- Facilities."

     Government Regulation and Legal Uncertainties. The Company is not currently
subject to direct regulation by any government agency, other than regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Web. However,
due to the increasing popularity and use of the Web, it is possible that a
number of laws and regulations may be adopted with respect to the Web, covering
issues such as user privacy, pricing, characteristics and quality of products
and services. For example, although it was held unconstitutional, the
Telecommunications Act of 1996 prohibited the transmission over the Internet of
certain types of information and content and other nations, including Germany,
have taken actions to restrict the free flow of material deemed to be
objectionable on the Web. In addition, several telecommunications carriers are
seeking to have telecommunications over the Web regulated by the Federal
Communications Commission (the "FCC") in the same manner as other
telecommunications services. In addition, because the growing popularity and use
of the Web has burdened the existing telecommunications infrastructure and many
areas with high Web use have begun to experience interruptions in phone service,
local telephone carriers, such as Pacific Bell, have petitioned the FCC to
regulate ISPs and OSPs in a manner similar to long distance telephone carriers
and to impose access fees on the ISPs and OSPs. If either of these petitions is
granted, or the relief sought therein is otherwise granted, the costs of
communicating on the Web could increase substantially, potentially slowing the
growth in use of the Web, which could in turn decrease the demand for the
Company's services. The adoption of any additional laws or regulations may also
decrease the growth of the Web, which could in turn decrease the demand for the
Excite Network or could increase the Company's cost of doing business. Moreover,
the applicability to the Web of existing laws in various jurisdictions governing
issues such as property ownership, libel and personal privacy is uncertain and
will take years to resolve. Any such new legislation or regulation or
application or interpretation of existing laws could have a material adverse
effect on the Company's business, results of operations and financial condition.

     Due to the global nature of the Web, it is possible that, although
transmissions of the Excite Network originate in the State of California, the
governments of other states and foreign countries might attempt to regulate the
Company's transmissions or prosecute the Company for violations of their laws.
There can be no assurance that violations of local laws will not be alleged or
charged by state or foreign governments, that the Company might not
unintentionally violate such law or that such laws will not be modified, or new
laws enacted, in the future. It is also possible that states or foreign
countries may seek to impose sales taxes on out of state companies that engage
in commerce over the Internet. In the event that states or foreign countries
succeed in imposing sales or other taxes on Internet commerce, the growth of the
use of the Internet for commerce could slow substantially. Any of the foregoing
developments could have a material adverse effect on the Company's business,
results of operations and financial condition.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.

                                       29
<PAGE>   32

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     ANNUAL FINANCIAL STATEMENTS: See Part IV, Item 14 of this Form 10-K.

     SELECTED QUARTERLY DATA: The following selected quarterly data should be
read in conjunction with the Consolidated Financial Statements and notes thereto
and "Management's Discussion and Analysis of Results of Operations" appearing
elsewhere in this Form 10-K. During 1996, Excite acquired McKinley in a
transaction accounted for as a pooling of interests. All financial information
has been restated to reflect the combined operations of Excite and McKinley.
During the fourth quarter of 1996 the Company entered into an agreement, which
closed effective on March 27, 1997, to acquire the WebCrawler Assets from AOL in
exchange for 1,950,000 shares of Convertible Preferred Stock. As a result of
this acquisition, during the fourth quarter of 1996, the Company expensed $3.5
million for in-process technology, as well as recording amortization of other
purchased intangibles. During the fourth quarter of 1997, the Company acquired
Netbot Inc. in a transaction accounted for as a pooling of interests. Because
the results of operations and financial position of Netbot were not material to
Excite's consolidated financial statements, financial information prior to the
date of acquisition has not been restated. See Note 2 of Notes to Consolidated
Financial Statements for a further discussion of these acquisitions and related
costs. During the second quarter of 1996, the Company entered into two
distribution license agreements with Netscape for total consideration of $10.0
million which was expensed during the second quarter of 1996. In the future, it
is anticipated that any such consideration will be expensed over the term of the
agreement. See Note 12 of Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                                                                QUARTER ENDED
                                            -------------------------------------------------------------------------------------
                                            MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,
                                              1996       1996       1996       1996       1997       1997       1997       1997
                                            --------   --------   --------   --------   --------   --------   --------   --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)
<S>                                         <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Total revenues............................  $ 1,374    $  2,816   $ 4,049    $  6,518   $ 7,515    $ 9,495    $14,422    $18,719
Gross profit..............................      985       2,389     2,884       4,350     2,724      5,567      9,194     12,729
Distribution license fees.................    1,625      10,000       253          --        30      1,630      2,867      3,088
Merger and acquisition costs, including
  charge for purchased technology and
  amortization of intangibles.............       --          73     2,292       4,269       953        313        305      1,818
Total operating expenses..................    6,631      18,167    12,640      17,288    11,619     13,346     15,114     20,008
Net loss..................................  $(5,644)   $(15,408)  $(9,354)   $(12,711)  $(8,784)   $(7,890)   $(5,736)   $(7,749)
Basic and diluted net loss per share(1)...  $ (2.71)   $  (1.36)  $ (0.82)   $  (1.10)  $ (0.74)   $ (0.65)   $ (0.38)   $ (0.48)
Shares used in computing net loss per
  share (1)...............................    2,085      11,319    11,393      11,506    11,799     12,167     15,206     16,231
</TABLE>

---------------
(1) The loss per share amounts for previously reported periods have been
    restated as required to comply with Statement of Financial Standards No.
    128, "Earnings Per Share" and Staff Accounting Bulletin No. 98. For further
    discussion of loss per share and the impact of Statement No. 128 and Staff
    Accounting Bulletin No. 98, see Note 1 of Notes to Consolidated Financial
    Statements.

ITEM 9: CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES

     None

                                       30
<PAGE>   33

                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

     Information concerning the Company's directors may be found in the section
captioned "Proposal No. 1 -- Election of Directors" appearing in the Proxy
Statement to be delivered to shareholders in connection with the Annual Meeting
of Shareholders to be held in June 1998. Such information is incorporated herein
by reference.

EXECUTIVE OFFICERS

     The following table sets forth certain information regarding the executive
officers of the Company:

<TABLE>
<CAPTION>
                    NAME                        AGE                  POSITION
                    ----                        ---                  --------
<S>                                             <C>    <C>
George Bell.................................    41     President, Chief Executive Officer
                                                       and Director
Brett T Bullington..........................    44     Executive Vice President
James N. Desrosier..........................    43     Executive Vice President, Corporate
                                                       Marketing
Robert C. Hood..............................    55     Executive Vice President, Chief
                                                       Administrative Officer and Chief
                                                       Financial Officer
Joseph R. Kraus, IV.........................    26     Senior Vice President and Director
Kenneth Wachtel.............................    44     Senior Vice President, Advertising
                                                       Sales
Chris Vail..................................    37     Vice President, General Counsel and
                                                       Secretary
</TABLE>

     Mr. Bell has been President, Chief Executive Officer and a director of the
Company since January 1996. From December 1995 until January 1996, he was a
consultant to the Company. From May 1991 to December 1995, Mr. Bell was employed
by The Times Mirror Company, a publishing and cable television company, most
recently as President -- The Skiing Company for Times Mirror Magazines and
previously as President -- The Outdoor Company and Vice President, Multimedia
for Times Mirror Magazines. Prior to joining The Times Mirror Company, Mr. Bell
worked as an independent producer, writer and packager of television sports and
documentary programming and as a staff producer and writer for the ABC
television network. Mr. Bell has received four Emmy Awards. He received a B.A.
in English from Harvard College.

     Mr. Bullington has been Executive Vice President of the Company since
January 1997. From November 1995 to January 1997, he served as Senior Vice
President, Marketing and Sales of the Company and, from August 1995 until
November 1995, he was a consultant to the Company. From May 1995 to August 1995,
Mr. Bullington worked as an independent marketing and sales consultant. From May
1994 to May 1995, Mr. Bullington served as Vice President of Marketing and Sales
for Planning & Logic, Inc., a software company. From January 1992 to May 1994,
he was employed by Taligent, Inc., a software company, as Director of Worldwide
Channel Development. From 1986 to January 1992, Mr. Bullington was employed by
Computer Associates, a software company, where he served most recently as Vice
President, Sales and Marketing. He received a B.A. in Political Science from the
University of California at Santa Barbara.

     Mr. Desrosier has been Executive Vice President, Corporate Marketing since
July 1997. From March 1996 until June 1997, he was employed by Infoseek
Corporation, an Internet search company, as Vice President, Chief Marketing
Officer. From March 1990 to March 1996, Mr. Desrosier held a number of positions
including Senior Vice President, Global Brand Marketing, Vice President, Debit
Product Management and Marketing, and Vice President, Advertising at MasterCard
International Incorporated, an electronic payments, systems, and products
company. Mr. Desrosier received an A.B. in philosophy from Kenyon College.

                                       31
<PAGE>   34

     Mr. Hood has been Executive Vice President, Chief Administrative Officer
and Chief Financial Officer of the Company since December 1996. From November
1996 to December 1996, he was a consultant to the Company. From July 1995 to
February 1996, Mr. Hood served as Chief Operating Officer of RockShox Inc., a
mountain bike component manufacturer. From March 1992 to April 1995, he served
as Senior Vice President and Chief Financial Officer of Crowley Maritime
Corporation, a transportation services company. From April 1991 to February
1992, Mr. Hood served as Executive Vice President and Chief Financial Officer of
Qume Corp., a computer peripherals company. He received a B.A. in Economics from
Bates College and an M.B.A. from Dartmouth College.

     Mr. Kraus has been Senior Vice President of the Company since January 1997
and a director of the Company since June 1994. He served as Senior Vice
President, Business Development of the Company from January 1996 to January 1997
and, from June 1994 to January 1996, served as President of the Company. Prior
to joining the Company, Mr. Kraus was a student at Stanford University. He
received a B.A. in Political Science from Stanford University.

     Mr. Wachtel has been Senior Vice President, Advertising Sales since March
1997. Prior to joining the Company and since 1976, Mr. Wachtel was employed by
CBS television network, most recently as Vice President, News Sales. He received
an A.B. in Economics and Government from Dartmouth College and an M.B.A. from
the University of Chicago Graduate School of Business.

     Mr. Vail has been Vice President, General Counsel since October 1997 and
Secretary of the Company since May 1997. From April 1997 to September 1997, Mr.
Vail served as Associate General Counsel of the Company and from September 1996
to March 1997 he served as Contracts Manager of the Company. From January 1996
to September 1996, Mr. Vail maintained his own law practice. From May 1989 to
January 1996, Mr. Vail was a member of the legal department of AT&T Corp, a
communications company. He received and a B.A. in Government from Georgetown
University and a J.D. from the University of California, Los Angeles. Mr. Vail
is a member of the State Bar of California.

     Executive officers are chosen by, and serve at the discretion of, the Board
of Directors. There are no family relationships among any of the executive
officers of the Company.

ITEM 11: EXECUTIVE COMPENSATION

     Information required by this Item may be found in the section captioned
"Executive Compensation" appearing in the Proxy Statement to be delivered to
shareholders in connection with the Annual Meeting of Shareholders to be held in
June 1998. Such information is incorporated herein by reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information required by this Item may be found in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" appearing in
the Proxy Statement to be delivered to shareholders in connection with the
Annual Meeting of Shareholders to be held in June 1998. Such information is
incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information required by this Item may be found in the section captioned
"Executive Compensation -- Certain Transactions" appearing in the Proxy
Statement to be delivered to shareholders in connection with the Annual Meeting
of Shareholders to be held in June 1998. Such information is incorporated herein
by reference.

                                       32
<PAGE>   35

                                    PART IV

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

     Upon written request, the Company will provide, without charge, a copy of
this Report on Form 10-K, including the consolidated financial statements,
financial statement schedules and any exhibits for the Company's most recent
fiscal year. All requests should be sent to:

     Excite, Inc.
     Investor Relations
     555 Broadway
     Redwood City, CA 94063
     (650) 568-6000

(a) The following documents are filed as part of this report:

<TABLE>
<CAPTION>
                                                                   PAGE
                                                                  NUMBER
                                                                  ------
    <S>                                                           <C>
    1.   CONSOLIDATED FINANCIAL STATEMENTS:
         Report of Ernst & Young LLP, Independent Auditors......    39
         Report of Price Waterhouse LLP, Independent
          Accountants...........................................    40
         Consolidated Balance Sheets as of December 31, 1996 and
          1997..................................................    41
         Consolidated Statements of Operations for the years
          ended December 31, 1995, 1996 and 1997................    42
         Consolidated Statements of Shareholders' Equity (Net
          Capital Deficiency) for the years ended December 31,
          1995, 1996 and 1997...................................    43
         Consolidated Statements of Cash Flows for the years
          ended December 31, 1995, 1996 and 1997................    44
         Notes to Consolidated Financial Statements.............    45
</TABLE>

     2.   FINANCIAL STATEMENT SCHEDULES.
          All schedules have been omitted because the information required to be
          set forth therein is not applicable or is shown in the financial
          statements or notes thereto.

     3.   EXHIBITS.
          The following exhibits are files as part of, or incorporated by
          reference into, this Form 10-K:

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                           EXHIBIT TITLE
        -------    ------------------------------------------------------------
        <C>        <S>
          2.01 -   Agreement and Plan of Reorganization dated as of August 7,
                   1996 by and among the Registrant, Excite Acquisition
                   Corporation, The McKinley Group, Inc., Isabel Maxwell,
                   Christine Maxwell, David Hayden, Roger Malina and Daniel
                   Lynch.(1)
          2.02 -   Agreement of Merger dated as of August 30, 1996 by and
                   between Excite Acquisition Corporation and the McKinley
                   Group, Inc.(1)
          2.03 -   Agreement and Plan of Reorganization dated as of October 30,
                   1997 by and among the Registrant, Excite Merger Corporation,
                   Netbot, Inc. and certain shareholders of Netbot, Inc. (12)
          2.04 -   Agreement and Plan of Reorganization dated as of January 15,
                   1998 by and among the Company, XCite Acquisition
                   Corporation, Matchlogic, TL Ventures III, L.P., TL Ventures
                   III Offshore, TL Ventures III Interfund L.P., Sequel Limited
                   Partnership, Sequel Euro Limited Partnership, Internet
                   Capital Group, L.L.C., Data Strategies, Inc., and Gary
                   Anderson.(14)
          3.01 -   Registrant's Amended and Restated Articles of Incorporation,
                   as amended.
          3.02 -   Registrant's Bylaws, as amended.(3)
          4.01 -   Form of Specimen Certificate for Registrant's Common
                   Stock.(4)
          4.02 -   Restated and Amended Investors' Rights Agreement.(4)
</TABLE>

                                       33
<PAGE>   36

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                           EXHIBIT TITLE
        -------    ------------------------------------------------------------
        <C>        <S>
          4.03 -   Amendment to Restated and Amended Investors' Rights
                   Agreement dated as of August 1, 1996.(8)
          4.04 -   Amendment to Restated and Amended Investors' Rights
                   Agreement dated as of November 25, 1996.(9)
          4.05 -   Registration Rights Agreement dated as of November 25, 1996
                   by and among the Registrant, America Online, Inc. and AOL
                   Ventures, Inc.(8)
          4.06 -   Voting Agreement dated as of November 25, 1996 by and among
                   the Registrant and certain of its shareholders. (9)
          4.07 -   Letter Agreement dated as of November 25, 1996 by and among
                   certain shareholders of the Registrant.(9)
          4.08 -   Nomination and Observer Rights Agreement dated as of June
                   25, 1997 between the Registrant and Intuit Inc. (11)
          4.09 -   Registration Rights Agreement dated as of June 25, 1997
                   between the Registrant and Intuit Inc.(11)
          4.10 -   Right of First Refusal Agreement dated as of June 25, 1997
                   between the Registrant and Intuit Inc.(11)
          4.11 -   Amendment to Restated and Amended Investors' Rights
                   Agreement dated as of June 25, 1997 among the Registrant,
                   Institutional Venture Partners VI, Institutional Venture
                   Management VI, IVP Founders Fund I, L.P., Kleiner Perkins
                   Caufield & Byers VII, KPCB VII Founders Fund, KPCB
                   Information Sciences Zaibatsu Fund II and Intuit Inc.(11)
          4.12 -   Stock Purchase Agreement dated as of June 11, 1997 between
                   the Registrant and Intuit Inc.(11)
          9.01 -   Voting Trust Agreement dated as of November 25, 1996 by and
                   among the Registrant, America Online, Inc., AOL Ventures,
                   Inc. and Richard Redding.(8)
        *10.01 -   Registrant's 1995 Equity Incentive Plan.(3)
        *10.02 -   Registrant's 1996 Equity Incentive Plan, as amended.(8)
        *10.03 -   Registrant's 1996 Directors Stock Option Plan.(3)
        *10.04 -   Registrant's 1996 Employee Stock Purchase Plan.(3)
        *10.05 -   Registrant's 401(k) Plan.(8)
        *10.06 -   Form of Assumed Stock Option Grant Agreement, together with
                   Netbot, Inc. 1996 Stock Option Plan and Related
                   Agreements.(13)
        *10.07 -   Form of Assumed Stock Option Grant Agreement, together with
                   MatchLogic, Inc. 1997 Equity Compensation Plan and Related
                   Agreements.(15)
         10.08 -   Form of Indemnity Agreement entered into by Registrant with
                   each of its directors.(3)
         10.09 -   Bridge Line of Credit Agreement, dated as of February 23,
                   1996, among the Registrant and Kleiner Perkins Caufield &
                   Byers VII, KPCB VII Founders Fund, KPCB Information Sciences
                   Zaibatsu Fund II, Institutional Venture Partners VI,
                   Institutional Venture Management VI and IVP Founders Fund I,
                   L.P., and Form of Convertible Promissory Note and Form of
                   Promissory Note, as amended.(3)
        *10.10 -   Promissory Note, dated as of February 27, 1996, issued by
                   Graham F. Spencer to the Registrant.(3)
        *10.11 -   Secured Full Recourse Promissory Note, dated as of March 15,
                   1996, issued by Brett T Bullington to the Registrant.(8)
        *10.12 -   Stock Pledge Agreement dated as of March 15, 1996 by and
                   between the Registrant and Brett T Bullington.(8)
        *10.13 -   Offer Letter dated November 30, 1995, as amended, to Brett T
                   Bullington.(3)
        *10.14 -   Offer Letter dated January 16, 1996, as amended, to George
                   Bell.(3)
        *10.15 -   Offer Letter dated as of November 15, 1996 to Robert C.
                   Hood.(8)
        *10.16 -   Consulting Agreement dated as of November 19, 1996 by and
                   between the Registrant and Robert C. Hood.(8)
        *10.17 -   Offer Letter dated as of July 18, 1997 to James N.
                   Desrosier.
</TABLE>

                                       34
<PAGE>   37

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                           EXHIBIT TITLE
        -------    ------------------------------------------------------------
        <C>        <S>
        *10.18 -   Form of standard employment offer letter.
         10.19 -   Office Lease, dated as of January 22, 1996 by and between
                   the Registrant and McCandless Land and Cattle Company.(3)
        #10.20 -   Net Search Program -- Premier Provider Agreement dated as of
                   March 28, 1996 between the Registrant and Netscape
                   Communications Corporation.(6)
         10.21 -   Net Search Program -- Premier Provider Agreement dated as of
                   March 27, 1996, and as amended March 27, 1996 and January
                   21, 1997, between The McKinley Group, Inc. and Netscape
                   Communications Corporation.(7)
         10.22 -   Series D Preferred Stock Purchase Agreement dated as of
                   March 8, 1996 by and among the Registrant and various
                   investors.(5)
         10.23 -   Warrant to purchase 650,000 shares of Common Stock dated
                   March 8, 1996 issued to AOL Ventures, Inc.(5)
         10.24 -   Office Lease, dated as of August 9, 1996, by and between the
                   Registrant and Martin/ Campus Associated, L.P.(6)
         10.25 -   Acquisition Agreement dated as of November 25, 1996 by and
                   among the Registrant, America Online, Inc. and Global
                   Network Navigator, Inc.(8)
        #10.26 -   Premier Provider Services Agreement between the Registrant
                   and Netscape Communications Corporation dated as of March
                   21, 1997.(10)
         21.01 -   List of Subsidiaries.
         23.01 -   Consent of Ernst & Young LLP, Independent Auditors.
         23.02 -   Consent of Price Waterhouse LLP, Independent Accountants.
         24.01 -   Power of Attorney (see signature page.)
         27.01 -   Financial Data Schedule for December 31, 1997 (EDGAR version
                   only.)
         27.02 -   Restated Financial Data Schedule for 1997 (EDGAR version
                   only)
         27.03 -   Restated Financial Data Schedule for 1996 (EDGAR version
                   only)
         27.04 -   Restated Financial Data Schedule for 1995 (EDGAR version
                   only)
</TABLE>

---------------

        *    Indicates a management contract or compensatory plan or
             arrangement.

        #    Confidential treatment was ordered or has been requested with
             respect to certain portions of these agreements. Such portions have
             been omitted from this filing and have been filed separately with
             the Securities and Exchange Commission.

        (1)  Previously filed with the Commission on September 12, 1996, as an
             exhibit to the Registrant's Form 8-K (File No. 0-28064) regarding
             the acquisition of The McKinley Group, Inc.

        (2)  Previously filed with the Commission on July 3, 1996, as an exhibit
             to the Registrant's Registration Statement on Form S-8 (File No.
             333-07625).

        (3)  Previously filed with the Commission on March 11, 1996, as an
             exhibit to the Registrant's Registration Statement on Form SB-2
             (File No. 333-2328-LA).

        (4)  Previously filed with the Commission on March 29, 1996, as an
             exhibit to Amendment No. 1 to the Registrant's Registration
             Statement on Form SB-2 (File No. 333-2328-LA).

        (5)  Previously filed with the Commission on April 3, 1996, as an
             exhibit to Amendment No. 2 to the Registrant's Registration
             Statement on Form SB-2 (File No. 333-2328-LA).

        (6)  Previously filed with the Commission on April 3, 1996, as an
             exhibit to Amendment No. 3 to the Registrant's Registration
             Statement on Form SB-2 (File No. 333-2328-LA).

        (7)  Previously filed with the Commission on February 28, 1997, as an
             exhibit to the Registrant's Quarterly Report on Form 10-QSB/A (File
             No. 0-28064).

        (8)  Previously filed with the Commission on March 3, 1997, as an
             exhibit to the Registrant's Registration Statement on Form S-1
             (File No. 333-22669).

        (9)  Previously filed with the Commission on March 31, 1997, as an
             exhibit to the Registrant's Annual Report on Form 10-K (File No.
             0-28064).

                                       35
<PAGE>   38

        (10) Previously filed with the Commission on April 2, 1997, as an
             exhibit to the Registrant's Current Report on Form 8-K (File No.
             0-28064).

        (11) Previously filed with the Commission on July 25, 1997, as an
             exhibit to the Registrant's Registration Statement on Form S-3
             (File No. 333-32123)

        (12) Previously filed with the Commission on December 4, 1997, as an
             exhibit to the Registrant's Current Report on Form 8-K (File No.
             0-28064).

        (13) Previously filed with the Commission on December 5, 1997, as an
             exhibit to the Registrant's Registration Statement on Form S-8
             (File No. 333-41523)

        (14) Previously filed with the Commission on February 17, 1998, as an
             exhibit to the Registrant's Current Report on Form 8-K (File No.
             0-28064).

        (15) Previously filed with the Commission on February 19, 1998, as an
             exhibit to the Registrant's Registration Statement on Form S-8
             (File No. 333-46591).

(b)  Reports on Form 8-K: On December 4, 1997 the Company filed a Form 8-K
     regarding the acquisition of Netbot, Inc. There were no other reports on
     Form 8-K filed during the quarter ended December 31, 1997.

(c)  Exhibits: See item 14(a)3 above.

(d)  Financial Statement Schedules: See Item 14(a)2 above.

                                       36
<PAGE>   39

                                  EXCITE, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........    38
Report of Price Waterhouse LLP, Independent Accountants.....    39
Consolidated Balance Sheets as of December 31, 1996 and
  1997......................................................    40
Consolidated Statements of Operations for the years ended
  December 31, 1995,
  1996 and 1997.............................................    41
Consolidated Statements of Shareholders' Equity (Net Capital
  Deficiency) for the years ended December 31, 1995, 1996
  and 1997..................................................    42
Consolidated Statements of Cash Flows for the years ended
  December 31, 1995,
  1996 and 1997.............................................    43
Notes to Consolidated Financial Statements..................    44
</TABLE>

                                       37
<PAGE>   40

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Excite, Inc.

     We have audited the accompanying consolidated balance sheets of Excite,
Inc. as of December 31, 1996 and 1997, and the related consolidated statements
of operations, shareholders' equity (net capital deficiency) and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. In August 1996, the Company merged
with The McKinley Group, Inc. in a transaction that was accounted for as a
pooling of interests. We did not audit the financial statements of The McKinley
Group, Inc. for the year ended December 31, 1995, which statements reflect net
losses constituting approximately 49% of the related consolidated financial
statement totals for the year ended December 31, 1995. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for The McKinley Group, Inc. is
based solely on the report of the other auditors.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.

     In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Excite, Inc. at
December 31, 1996 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.

                                          ERNST & YOUNG LLP

Palo Alto, California
January 22, 1998

                                       38
<PAGE>   41

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
The McKinley Group, Inc.

     In our opinion, the balance sheets and the related statements of
operations, stockholders' deficit, and cash flows present fairly, in all
material respects, the financial position of The McKinley Group, Inc. at
December 31, 1995, and the results of its operations and its cash flows for the
year ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

     The financial statements have been prepared assuming the Company will
continue as a going concern. The Company has suffered recurring losses from
operations, has a net capital deficiency and is not in compliance with certain
covenants underlying outstanding bank borrowings. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

     On August 6, 1996, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement") with Excite, Inc. Upon the effectiveness of the
Agreement, the Company's stockholders will exchange all of their shares of
Common Stock for shares of Common Stock of Excite, Inc., in a business
combination to be accounted for as a pooling of interests.

                                          PRICE WATERHOUSE LLP

San Jose, CA
August 6, 1996

                                       39
<PAGE>   42

                                  EXCITE, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 1996       1997
                                                                -------    -------
                                                                  (IN THOUSANDS)
<S>                                                             <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................    $ 3,971    $15,374
  Short-term investments....................................     16,863     16,398
  Restricted investments....................................      1,496        302
  Accounts receivable, net..................................      3,340     20,278
  Prepaid expenses and other current assets.................      1,070      1,972
                                                                -------    -------
     Total current assets...................................     26,740     54,324
Property and equipment, net.................................      8,194     12,678
Intangible assets, net......................................     11,841      1,771
Other assets................................................        923      4,657
                                                                -------    -------
                                                                $47,698    $73,430
                                                                =======    =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Borrowings under bank line of credit and other notes
     payable................................................    $ 1,200    $ 6,100
  Accounts payable..........................................      6,699      4,700
  Capital lease obligations, current portion................      2,325      2,904
  Non-lease financing, current portion......................         --      1,176
  Related party liabilities.................................         --      1,575
  Other accrued liabilities.................................      8,392     10,834
                                                                -------    -------
     Total current liabilities..............................     18,616     27,289
Capital lease obligations...................................      3,985      2,789
Non-lease financing.........................................         --      1,613
Convertible note............................................         --      5,000
Commitments and contingencies
Shareholders' equity:
  Convertible preferred stock issuable, no par value
     Authorized -- 4,000 shares issuable in series
     Issuable at December 31, 1996 -- 1,950 shares;
     Issued and outstanding at December 31, 1997 -- none,
      issuable -- 325 shares for unexercised warrant........     15,816        813
  Common stock, no par value
     Authorized -- 50,000 shares
     Issued and outstanding -- 12,108 and 18,676 shares at
      December 31, 1996 and 1997, respectively..............     59,999    121,060
  Deferred compensation.....................................       (388)      (228)
  Unrealized gain (loss) on available-for-sale securities...       (128)        15
  Accumulated deficit.......................................    (50,202)   (84,921)
                                                                -------    -------
     Total shareholders' equity.............................     25,097     36,739
                                                                -------    -------
                                                                $47,698    $73,430
                                                                =======    =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       40
<PAGE>   43

                                  EXCITE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                               1995        1996        1997
                                                              -------    --------    --------
                                                              (IN THOUSANDS, EXCEPT PER SHARE
                                                                           DATA)
<S>                                                           <C>        <C>         <C>
Revenues:
  Advertising revenues....................................    $   145    $ 14,030    $ 50,134
  Contract and other revenues.............................        808         727          17
                                                              -------    --------    --------
     Total revenues.......................................        953      14,757      50,151
Cost of revenues:
  Hosting costs...........................................         65       3,296       7,914
  Royalties and other cost of revenues....................        163         667       3,809
  Amortization of purchased technology....................         --         186       8,214
                                                              -------    --------    --------
     Total cost of revenues...............................        228       4,149      19,937
                                                              -------    --------    --------
Gross profit..............................................        725      10,608      30,214
Operating expenses:
  Research and development................................      2,810       8,030      13,427
  Sales and marketing.....................................      1,648      21,103      27,599
  Distribution license fees...............................         --      11,878       7,615
  General and administrative..............................      2,326       7,081       8,057
  Charge for purchased in-process technology..............        331       3,500          --
  Other merger and acquisition related costs, including
   amortization of goodwill and other purchased
   intangibles............................................         --       3,134       3,389
                                                              -------    --------    --------
     Total operating expenses.............................      7,115      54,726      60,087
                                                              -------    --------    --------
Operating loss............................................     (6,390)    (44,118)    (29,873)
Interest income...........................................          5       1,410       1,246
Interest expense and other................................        (50)       (409)     (1,055)
Equity share of losses of affiliated company..............         --          --        (477)
                                                              -------    --------    --------
Net loss..................................................    $(6,435)   $(43,117)   $(30,159)
                                                              =======    ========    ========
Basic and diluted net loss per share......................    $ (6.15)   $  (4.75)   $  (2.18)
                                                              =======    ========    ========
Shares used in computing net loss per share...............      1,046       9,076      13,851
                                                              =======    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       41
<PAGE>   44

                                  EXCITE, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            (NET CAPITAL DEFICIENCY)

<TABLE>
<CAPTION>
                                     PREFERRED STOCK      COMMON STOCK                         OTHER
                                    -----------------   -----------------     DEFERRED     COMPREHENSIVE   ACCUMULATED
                                    SHARES    AMOUNT    SHARES    AMOUNT    COMPENSATION   INCOME(LOSS)      DEFICIT      TOTAL
                                    ------   --------   ------   --------   ------------   -------------   -----------   --------
                                                                           (IN THOUSANDS)
<S>                                 <C>      <C>        <C>      <C>        <C>            <C>             <C>           <C>
Balance at December 31, 1994.....      --    $     --   1,290    $    108      $  --          $   --        $    (650)   $   (542)
                                                                                                                         --------
  Net loss.......................      --          --      --          --         --              --           (6,435)     (6,435)
  Unrealized gain on
    available-for-sale
    investments..................      --          --      --          --         --             152               --         152
                                                                                                                         --------
      Comprehensive income
        (loss)...................                                                                 --                       (6,283)
                                                                                                                         --------
  Issuance of common stock for
    cash.........................      --          --   1,024       1,921         --              --               --       1,921
  Exercise of stock options......      --          --       1           6         --              --               --           6
  Issuance of common stock for
    equity securities............      --          --      33         300         --              --               --         300
  Issuance of common stock for
    services.....................      --          --       8         196         --              --               --         196
  Note payable conversion........      --          --      22         275         --              --               --         275
  Issuance of common stock and
    warrant in connection with
    asset purchase agreement.....      --          --      70          84         --              --               --          84
  Deferred compensation related
    to stock options, net of
    amortization.................      --          --      --         640       (631)             --               --           9
                                    ------   --------   ------   --------      -----          ------        ---------    --------
Balance at December 31, 1995.....      --          --   2,448       3,530       (631)            152           (7,085)     (4,034)
                                                                                                                         --------
  Net loss.......................      --          --      --          --         --              --          (43,117)    (43,117)
  Unrealized loss on
    available-for-sale
    investments..................      --          --      --          --         --            (280)              --        (280)
                                                                                                                         --------
      Comprehensive income
        (loss)...................                                                                 --                      (43,397)
                                                                                                                         --------
  Issuance of common stock for
    cash.........................      --          --     283       1,412         --              --               --       1,412
  Notes payable conversions......      --          --      87         400         --              --               --         400
  Issuance of warrant in
    connection with distribution
    agreement....................      --          --      --       1,625         --              --               --       1,625
  Issuance of shares, note
    payable conversion and
    exercise of outstanding
    warrants in connection with
    the Company's IPO, net of
    issuance costs of $3,682.....      --          --   3,651      36,418         --              --               --      36,418
  Conversion of redeemable
    preferred stock in connection
    with the Company's IPO.......      --          --   5,324      16,129         --              --               --      16,129
  Exercise of stock options......      --          --     300         375         --              --               --         375
  Amortization of deferred
    compensation, net of
    cancellations................      --          --      --           7        243              --               --         250
  Issuance of common and
    preferred stock issuable in
    connection with asset
    purchase agreements..........   1,950      15,816      15         103         --              --               --      15,919
                                    ------   --------   ------   --------      -----          ------        ---------    --------
Balance at December 31, 1996.....   1,950      15,816   12,108     59,999       (388)           (128)         (50,202)     25,097
                                                                                                                         --------
  Net loss.......................      --          --      --          --         --                          (30,159)    (30,159)
  Unrealized gain on
    available-for-sale
    investments..................      --          --      --          --         --             143               --         143
                                                                                                                         --------
      Comprehensive income
        (loss)...................                                                                                         (30,016)
                                                                                                                         --------
  Issuance of common stock for
    cash, net of issuance costs
    of $800......................      --          --   2,900      38,350         --                               --      38,350
  Conversion of common stock
    warrant to preferred stock
    warrant......................      --       1,625      --      (1,625)        --              --               --          --
  Exercise of outstanding
    warrants.....................     229          --      43          --         --              --               --          --
  Issuance of common stock under
    employee plans...............      --          --     592       2,319         --                                        2,319
  Compensation expense from
    accelerated deferred
    compensation charges and
    stock option vesting.........      --          --      --       1,658         --              --               --       1,658
  Amortization of deferred
    compensation, net of
    cancellations................      --          --      --          --        160              --               --         160
  Acquisition of Netbot, Inc.:
    Issuance of common stock.....      --          --     854       3,731         --              --               --       3,731
    Accumulated deficit..........      --          --      --          --         --              --           (4,560)     (4,560)
  Conversion of preferred stock
    to common stock..............   (2,179)   (16,628)  2,179      16,628         --              --               --          --
                                    ------   --------   ------   --------      -----          ------        ---------    --------
Balance at December 31, 1997.....      --    $    813   18,676   $121,060      $(228)         $   15        $ (84,921)   $ 36,739
                                    ======   ========   ======   ========      =====          ======        =========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       42
<PAGE>   45

                                  EXCITE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                               1995        1996        1997
                                                              -------    --------    --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>         <C>
Cash flows from operating activities:

  Net loss................................................    $(6,435)   $(43,117)   $(30,159)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
     Amortization of deferred compensation................          9         243         160
     Compensation expense from accelerated deferred
       compensation charges and stock option vesting......         --          --       1,658
     Issuance of warrants.................................         --       1,625          --
     Equity securities issued for services................        196          --          --
     Depreciation.........................................        140       2,189       5,727
     Amortization of intangible assets....................         19         954      10,070
     Charge for purchased in-process technology...........        331       3,500          --
     Loss on disposal of property and equipment...........         --          96          --
     Provision for loan impairment........................         --         629          --
     Changes in assets and liabilities:
       Accounts receivable................................       (335)     (2,957)    (16,938)
       Prepaid expenses and other current assets..........       (168)       (863)       (879)
       Other assets.......................................        (36)       (873)     (3,726)
       Accounts payable...................................      1,021       5,515      (2,395)
       Accrued compensation...............................        384         425       3,307
       Related party liabilities..........................         --          --       1,575
       Other accrued liabilities..........................        222       6,512        (295)
                                                              -------    --------    --------
          Net cash used in operating activities...........     (4,652)    (26,122)    (31,895)
                                                              -------    --------    --------
Cash flows from investing activities:
  Purchases of property and equipment.....................       (811)       (892)     (4,561)
  Purchases of investments................................       (358)    (49,765)    (47,433)
  Sales and maturities of investments.....................         --      31,936      49,235
  Notes and advances to Novo MediaGroup, Inc..............         --        (629)         --
  Payments for acquisitions, net of cash received.........       (150)         --        (308)
                                                              -------    --------    --------
          Net cash used in investing activities...........     (1,319)    (19,350)     (3,067)
                                                              -------    --------    --------
Cash flows from financing activities:
  Payments on capital lease and other financing
     obligations..........................................        (69)     (1,875)     (3,564)
  Proceeds from bank line of credit and other notes
     payable..............................................      1,277       3,490       6,000
  Proceeds from issuance of convertible note..............         --          --       5,000
  Payments on bank line of credit and other notes
     payable..............................................       (263)     (2,426)     (1,100)
  Proceeds from sale of redeemable convertible preferred
     stock................................................      3,847      12,282          --
  Proceeds from sale of common stock, common stock
     warrants, and exercise of stock options..............      1,927      37,212      40,029
                                                              -------    --------    --------
          Net cash provided by financing activities.......      6,719      48,683      46,365
                                                              -------    --------    --------
Net increase in cash and cash equivalents.................        748       3,211      11,403
Cash and cash equivalents at beginning of period..........         12         760       3,971
                                                              -------    --------    --------
Cash and cash equivalents at end of period................    $   760    $  3,971    $ 15,374
                                                              =======    ========    ========
Non-cash financing activities:
  Conversion of convertible preferred stock to common
     stock................................................    $    --    $ 16,129    $ 16,628
  Conversion of notes payable to common stock.............    $   275    $  1,400    $     --
  Property and equipment acquired under capital leases and
     other non-lease financing............................    $   676    $  7,564    $  6,666
Supplemental cash flow disclosure:
  Cash paid for interest..................................    $    17    $    379    $    992
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       43
<PAGE>   46

                                  EXCITE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Business

     Excite, Inc. ("Excite" or the "Company"), formerly Architext Software,
Inc., which was formed in June 1994, is a global media company offering
consumers and advertisers comprehensive Internet navigation services with
extensive personalization capabilities. The Excite Network consists of the
Excite (www.excite.com) and WebCrawler (www.webcrawler.com) brands, which
provide a gateway to the World Wide Web (the "Web") that organizes, aggregates
and delivers information to meet the needs of individual consumers. Designed to
help consumers navigate the Web, the Excite Network contains a suite of
specialized information services, organized under numerous topical channels,
which combine proprietary search technology, editorial Web reviews, aggregated
content from third parties, bulletin boards and chat and personalization
capabilities. Localized versions of Excite are available in Australia, France,
Germany, Japan, the Netherlands, Sweden and the United Kingdom. The Company
derives a substantial portion of its revenues from selling banner and
sponsorship advertising on its Web sites to customers in various industries. The
Company conducts its business within one industry segment.

     The Company has incurred operating losses to date and incurred a net loss
of approximately $30.2 million for the year ended December 31, 1997. Management
believes that available resources will provide sufficient funding to enable the
Company to meet its obligations through at least December 31, 1998. If
anticipated operating results are not achieved, management has the intent and
believes it has the ability to delay or reduce expenditures so as not to require
additional financial resources if such resources were not available.

  Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. Investments in 50% or less owned companies
and joint ventures over which Excite has the ability to exercise significant
influence are accounted for using the equity method.

  Foreign Currency

     Exchange gains and losses arising from transactions denominated in a
currency other than the functional currency of the entity involved are included
in other expense. Such gains and losses have been insignificant in all years to
date. To date the Company has entered into no foreign currency forward exchange
contracts or other such derivative instruments.

  Basis of Presentation

     In August 1996, the Company acquired The McKinley Group, Inc. ("McKinley")
in a merger transaction accounted for as a pooling of interests (see Note 2.)
McKinley was incorporated in December 1993. All financial information has been
restated to reflect the combined operations of the Company and McKinley. In
November 1997, the Company acquired Netbot, Inc. ("Netbot") in a merger
transaction accounted for as a pooling of interests (see Note 2.) The results of
operations and financial position of Netbot, which was incorporated in May 1996,
were not significant to the Company's consolidated financial statements in any
period, and therefore, amounts prior to the date of acquisition were not
combined with the Company's financial statements.

  Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial

                                       44
<PAGE>   47
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

statements and accompanying notes. Actual results may differ from those
estimates, and such differences may be material to the financial statements.

  Cash, Cash Equivalents and Short-Term Investments

     The Company considers investments in highly liquid instruments purchased
with an original maturity of 90 days or less to be cash equivalents. All of the
Company's cash equivalents and short-term investments, consisting principally of
commercial paper and government securities, are classified as available-for-sale
as of the balance sheet date. These securities are recorded at fair market
value. Unrealized gains and losses on these investments are included in
shareholders' equity. The cost of securities sold is based on specific
identification. There were no material gross realized gains or losses from sales
of securities in the periods presented. The fair value of investments is based
on quoted market prices at December 31, 1996 and 1997. The fair value of
investments presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. All available-for-sale
investments generally mature in one year or less.

<TABLE>
<CAPTION>
                                       DECEMBER 31, 1996                         DECEMBER 31, 1997
                            ---------------------------------------    --------------------------------------
                                             GROSS                                     GROSS
                            HISTORICAL    UNREALIZED                   HISTORICAL    UNREALIZED
                               COST       GAIN/(LOSS)    FAIR VALUE       COST          GAIN       FAIR VALUE
                            ----------    -----------    ----------    ----------    ----------    ----------
                                                             (IN THOUSANDS)
<S>                         <C>           <C>            <C>           <C>           <C>           <C>
Cash and cash
  equivalents:
  Cash..................     $   758         $  --        $   758       $ 5,296         $--         $ 5,296
  Commercial paper......          --            --             --         1,957           1           1,958
  U.S. Government
     securities.........       1,604            --          1,604         8,057           1           8,058
  Money market funds....       1,609            --          1,609            62          --              62
                             -------         -----        -------       -------         ---         -------
                             $ 3,971         $  --        $ 3,971       $15,372         $ 2         $15,374
                             =======         =====        =======       =======         ===         =======
Short-term investments:
  Commercial paper......     $ 3,882         $   3        $ 3,885       $ 7,780         $11         $ 7,791
  Corporate notes.......         770            --            770            --          --              --
  U.S. Government
     securities.........      12,203             5         12,208         8,607          --           8,607
                             -------         -----        -------       -------         ---         -------
                             $16,855         $   8        $16,863       $16,387         $11         $16,398
                             =======         =====        =======       =======         ===         =======
Restricted investments:
  Restricted certificate
     of deposit.........     $ 1,332            --        $ 1,332       $    --         $--         $    --
  Restricted investment
     in common stock....         300          (136)           164           300           2             302
                             -------         -----        -------       -------         ---         -------
                             $ 1,632         $(136)       $ 1,496       $   300         $ 2         $   302
                             =======         =====        =======       =======         ===         =======
</TABLE>

     The restricted investment in common stock is being held as collateral by a
financial institution against the Company's line of credit borrowings (see Note
4.)

     The restricted certificate of deposit at December 31, 1996 was being held
as collateral by a financial institution against a letter of credit for tenant
improvements at the Company's new headquarters.

  Concentration of Credit Risk

     The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, does not require collateral on accounts receivable.
When required, the Company maintains allowances for

                                       45
<PAGE>   48
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

credit losses and such losses have been within management's expectations. The
Company's services are provided to customers in several industries, primarily in
North America.

     Provisions for doubtful accounts were $670,000 and $1.4 million for the
years ended December 31, 1996 and 1997, respectively. Accounts receivable are
stated net of allowances for doubtful accounts of $425,000 and $1.1 million at
December 31, 1996 and 1997, respectively. During 1996, the Company advanced
amounts under notes and advances receivable to Novo MediaGroup, Inc. ("Novo") in
the amount of $629,000, of which $330,000 was evidenced by an 8% promissory note
convertible into shares of Novo common stock. Based on management's assessment
of the financial uncertainty with regard to Novo's ability to repay the
outstanding amounts, an impairment reserve of $629,000 was provided for in 1996.

     Two customers accounted for approximately 26% and 16% respectively, of
total revenues in 1995. One customer accounted for approximately 12% of total
revenues in 1996. No customers accounted for 10% or more of total revenues in
1997.

  Property and Equipment

     Property and equipment are stated at cost, net of accumulated depreciation
and amortization, which includes the amortization of assets recorded under
capital leases. Property and equipment are depreciated on a straight-line basis
over the estimated useful lives of the assets (generally one to five years.)
Equipment purchased under capital leases is amortized on a straight-line basis
over the lesser of the estimated useful life of the asset or the lease term.
Property and equipment, at cost, consist of the following:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 1996       1997
                                                                -------    -------
                                                                  (IN THOUSANDS)
<S>                                                             <C>        <C>
Computer equipment and internal use software................    $ 9,859    $15,158
Furniture and fixtures......................................        667      2,862
Leasehold improvements......................................         60      2,607
                                                                -------    -------
                                                                 10,586     20,627
Less accumulated depreciation and amortization..............     (2,392)    (7,949)
                                                                -------    -------
                                                                $ 8,194    $12,678
                                                                =======    =======
</TABLE>

  Intangible Assets

     Intangible assets consist primarily of goodwill, developed technology,
distribution rights, trademarks, bookmarks and trade names, and are being
amortized generally over periods ranging from four months to three years. These
purchased intangibles and goodwill relate to the acquisitions of certain assets
from other companies.

                                       46
<PAGE>   49
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                        LIFE IN    -------------------
                                                        MONTHS      1996        1997
                                                        -------    -------    --------
                                                                     (IN THOUSANDS)
<S>                                                     <C>        <C>        <C>
Trademarks, trade names, goodwill and other.........    24 - 36    $ 2,708    $  2,708
Developed technology................................         13      8,400       8,400
Operating agreement.................................          4      1,200       1,200
Distribution agreement..............................         24        500         500
                                                                   -------    --------
                                                                    12,808      12,808
Less accumulated amortization.......................                  (967)    (11,037)
                                                                   -------    --------
                                                                   $11,841    $  1,771
                                                                   =======    ========
</TABLE>

  Long-Lived Assets

     In accordance with Financial Accounting Standards Board ("FASB") Statement
of Financial Accounting Standard ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the carrying
value of intangible assets and other long-lived assets is reviewed on a regular
basis for the existence of facts or circumstances, both internally and
externally, that may suggest impairment. To date no such impairment has been
indicated. Should there be an impairment in the future, the Company will measure
the amount of the impairment based on undiscounted expected future cash flows
from the impaired assets. The cash flow estimates that will be used will contain
management's best estimates, using appropriate and customary assumptions and
projections at the time.

  Fair Value of Financial Instruments

     The carrying amount of certain of the Company's financial instruments,
including accounts receivable and accrued liabilities, approximate fair value
because of their short maturities. Because the interest rates on the Company's
notes payable and convertible debt are adjusted periodically to reflect market
rates, the fair value of these instruments approximates their carrying amounts.
The carrying amount of the Company's capital lease and other equipment financing
obligations approximates the fair value of such instruments based upon
management's best estimate of interest rates that would be available to the
Company for similar debt obligations at December 31, 1997.

  Revenue Recognition

     Advertising revenues are derived principally from short-term advertising
contracts in which the Company guarantees a minimum number of impressions (a
view of an advertisement by a consumer) for a fixed fee. The Company has
recently entered into a number of longer-term advertising and commerce
sponsorship agreements. These agreements generally involve more integration with
Excite services and provide for more varied sources of revenue to Excite over
the term of the agreements, which average between 2 to 3 years. Under these
agreements, Excite earns fees for initial programming, initiation of service and
access to the Excite Network, and for generating impressions which in some
instances are guaranteed. The terms of a number of these agreements provide that
revenues from advertising and electronic commerce transactions are to be shared
between the advertiser and Excite as realized. Revenues are generally recognized
ratably over the term of the agreement, provided that the Company does not have
any significant remaining obligations and collection of the resulting receivable
is probable. To the extent that impression deliveries are falling short of the
guarantees, the Company defers recognition of the corresponding revenues.

                                       47
<PAGE>   50
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Advertising

     Costs related to advertising are expensed as incurred. Advertising expense
was approximately $144,000, $10.4 million and $7.0 million for the years ended
December 31, 1995, 1996 and 1997, respectively. The Company has not incurred
significant direct response advertising costs to date.

  Per Share Amounts

     In 1997, the FASB issued Statement No. 128, "Earnings per Share." Statement
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effect of options, warrants,
convertible securities and unvested securities issued subject to repurchase.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all periods have
been restated to conform to the Statement 128 requirements. The Company has
excluded all convertible debt, convertible preferred stock, warrants and
employee stock options from the computation of basic and diluted earnings per
share because all such securities are anti-dilutive for all periods presented.
See Notes 6, 7, and 8 for further information on these securities. See also Note
14 regarding subsequent events affecting common stock outstanding. The following
table sets forth the computation of basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                      -------------------------------------
                                                        1995          1996          1997
                                                      ---------    ----------    ----------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>          <C>           <C>
Net loss..........................................     $(6,435)     $(43,117)     $(30,159)
                                                       =======      ========      ========
  Weighted average shares outstanding.............       1,664         9,686        14,149
  Weighted average unvested common shares issued
     subject to repurchase agreements.............        (618)         (610)         (298)
                                                       -------      --------      --------
Shares used to compute basic and diluted net loss
  per share.......................................       1,046         9,076        13,851
                                                       =======      ========      ========
Basic and diluted net loss per share..............     $ (6.15)     $  (4.75)     $  (2.18)
                                                       =======      ========      ========
</TABLE>

  Reclassifications

     Certain previously reported amounts have been reclassified to conform to
the current presentation format.

  Recent Accounting Pronouncements

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of income and its
components (revenue, expenses, gains, and losses) in a full set of
general-purpose financial statements. The Company adopted SFAS No. 130 as of
December 31, 1997 and has presented comprehensive income for all periods
presented in the Statement of Shareholders' Equity.

     In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. The Company adopted SFAS No.
131 as of December 31, 1997. Because the Company operates within a single

                                       48
<PAGE>   51
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operating segment, adoption of SFAS No. 131 did not result in the restatement of
any previously reported information.

2. BUSINESS COMBINATIONS AND PURCHASED PRODUCT RIGHTS

     During the three years ended December 31, 1997, Excite completed the
following acquisitions:

<TABLE>
<CAPTION>
                                                                          SHARES OF       SHARES OF EXCITE      SHARES OF
                                                             CASH AND       EXCITE      SERIES E CONVERTIBLE   OPTIONS AND
                                                            PROMISSORY      COMMON        PREFERRED STOCK       WARRANTS
      COMPANY OR TECHNOLOGY ACQUIRED        DATE ACQUIRED   NOTE PAID    STOCK ISSUED          ISSUED            ASSUMED
      ------------------------------        -------------   ----------   ------------   --------------------   -----------
<S>                                         <C>             <C>          <C>            <C>                    <C>
Netbot, Inc. ("Netbot")...................  November 1997                  854,000                               211,053
America Online, Inc.'s ("AOL")
  WebCrawler search and directory
  technology (the "WebCrawler Assets")....  November 1996                                    1,950,000
The McKinley Group, Inc. ("McKinley").....    August 1996                  850,000                                13,742
City.Net Express ("City.Net").............  November 1995    $450,000       70,000
</TABLE>

     In connection with the acquisition of Netbot, a private company and
developer of advanced search technology utilized for electronic commerce, the
Company incurred approximately $1.5 million in merger related expenses,
including $1.3 million for accelerated deferred compensation charges and
$217,000 in professional fees and other expenses. The acquisition was accounted
for as a pooling of interests. Because the results of operations and financial
position of Netbot were not material to Excite's consolidated financial
statements for any periods, financial information prior to the date of
acquisition has not been restated.

     In November 1996, the Company entered into a series of agreements with AOL,
a provider of Internet online services, whereby a co-branded version of Excite
became the exclusive Internet search and directory service for AOL. Under these
agreements, Excite acquired AOL's WebCrawler Assets. The series of agreements
were accounted for as the acquisition of rights to developed and in-process
technologies and distribution rights. The intangible assets were recorded based
on their independently appraised fair values as of December 1, 1996. Of the
total purchase price, $3.5 million was allocated to purchased in-process
technology and the remaining purchase price of approximately $12.6 million was
allocated to trademarks, distribution rights, bookmarks, trade names, goodwill
and other. The amount of the purchase price allocated to purchased in-process
technology was charged to the Company's operations as of December 1, 1996.

     The Company determined the amounts to be allocated to developed and
in-process technology based on whether technological feasibility had been
achieved (as defined and utilized by the Company in assessing software
capitalization) and whether there was any alternative future use for the
technology. Other considerations included the time and cost to complete each
project, anticipated gross profit, and associated risks which included the
inherent difficulties and uncertainties in completing the project and thereby
achieving technological feasibility and risks related to the viability of and
potential changes to future target markets. The Company concluded that the
in-process technology had no alternative future use after taking into
consideration the potential for usage of the technology in different products,
resale of the technology and internal usage.

     In connection with the McKinley acquisition, which was accounted for as a
pooling of interests, the Company incurred approximately $2.2 million in merger
related expenses, including $1.0 million for legal and other professional fees,
$901,000 for personnel severance and outplacement expenses and $345,000 for
termination of distribution contracts and discontinuation of duplicate
operations and facilities.

     Of the total purchase price valued at approximately $534,000 for certain
assets of City.Net, $203,000 was allocated to identified intangible assets and
$331,000 was allocated to purchased in-process technology which was charged to
operations at the time of the acquisition.

                                       49
<PAGE>   52
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. OTHER ACCRUED LIABILITIES

     Other accrued liabilities consists of the following:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                -----------------
                                                                 1996      1997
                                                                ------    -------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Deferred revenues...........................................    $1,784    $ 4,269
Accrued compensation........................................       861      3,598
Accrued distribution license fees...........................     2,300         --
Other accrued liabilities...................................     3,447      2,967
                                                                ------    -------
                                                                $8,392    $10,834
                                                                ======    =======
</TABLE>

4. BORROWINGS UNDER BANK LINE OF CREDIT AND OTHER NOTES PAYABLE

     Borrowings under bank line of credit and other notes payable, all of which
are current liabilities, are as follows:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Borrowings under bank line of credit........................    $1,100    $6,000
Other notes payable.........................................       100       100
                                                                ------    ------
                                                                $1,200    $6,100
                                                                ======    ======
</TABLE>

  Borrowings Under Bank Line of Credit

     In March 1997, the Company entered into a $6.0 million line of credit,
which replaced the $1.1 million line of credit outstanding at December 31, 1996.
This line of credit, which expires in June 1998, bears interest at rates ranging
from the bank's prime rate to prime plus .25% (approximately 8.5% at December
31, 1997) and is secured by substantially all of the Company's assets. This line
of credit agreement also contains certain financial covenants, including minimum
requirements for tangible net worth, quick ratio and accounts receivable
balances, as well as prohibiting the declaration and payment of cash dividends
on capital stock. The Company was in compliance with these covenants at December
31, 1997. At December 31, 1997, a short-term investment with a carrying amount
of $302,000 was held by the bank as collateral for borrowings under the line of
credit and is not available to the Company. The Company is currently negotiating
to extend the term of this line of credit.

5. COMMITMENTS

  Capital Leases

     The Company leases certain computer equipment and office furniture under
capital leases. The leases generally provide for the Company to pay taxes,
maintenance and insurance. Most of the leases contain purchase options as well
as renewal provisions at the end of the initial lease terms, which generally
range from

                                       50
<PAGE>   53
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

30 to 36 months. At December 31, 1997 the Company had an additional $2.2 million
available under a lease line of credit expiring on December 31, 1998. Equipment
under capital leases consist of the following:

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 1996      1997
                                                                ------    ------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Computer equipment and internal use software................    $7,891    $9,180
Furniture and fixtures......................................       297       785
                                                                ------    ------
                                                                 8,188     9,965
Less accumulated depreciation and amortization..............    (1,571)   (5,277)
                                                                ------    ------
                                                                $6,617    $4,688
                                                                ======    ======
</TABLE>

  Other Financing Arrangements:

During 1997, the Company entered into several non-lease equipment financing
arrangements. These liabilities are secured by specified computer equipment,
internal use software and office furniture of the Company and are payable over
36 months. At December 31, 1997, property and equipment under non-lease
financing arrangements totaled $2.5 million, which is net of $401,000 of
accumulated depreciation.

  Building Leases

     In 1996 and 1997, the Company entered into leases for new corporate offices
located in Redwood City, California. These leases, which have approximately ten
year terms, commenced during the second and fourth quarters of 1997. The Company
has subleased a portion of this space to a third party under a non-cancelable
sublease agreement which will commence in 1998. The Company leases additional
space, primarily for sales offices, in various states as well as the United
Kingdom. Rent expense under operating leases was approximately $152,000,
$722,000 and $2.4 million for the years ended December 31, 1995, 1996 and 1997,
respectively.

     Annual minimum commitments under these leases and other financing
arrangements are as follows:

<TABLE>
<CAPTION>
                                             CAPITAL      OTHER      OPERATING    SUBLEASE
                                             LEASES     FINANCING     LEASES        RENT
                                             -------    ---------    ---------    --------
                                                            (IN THOUSANDS)
<S>                                          <C>        <C>          <C>          <C>
YEARS ENDING DECEMBER 31,
  1998...................................    $ 3,359     $ 1,378      $ 2,600     $  (856)
  1999...................................      1,903       1,162        2,480        (478)
  2000...................................      1,127         582        2,433          --
  2001...................................         --          --        2,501          --
  2002...................................         --          --        2,463          --
  Thereafter.............................         --          --       10,272          --
                                             -------     -------      -------     -------
Total minimum payments required..........      6,389       3,122      $22,749     $(1,334)
                                                                      =======     =======
Less amounts representing interest.......       (696)       (333)
                                             -------     -------
Present value of future lease payments...      5,693       2,789
Less current portion.....................     (2,904)     (1,176)
                                             -------     -------
                                             $ 2,789     $ 1,613
                                             =======     =======
</TABLE>

                                       51
<PAGE>   54
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. CONVERTIBLE NOTE

     In 1997, the Company entered into a convertible promissory note with Itochu
Corporation ("Itochu") (see also Note 11) in the principal amount of $5.0
million. The note bears interest at the London Interbank Offered Rate plus 1%
(approximately 6.9% at December 31, 1997,) is payable in United States dollars,
and matures on October 17, 2002, although earlier payment is permitted. The
entire unpaid principle amount at the maturity date (or earlier in the event the
Company elects to prepay the note) is convertible, in whole but not in part, at
the option of the holder, into fully paid shares of Excite Common Stock at a
conversion price equal to the average closing price of the shares for the 30
trading day period ending on the date of conversion.

7. SHAREHOLDERS' EQUITY

  Convertible Preferred Stock

     Of the 4,000,000 authorized shares of Convertible Preferred Stock (no par
value), 3,280,000 shares were designated as Series E and were issued in
association with the acquisition of certain assets from AOL in December 1996.
1,950,000 of the Series E shares were issuable to AOL at December 31, 1996, and
all of the Series E shares were issued and converted into Common Stock during
1997. The remaining 720,000 shares of Convertible Preferred Stock authorized
remained undesignated at December 31, 1997.

  Common Stock

     In April 1996, the Company completed its initial public offering and issued
2,300,000 shares of its Common Stock at a price of $17.00 per share. The Company
received approximately $35.4 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 Redeemable Convertible
Preferred Stock was automatically converted into two shares of Common Stock,
outstanding warrants were exercised (on a net exercise basis) at an exercise
price of $17.00 per share, resulting in the issuance of 1,191,176 shares of
Common Stock, and $1.0 million principal amount of notes payable was converted
into 160,000 shares of Common Stock.

     On March 3, 1997 the Company filed a registration statement on Form S-1
with the United States Securities and Exchange Commission with respect to the
sale of shares of the Company's Common Stock. The Company sold all of the
2,900,000 shares of the Company's Common Stock offered to Intuit Inc. ("Intuit")
on June 26, 1997 at a price of $13.50 per share (see also Note 11.) Proceeds to
the Company from this offering were approximately $38.4 million net of offering
costs.

     Intuit was also granted a right of first refusal to participate in certain
future issuances of the Company's securities in order to prevent dilution of
Intuit's percentage ownership, as well as registration rights with respect to
the shares originally purchased, and any shares that might be purchased pursuant
to the right of first refusal. The agreements also place certain conditions on
Intuit's ability to dispose of its shares of, or acquire additional shares of,
the Company's Common Stock.

     At December 31, 1997, 1,780,020 shares of Common Stock issued by the
Company were subject to stock repurchase agreements whereby the Company has the
option to repurchase the unvested shares upon termination of employment for any
reason, with or without cause, at the original price paid for the shares.
Generally the stock vests 30% immediately with the remaining 70% vesting ratably
over 48 months from the date of issuance. At December 31, 1997, 181,718 shares
of Common Stock were subject to repurchase at the option of the Company at the
original exercise price ranging from $0.00045 to $0.035.

  Warrants

     During 1995, the Company issued warrants to purchase 30,000 shares of
Series A and 16,000 shares of Series B Redeemable Convertible Preferred Stock at
exercise prices of $0.67 and $1.25 per share, respectively,

                                       52
<PAGE>   55
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in connection with an equipment lease agreement. These warrants converted into
warrants to purchase Common Stock upon the Company's initial public offering in
April 1996. In January 1997, the holder of these warrants elected to exercise
the warrants and receive a lesser number of shares in exchange for a reduction
in the exercise price resulting in the issuance of 43,466 shares of Common
Stock.

     During 1995, the Company issued warrants to purchase 1,200,000 shares of
Common Stock at an exercise price of $0.125 per share in connection with the
sale of Series B Redeemable Convertible Preferred Stock. These warrants were
exercised in April 1996 in connection with the Company's initial public
offering. Also during 1995, the Company issued warrants to purchase 36,000 and
28,540 shares of Common Stock at exercise prices of $0.67 and $1.25 per share,
respectively, in connection with an employment offer. These warrants were
exercised in 1996.

     During 1995, the Company issued warrants to purchase 2,356 shares of Common
Stock at an exercise price of $32.66 per share in connection with obtaining a
working capital line of credit from a bank (see Note 4.) These warrants expire
in September 2001.

     In February 1996, the Company issued warrants to purchase 7,095 shares of
Common Stock at an exercise price of $101.27 per share in connection with a
consulting services agreement. These warrants fully vest on January 31, 1997 and
expire on January 31, 1999.

     In March 1996, the Company entered into an agreement with AOL whereby, in
return for certain distribution rights, the Company issued a warrant to purchase
650,000 shares of Common Stock at an exercise price of $8.00 per share. The
warrant expires in March 2001. The value of the warrant was established through
an independent appraisal. A charge to operations of $1.6 million for the fair
value of the warrant was recorded at the time of issuance. Upon the closing of
the acquisition of the WebCrawler Assets, this warrant was converted into a
warrant to purchase an equivalent number of shares of Series E-3 Convertible
Preferred Stock at the same exercise price per share. The value attributed to
the amendment of the warrant terms from Common Stock to Series E-3 Convertible
Preferred Stock was minimal, as the expiration date of the warrant was also
amended such that 325,000 shares exercisable under this warrant would expire, if
unexercised, on September 30, 1997, instead of in March, 2001. In September
1997, 325,000 shares were exercised under this warrant with the holder electing
to receive a lesser number of shares in exchange for a reduction in the exercise
price, resulting in the issuance of 229,271 shares of Series E-3 Convertible
Preferred stock, which were converted into Common Stock in December 1997.

     In November 1997, as part of the acquisition of Netbot, the Company assumed
warrants under which the holder can purchase 2,087 shares of Excite Common Stock
at an exercise price of approximately $11.49 per share in connection with an
equipment lease agreement entered into by Netbot prior to the acquisition.

8. EMPLOYEE BENEFIT PLANS

  Stock Option Plans

     During 1995, the Company adopted the 1995 Equity Incentive Plan (the "1995
Plan") under which incentive stock options or non-qualified stock options to
purchase Common Stock may be granted to eligible participants. Under the 1995
Plan, options to purchase Common Stock may be granted at prices no less than 85%
of the fair market value on the date of grant (110% of fair value in certain
instances.) Options generally vest over a 48-month period. Options granted under
the 1995 Plan before its termination in April 1996 remain outstanding in
accordance with their terms, but no further options have been granted under the
1995 Plan after the date of its termination.

     Additionally, in February 1996 the Company's Board of Directors adopted,
and in March 1996 the Company's shareholders approved, increases to the number
of shares authorized for issuance under the 1995 Plan totaling 550,000 shares,
the 1996 Equity Incentive Plan (the "1996 Plan") and 1996 Directors

                                       53
<PAGE>   56
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock Option Plan (the "Directors Plan") which authorized the issuance of
1,500,000 and 150,000 shares of Common Stock, respectively, upon exercise of
stock options granted to eligible participants under the 1996 Plan and to
directors under the Directors Plan. In November 1996 and January 1997, the Board
approved, and in June 1997 the shareholders approved, amendments to the 1996
Plan to increase the number of shares thereunder by 800,000 and 2,455,000
shares, respectively.

     The 1996 Plan serves as the successor equity incentive program to the
Company's 1995 Plan. The 1996 Plan provides for the grant of either incentive
stock options (as defined in Section 422 of the Internal Revenue Code of 1986,
as amended) or non qualified stock options and stock bonuses and the issuance of
restricted stock by the Company to eligible participants at a price no less than
85% of the fair value on the date of grant. Options generally vest over a 48
month period. No person is eligible to receive more than 500,000 shares in any
calendar year pursuant to grants under the 1996 Plan, other than new employees
of the Company who will be eligible to receive up to a maximum of 800,000 shares
in the calendar year in which they commence employment with the Company. Shares
that (i) are subject to issuance upon exercise of an option but cease to be
subject to such stock option for any reason other than exercise of such stock
option, (ii) are subject to an award granted under the 1996 Plan but are
forfeited or are repurchased by the Company at the original issue price or (iii)
are subject to an award that otherwise terminates without shares being issued
will again be available for grant and issuance in connection with future awards
under the 1996 Plan. The 1996 Plan will terminate in February 2006, unless
terminated earlier in accordance with the provisions of the 1996 Plan.

     A summary of activity under the Plans is as follows:

<TABLE>
<CAPTION>
                                                     OPTIONS OUTSTANDING
                                     SHARES     ------------------------------      WEIGHTED
                                    AVAILABLE   NUMBER OF                           AVERAGE
                                    FOR GRANT    SHARES      PRICE PER SHARE     EXERCISE PRICE
                                    ---------   ---------   ------------------   --------------
                                                       (SHARES IN THOUSANDS)
<S>                                 <C>         <C>         <C>        <C>       <C>
Initial shares authorized........     1,650          --                     --           --
  Options granted................    (1,375)      1,375     $0.035 -   $34.612       $ 0.31
  Options exercised..............        --          (1)               $ 8.194       $ 8.19
                                     ------       -----
Balance at December 31, 1995.....       275       1,374     $0.035 -   $34.612       $ 0.31
  Additional shares authorized...     3,000          --                     --           --
  Options granted................    (2,836)      2,836     $2.500 -   $67.757       $ 6.80
  Options exercised..............        --        (300)    $0.035 -   $ 5.750       $ 0.33
  Options canceled...............       263        (263)    $0.035 -   $67.757       $10.50
  Options expired................      (528)         --                     --           --
                                     ------       -----
Balance at December 31, 1996.....       174       3,647     $0.035 -   $67.757       $ 4.66
  Additional shares authorized...     2,664          --                     --           --
  Options granted................    (1,958)      1,958     $8.750 -   $28.375       $13.08
  Options exercised..............        --        (564)    $0.035 -   $16.125       $ 2.61
  Options canceled...............       633        (633)    $0.035 -   $67.757       $ 5.17
  Options expired................      (210)         --                     --           --
                                     ------       -----
Balance at December 31, 1997.....     1,303       4,408     $0.035 -   $67.757       $ 7.89
                                     ======       =====
</TABLE>

  Employee Stock Purchase Plan

     In February 1996 the Company's Board of Directors adopted, and in March
1996 the Company's shareholders approved, the 1996 Employee Stock Purchase Plan
(the "ESPP") to provide employees of the Company with an opportunity to purchase
Common Stock through payroll deductions. Under the ESPP, 150,000 shares of
Common Stock have been reserved for issuance, subject to anti-dilution
adjustments. The

                                       54
<PAGE>   57
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ESPP became effective in December 1996. The Board of Directors has the authority
to determine the duration of offering periods, up to a maximum of 24 months.
Eligible employees may participate in the ESPP by authorizing payroll deductions
of an amount determined by the Board of Directors. The amount of authorized
payroll deductions may not be less than 2% nor more than 10% of an employee's
compensation, not to exceed $21,250 per year. Amounts withheld are applied at
the end of every six-month accumulation period to purchase shares of Common
Stock, but not more than the number of shares as the Board of Directors shall
determine.

     Participants may withdraw their contributions at any time prior to fifteen
days before the stock is purchased, and such contributions will be returned to
the participants without interest. The purchase price is equal to 85% of the
lower of (i) the market price of the Company's Common Stock immediately before
the beginning of the applicable period or (ii) the market price of the Company's
Common Stock at the time of the purchase. As of December 31, 1997, 27,230 shares
had been purchased under the ESPP.

  Accounting for Stock-Based Compensation

     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock plans because, as discussed
below, the alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock-Based Compensation' ("Statement 123"), requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, if the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation is recognized.

     Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock plans granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                                -------------------------
                                                                1995      1996      1997
                                                                -----     -----     -----
<S>                                                             <C>       <C>       <C>
Average risk-free interest rate............................      5.7%      5.9%      6.1%
Average expected life (in years)...........................      4.5       4.5       3.0
Dividend yield.............................................        0%        0%        0%
Expected volatility factor of the market price of the
  Company's Common Stock(1)................................        0%       75%       75%
</TABLE>

---------------

(1) Options granted prior to the Company's initial public offering and by
     non-public companies prior to their merger with Excite were valued using
     the minimum value method.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

                                       55
<PAGE>   58
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                      -------------------------------------
                                                        1995          1996          1997
                                                      ---------    ----------    ----------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>          <C>           <C>
Net loss -- as reported...........................     $(6,435)     $(43,117)     $(30,159)
                                                       =======      ========      ========
Net loss -- pro forma.............................     $(6,437)     $(44,104)     $(37,441)
                                                       =======      ========      ========
Net loss per share -- as reported.................     $ (6.15)     $  (4.75)     $  (2.18)
                                                       =======      ========      ========
Net loss per share -- pro forma...................     $ (6.15)     $  (4.86)     $  (2.70)
                                                       =======      ========      ========
</TABLE>

     The weighted average fair value of options granted during 1995, 1996 and
1997 was approximately $0.03, $3.54, and $6.89 per share, respectively, and was
approximately $7.74 for shares granted under the ESPP in 1997.

     The following table summarizes information about fixed stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                      -----------------------------------------   ---------------------------
                                         WEIGHTED-
                         NUMBER OF        AVERAGE     WEIGHTED-      NUMBER OF      WEIGHTED-
                          SHARES         REMAINING     AVERAGE        SHARES         AVERAGE
 RANGE OF EXERCISE      OUTSTANDING     CONTRACTUAL   EXERCISE      EXERCISABLE     EXERCISE
      PRICES          (IN THOUSANDS)       LIFE         PRICE     (IN THOUSANDS)      PRICE
-------------------   ---------------   -----------   ---------   ---------------   ---------
<C>         <C>       <C>               <S>           <C>         <C>               <C>
$ 0.035 -   $ 0.290          571         7.9 years     $ 0.24           206          $ 0.26
  0.580 -     2.500          409         8.6             1.63           219            1.40
  5.500 -     9.875        2,332         9.0             6.94           432            6.29
 10.250 -    17.125          586         9.2            11.63            80           11.63
 20.125 -    28.375          508         9.9            21.46             3           21.20
 67.757 -    67.757            2         8.3            67.76             1           67.76
                           -----                                        ---
                           4,408         8.9             7.89           941            4.36
                           =====                                        ===
</TABLE>

  Employee Benefit Plan

     The Company has a savings plan (the "Savings Plan") that qualifies as a
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a percentage (not to
exceed 15%) of their pretax earnings up to the Internal Revenue Service's annual
contribution limit. All employees on the United States payroll of the Company
are eligible to participate in the Plan. The Company is not required to
contribute to the Savings Plan and has made no contributions since the inception
of the Savings Plan.

9. INCOME TAXES

     Due to operating losses and the inability to recognize an income tax
benefit therefrom, there is no provision for income taxes for 1995, 1996 or
1997.

                                       56
<PAGE>   59
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows:

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                                ------------------------
                                                                   1996          1997
                                                                ----------    ----------
                                                                     (IN THOUSANDS)
<S>                                                             <C>           <C>
Net operating loss carryforwards............................     $ 15,200      $ 25,160
Research credits............................................          400           910
Acquired intangible assets..................................        1,865         5,670
Depreciation................................................          390         1,730
Other.......................................................        1,345           710
                                                                 --------      --------
          Total deferred tax assets.........................       19,200        34,180
Valuation allowance for deferred tax assets.................      (19,200)      (34,180)
                                                                 --------      --------
          Net deferred tax assets...........................     $     --      $     --
                                                                 ========      ========
</TABLE>

     Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $16.6 million and $15.0 million during the years ended December 31,
1996 and 1997, respectively. Approximately $3.0 million of the valuation
allowance at December 31, 1997 is attributable to stock option deductions, the
benefit of which will be credited to paid in capital when realized.

     As of December 31, 1997, the Company had federal and state net operating
loss carryforwards of approximately $66.3 million and $43.4 million,
respectively. The federal net operating loss carryforwards will expire at
various dates beginning in 2009 through 2012, and the state net operating loss
carryforwards will expire at various dates beginning in 1999 through 2002. As of
December 31, 1997 the Company also had federal and California research and
development credit carryforwards of approximately $650,000 and $390,000,
respectively. The federal credits will expire in 2009 through 2012 if not
utilized.

     Utilization of the net operating losses and tax credit carryforwards may be
subject to a substantial annual limitation due to the ownership change
provisions of the Internal Revenue Code of 1986. The annual limitation may
result in the expiration of net operating losses and credits before full
utilization.

10. SEGMENT INFORMATION

     The Company operates in the Internet navigation industry business segment.
The Company derives substantially all of its revenues from selling banner and
sponsorship advertising on its Web sites to customers in various industries.

                                       57
<PAGE>   60
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Information by Geographic Area

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                               1995        1996        1997
                                                              -------    --------    --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>         <C>
Revenues:
  United States operations:
     United States customers..............................    $   953    $ 14,721    $ 48,235
     International customers..............................         --          36         719
                                                              -------    --------    --------
                                                                  953      14,757      48,954
  International operations:
     International customers..............................         --          --       1,197
                                                              -------    --------    --------
       Total revenues.....................................    $   953    $ 14,757    $ 50,151
                                                              =======    ========    ========
Operating loss:
  United States operations................................    $(6,390)   $(43,989)   $(26,477)
  International operations................................         --        (129)     (3,396)
                                                              -------    --------    --------
       Total operating loss...............................    $(6,390)   $(44,118)   $(29,873)
                                                              =======    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                               ------------------------------
                                                                1995       1996        1997
                                                               ------     -------     -------
                                                                       (IN THOUSANDS)
<S>                                                            <C>        <C>         <C>
Long-lived assets:
  United States operations.................................    $1,686     $20,958     $18,993
  International operations.................................        --          --         113
                                                               ------     -------     -------
                                                               $1,686     $20,958     $19,106
                                                               ======     =======     =======
Total assets:
  United States operations.................................    $3,801     $47,668     $72,525
  International operations.................................        --          30         905
                                                               ------     -------     -------
                                                               $3,801     $47,698     $73,430
                                                               ======     =======     =======
</TABLE>

11. RELATED PARTY TRANSACTIONS

  Investment in Affiliated Company

     In October 1997, the Company and Itochu Corporation and certain affiliated
entities (collectively "Itochu") entered into a joint venture agreement with
respect to the Company's wholly-owned subsidiary, Excite Japan, Co. Ltd.
("Excite Japan") in order to provide Web based information services to the
Japanese market. The Company intends to retain a 50% equity interest in Excite
Japan. Advertising sales responsibilities will be assumed by CTC Create
Corporation, a wholly-owned subsidiary of Itochu Corporation. The joint venture
agreement with respect to Excite Japan obligates Excite and Itochu to make
capital contributions in the aggregate amount of $10.0 million by March 31,
1999. Itochu loaned Excite $5.0 million (see Note 6) in 1997 in order to fund
Excite's capital contributions. As of December 31, 1997 Excite had invested
$168,000 in the joint venture, and had recognized 50% of the losses through
December 31, 1997 totaling $477,000. Condensed financial information of Excite
Japan has not been presented as its operating results and financial position are
not material to Excite.

                                       58
<PAGE>   61
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Other Related Party Transactions

     In June 1997, the Company sold 2,900,000 shares of the Company's Common
Stock to Intuit at a price of $13.50 per share. Proceeds from this offering were
approximately $38.4 million net of offering costs. Also in June 1997, the
Company entered into a Joint Activities Agreement with Intuit. Under this
agreement, Intuit became the exclusive provider and aggregator of financial
content on all of Excite's services, and Excite became the exclusive search and
navigation service featured in the U.S. versions of Intuit's Quicken, Quickbooks
and TurboTax products. Under this agreement, the two companies share certain
revenues and expenses at varying amounts throughout the seven year term of this
agreement. For the year ended December 31, 1997, the Company recorded
approximately $1.5 million in payments due to Intuit under this agreement, of
which approximately $836,000 was unpaid as of December 31, 1997.

     In November 1996, the Company entered into a five-year distribution
agreement with AOL pursuant to which the Company will provide to AOL a
co-branded version of Excite and, for a minimum of a two year period, be the
exclusive provider of Web search and directory services for AOL. AOL and Excite
will share advertising revenues derived from the use of these services by AOL
subscribers. If either of the parties does not elect to continue the exclusivity
period for the remaining three year period of the agreement, AOL will be
permitted to offer other Web navigation services on its online service; however,
Excite will remain as the "default" Web navigation service and Excite will
receive a larger percentage of the advertising revenues derived from the use of
Excite through AOL. Excite will also advertise AOL's service on Excite and AOL
will pay a commission to the Company for new AOL subscribers referred from these
advertisements. The Company is also required to satisfy certain technical,
product feature and editorial criteria. In addition, the Company completed the
purchase of the WebCrawler Assets from AOL in March 1997. Revenues and expenses
to date associated with this agreement have not been significant.

12. SIGNIFICANT AGREEMENTS

     In April 1996, Excite and McKinley each entered into agreements with
Netscape Communications Corporation ("Netscape") under which they were each
designated as one of five "Premier Providers" of search and navigation services
accessible from the "Net Search" button on the Netscape home page. These
agreements provided that the "Premier Provider" status was established for one
year from April 1, 1996, in exchange for which the Company made payments in cash
and delivery of advertising impressions totaling $10.0 million over the course
of the year. These contracts were subsequently extended to April 30, 1997.

     In March 1997, the Company entered into an agreement to continue the
Premier Provider arrangement for the Excite brand, and a Marquee Provider
agreement for the WebCrawler brand covering the period from May 1, 1997 through
April 30, 1998. Under the terms of these agreements, the Company is committed to
make minimum payments of $8.25 million in exchange for a guaranteed number of
impressions. Of the $8.25 million minimum, a portion is being applied towards
advertising by Netscape on the Excite Network over the one year term of the
agreements based upon delivery of such advertisements, with the remainder being
paid in cash at intervals over the term of the agreements. To the extent that
the number of impressions provided by Netscape under the Premier Provider and
Marquee Provider agreements exceed the minimum guarantees, the Company will be
subject to additional fees based on the actual number of impressions delivered
above the minimum.

     In June 1997, the Company entered into a Co-Marketing Services Agreement
and a Trademark License Agreement with Netscape. Under these agreements, the
Company is responsible for the programming, production, operations and
advertising sales of "International Netscape Guide by Excite," a new service
being made available in Japan, Germany, France, the United Kingdom and
Australia. In connection with these agreements, the Company made a payment of
$4.0 million to Netscape in July 1997, which is being amortized over the terms
of these agreements to distribution license fees expense. At December 31, 1997,
the unamortized portion of this payment of $3.4 million was included in other
assets.

                                       59
<PAGE>   62
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. LITIGATION

     On November 18, 1996, Kristine Paaso and Laura Lindsey filed a complaint in
the California Superior Court, Santa Clara County, against the Company and
certain of its founders alleging breach of an alleged oral agreement, breach of
fiduciary duty and fraud. The plaintiffs allege that they participated in the
creation of the Company's business plan and were entitled to participate as
officers and shareholders of the Company. The complaint seeks an unspecified
amount of damages, including punitive damages. In February 1998, the Court
granted the Company a motion for summary judgement to this complaint and entered
judgement in favor of the Company and the individual defendants on all claims.
The plaintiffs have subsequently filed a notice of appeal from the judgment. The
Company intends to continue to defend this action vigorously. Although it not
possible to ascertain the definitive outcome of this litigation at this time, an
unfavorable outcome could have an adverse effect on the Company's business,
results of operations and financial condition.

     The Company is subject to other legal proceedings and claims that arise in
the ordinary course of business. Management currently believes that the ultimate
amount of liability, if any, with respect to any pending actions, either
individually or in the aggregate, will not materially affect the financial
position, results of operations or liquidity of the Company. However, the
ultimate outcome of any litigation is uncertain. If an unfavorable outcome were
to occur, the impact could be material. Furthermore, any litigation, regardless
of the outcome, can have an adverse impact on the Company's results of
operations as a result of defense costs, diversion of management resources, and
other factors.

14. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT

     On February 2, 1998 the Company acquired MatchLogic, Inc. ("MatchLogic"), a
private company providing advertisers and agencies with Internet advertising
management services which began operations in May 1997. The transaction was
effected through the issuance of approximately 3.1 million shares of the
Company's Common Stock and assumption of options and warrants to purchase
524,419 shares of Common Stock, and was accounted for as a pooling of interests.
In connection with the transaction, the Company incurred approximately $700,000
in merger related expenses primarily for legal and other professional fees in
the first quarter of 1998.

     Combined results of operations as they will be reported are as follows:

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                      -------------------------------------
                                                        1995          1996          1997
                                                      ---------    ----------    ----------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                   (UNAUDITED)
<S>                                                   <C>          <C>           <C>
Revenues..........................................     $   953      $ 14,757      $ 54,114
                                                       =======      ========      ========
Operating loss....................................     $(6,390)     $(44,118)     $(40,801)
                                                       =======      ========      ========
Net loss..........................................     $(6,435)     $(43,117)     $(41,392)
                                                       =======      ========      ========
Basic and diluted net loss per share..............     $ (6.15)     $  (4.75)     $  (2.94)
                                                       =======      ========      ========
Shares used in computing net loss per share.......       1,046         9,076        14,077
                                                       =======      ========      ========
</TABLE>

                                       60
<PAGE>   63
                                  EXCITE INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Separate results of the combined entities for the years ended December 31,
1995, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                      -------------------------------
                                                       1995        1996        1997
                                                      -------    --------    --------
                                                         (IN THOUSANDS; UNAUDITED)
<S>                                                   <C>        <C>         <C>
Revenues:
  Excite..........................................    $   953    $ 14,757    $ 50,151
  MatchLogic......................................         --          --       3,963
                                                      -------    --------    --------
                                                      $   953    $ 14,757    $ 54,114
                                                      =======    ========    ========
Net loss:
  Excite..........................................    $(6,435)   $(43,117)   $(30,159)
  MatchLogic......................................         --          --     (11,233)
                                                      -------    --------    --------
                                                      $(6,435)   $(43,117)   $(41,392)
                                                      =======    ========    ========
</TABLE>

     There were no significant inter-company transactions between the two
companies and no significant conforming accounting adjustments.

                                       61
<PAGE>   64

                                   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.

                                          EXCITE, INC.

Date: March 31, 1998                      By:      /s/ ROBERT C. HOOD
                                            ------------------------------------
                                                       Robert C. Hood
                                              Executive Vice President, Chief
                                                        Administrative
                                            Officer and Chief Financial Officer

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints George Bell and Robert C. Hood, and each of them,
his or her true and lawful attorneys-in-fact, with full power of substitution,
for him and in his name, place and stead in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Report, and to
file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
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
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
                    NAME                                       TITLE                       DATE
                    ----                                       -----                       ----
<C>                                            <S>                                    <C>
PRINCIPAL EXECUTIVE OFFICER:

               /s/ GEORGE BELL                 President, Chief Executive Officer     March 31, 1998
---------------------------------------------  and Director
                 George Bell

PRINCIPAL FINANCIAL AND PRINCIPAL ACCOUNTING OFFICER:

             /s/ ROBERT C. HOOD                Executive Vice President, Chief        March 31, 1998
---------------------------------------------  Administrative Officer and Chief
               Robert C. Hood                  Financial Officer

ADDITIONAL DIRECTORS:

             /s/ JOSEPH R. KRAUS               Senior Vice President and Director     March 31, 1998
---------------------------------------------
               Joseph R. Kraus

              /s/ VINOD KHOSLA                 Director                               March 31, 1998
---------------------------------------------
                Vinod Khosla

               /s/ DONN DAVIS                  Director                               March 31, 1998
---------------------------------------------
                 Donn Davis

            /s/ GEOFFREY Y. YANG               Director                               March 31, 1998
---------------------------------------------
              Geoffrey Y. Yang
</TABLE>

                                       62
<PAGE>   65

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                           EXHIBIT TITLE
        -------    ------------------------------------------------------------
        <C>        <S>
          2.01 -   Agreement and Plan of Reorganization dated as of August 7,
                   1996 by and among the Registrant, Excite Acquisition
                   Corporation, The McKinley Group, Inc., Isabel Maxwell,
                   Christine Maxwell, David Hayden, Roger Malina and Daniel
                   Lynch.(1)
          2.02 -   Agreement of Merger dated as of August 30, 1996 by and
                   between Excite Acquisition Corporation and the McKinley
                   Group, Inc.(1)
          2.03 -   Agreement and Plan of Reorganization dated as of October 30,
                   1997 by and among the Registrant, Excite Merger Corporation,
                   Netbot, Inc. and certain shareholders of Netbot, Inc. (12)
          2.04 -   Agreement and Plan of Reorganization dated as of January 15,
                   1998 by and among the Company, XCite Acquisition
                   Corporation, Matchlogic, TL Ventures III, L.P., TL Ventures
                   III Offshore, TL Ventures III Interfund L.P., Sequel Limited
                   Partnership, Sequel Euro Limited Partnership, Internet
                   Capital Group, L.L.C., Data Strategies, Inc., and Gary
                   Anderson.(14)
          3.01 -   Registrant's Amended and Restated Articles of Incorporation,
                   as amended.
          3.02 -   Registrant's Bylaws, as amended.(3)
          4.01 -   Form of Specimen Certificate for Registrant's Common
                   Stock.(4)
          4.02 -   Restated and Amended Investors' Rights Agreement.(4)
          4.03 -   Amendment to Restated and Amended Investors' Rights
                   Agreement dated as of August 1, 1996.(8)
          4.04 -   Amendment to Restated and Amended Investors' Rights
                   Agreement dated as of November 25, 1996.(9)
          4.05 -   Registration Rights Agreement dated as of November 25, 1996
                   by and among the Registrant, America Online, Inc. and AOL
                   Ventures, Inc.(8)
          4.06 -   Voting Agreement dated as of November 25, 1996 by and among
                   the Registrant and certain of its shareholders. (9)
          4.07 -   Letter Agreement dated as of November 25, 1996 by and among
                   certain shareholders of the Registrant.(9)
          4.08 -   Nomination and Observer Rights Agreement dated as of June
                   25, 1997 between the Registrant and Intuit Inc. (11)
          4.09 -   Registration Rights Agreement dated as of June 25, 1997
                   between the Registrant and Intuit Inc.(11)
          4.10 -   Right of First Refusal Agreement dated as of June 25, 1997
                   between the Registrant and Intuit Inc.(11)
          4.11 -   Amendment to Restated and Amended Investors' Rights
                   Agreement dated as of June 25, 1997 among the Registrant,
                   Institutional Venture Partners VI, Institutional Venture
                   Management VI, IVP Founders Fund I, L.P., Kleiner Perkins
                   Caufield & Byers VII, KPCB VII Founders Fund, KPCB
                   Information Sciences Zaibatsu Fund II and Intuit Inc.(11)
          4.12 -   Stock Purchase Agreement dated as of June 11, 1997 between
                   the Registrant and Intuit Inc.(11)
          9.01 -   Voting Trust Agreement dated as of November 25, 1996 by and
                   among the Registrant, America Online, Inc., AOL Ventures,
                   Inc. and Richard Redding.(8)
        *10.01 -   Registrant's 1995 Equity Incentive Plan.(3)
        *10.02 -   Registrant's 1996 Equity Incentive Plan, as amended.(8)
        *10.03 -   Registrant's 1996 Directors Stock Option Plan.(3)
        *10.04 -   Registrant's 1996 Employee Stock Purchase Plan.(3)
        *10.05 -   Registrant's 401(k) Plan.(8)
        *10.06 -   Form of Assumed Stock Option Grant Agreement, together with
                   Netbot, Inc. 1996 Stock Option Plan and Related
                   Agreements.(13)
</TABLE>

                                       63
<PAGE>   66

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                           EXHIBIT TITLE
        -------    ------------------------------------------------------------
        <C>        <S>
        *10.07 -   Form of Assumed Stock Option Grant Agreement, together with
                   MatchLogic, Inc. 1997 Equity Compensation Plan and Related
                   Agreements.(15)
         10.08 -   Form of Indemnity Agreement entered into by Registrant with
                   each of its directors.(3)
         10.09 -   Bridge Line of Credit Agreement, dated as of February 23,
                   1996, among the Registrant and Kleiner Perkins Caufield &
                   Byers VII, KPCB VII Founders Fund, KPCB Information Sciences
                   Zaibatsu Fund II, Institutional Venture Partners VI,
                   Institutional Venture Management VI and IVP Founders Fund I,
                   L.P., and Form of Convertible Promissory Note and Form of
                   Promissory Note, as amended.(3)
        *10.10 -   Promissory Note, dated as of February 27, 1996, issued by
                   Graham F. Spencer to the Registrant.(3)
        *10.11 -   Secured Full Recourse Promissory Note, dated as of March 15,
                   1996, issued by Brett T Bullington to the Registrant.(8)
        *10.12 -   Stock Pledge Agreement dated as of March 15, 1996 by and
                   between the Registrant and Brett T Bullington.(8)
        *10.13 -   Offer Letter dated November 30, 1995, as amended, to Brett T
                   Bullington.(3)
        *10.14 -   Offer Letter dated January 16, 1996, as amended, to George
                   Bell.(3)
        *10.15 -   Offer Letter dated as of November 15, 1996 to Robert C.
                   Hood.(8)
        *10.16 -   Consulting Agreement dated as of November 19, 1996 by and
                   between the Registrant and Robert C. Hood.(8)
        *10.17 -   Offer Letter dated as of July 18, 1997 to James N.
                   Desrosier.
        *10.18 -   Form of standard employment offer letter.
         10.19 -   Office Lease, dated as of January 22, 1996 by and between
                   the Registrant and McCandless Land and Cattle Company.(3)
        #10.20 -   Net Search Program -- Premier Provider Agreement dated as of
                   March 28, 1996 between the Registrant and Netscape
                   Communications Corporation.(6)
         10.21 -   Net Search Program -- Premier Provider Agreement dated as of
                   March 27, 1996, and as amended March 27, 1996 and January
                   21, 1997, between The McKinley Group, Inc. and Netscape
                   Communications Corporation.(7)
         10.22 -   Series D Preferred Stock Purchase Agreement dated as of
                   March 8, 1996 by and among the Registrant and various
                   investors.(5)
         10.23 -   Warrant to purchase 650,000 shares of Common Stock dated
                   March 8, 1996 issued to AOL Ventures, Inc.(5)
         10.24 -   Office Lease, dated as of August 9, 1996, by and between the
                   Registrant and Martin/ Campus Associated, L.P.(6)
         10.25 -   Acquisition Agreement dated as of November 25, 1996 by and
                   among the Registrant, America Online, Inc. and Global
                   Network Navigator, Inc.(8)
        #10.26 -   Premier Provider Services Agreement between the Registrant
                   and Netscape Communications Corporation dated as of March
                   21, 1997.(10)
         21.01 -   List of Subsidiaries.
         23.01 -   Consent of Ernst & Young LLP, Independent Auditors.
         23.02 -   Consent of Price Waterhouse LLP, Independent Accountants.
         24.01 -   Power of Attorney (see signature page.)
         27.01 -   Financial Data Schedule for December 31, 1997 (EDGAR version
                   only.)
         27.02 -   Restated Financial Data Schedule for 1997 (EDGAR version
                   only)
         27.03 -   Restated Financial Data Schedule for 1996 (EDGAR version
                   only)
         27.04 -   Restated Financial Data Schedule for 1995 (EDGAR version
                   only)
</TABLE>

---------------

* Indicates a management contract or compensatory plan or arrangement.

# Confidential treatment was ordered or has been requested with respect to
  certain portions of these agreements. Such portions have been omitted from
  this filing and have been filed separately with the Securities and Exchange
  Commission.

                                       64
<PAGE>   67

        (1)  Previously filed with the Commission on September 12, 1996, as an
             exhibit to the Registrant's Form 8-K (File No. 0-28064) regarding
             the acquisition of The McKinley Group, Inc.

        (2)  Previously filed with the Commission on July 3, 1996, as an exhibit
             to the Registrant's Registration Statement on Form S-8 (File No.
             333-07625).

        (3)  Previously filed with the Commission on March 11, 1996, as an
             exhibit to the Registrant's Registration Statement on Form SB-2
             (File No. 333-2328-LA).

        (4)  Previously filed with the Commission on March 29, 1996, as an
             exhibit to Amendment No. 1 to the Registrant's Registration
             Statement on Form SB-2 (File No. 333-2328-LA).

        (5)  Previously filed with the Commission on April 3, 1996, as an
             exhibit to Amendment No. 2 to the Registrant's Registration
             Statement on Form SB-2 (File No. 333-2328-LA).

        (6)  Previously filed with the Commission on April 3, 1996, as an
             exhibit to Amendment No. 3 to the Registrant's Registration
             Statement on Form SB-2 (File No. 333-2328-LA).

        (7)  Previously filed with the Commission on February 28, 1997, as an
             exhibit to the Registrant's Quarterly Report on Form 10-QSB/A (File
             No. 0-28064).

        (8)  Previously filed with the Commission on March 3, 1997, as an
             exhibit to the Registrant's Registration Statement on Form S-1
             (File No. 333-22669).

        (9)  Previously filed with the Commission on March 31, 1997, as an
             exhibit to the Registrant's Annual Report on Form 10-K (File No.
             0-28064).

        (10) Previously filed with the Commission on April 2, 1997, as an
             exhibit to the Registrant's Current Report on Form 8-K (File No.
             0-28064).

        (11) Previously filed with the Commission on July 25, 1997, as an
             exhibit to the Registrant's Registration Statement on Form S-3
             (File No. 333-32123)

        (12) Previously filed with the Commission on December 4, 1997, as an
             exhibit to the Registrant's Current Report on Form 8-K (File No.
             0-28064).

        (13) Previously filed with the Commission on December 5, 1997, as an
             exhibit to the Registrant's Registration Statement on Form S-8
             (File No. 333-41523)

        (14) Previously filed with the Commission on February 17, 1998, as an
             exhibit to the Registrant's Current Report on Form 8-K (File No.
             0-28064).

        (15) Previously filed with the Commission on February 19, 1998, as an
             exhibit to the Registrant's Registration Statement on Form S-8
             (File No. 333-46591).

                                       65