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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
(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, 1998

                                       OR

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

                        FOR THE TRANSITION PERIOD FROM TO
                    COMMISSION FILE NUMBER _________________

                                  EXCITE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                            77-0378215
   (STATE OR JURISDICTION OF                                (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NUMBER)

             555 BROADWAY, REDWOOD CITY, CALIFORNIA 94063 (Address
                        of principal executive offices)
                           TELEPHONE: (650) 568-6000
              (Registrant's Telephone Number, Including Area Code)

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

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                    COMMON STOCK, $0.001 PER SHARE PAR VALUE
                        PREFERRED STOCK PURCHASE RIGHTS

        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/A or any
amendment to this Form 10-K/A. [ ]

        As of January 29, 1999, 53,829,408 shares of Common Stock, $0.001 per
share par value, of the registrant were outstanding. The aggregate market value
of voting stock held by non-affiliates of the registrant was approximately
$5,074,187,064 as of January 29, 1999, based on the closing sale price per share
of the registrant's Common Stock as reported on the Nasdaq Stock Market on such
date. Shares of Common Stock held by each executive officer and director and by
each person who owns 10% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily conclusive for other purposes.

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Excite, Inc. Proxy Statement for the 1998 Annual Meeting
of Stockholders to be held in June 1999 are incorporated by reference into Part
III of this Annual Report on Form 10-K/A where indicated.


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Items 1, 6, 7, and 8 of the Company's Annual Report on Form 10K for the year
ended December 31, 1998 are amended to read as follows:

                                     PART I

ITEM 1.  BUSINESS

        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 may differ
materially from those anticipated in these forward-looking statements as a
result of the Merger with At Home, which is expected to close during the second
quarter of 1999, and certain other factors, including, without limitation, 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 be read in conjunction
with the consolidated financial statements and notes thereto included elsewhere
in this Report.

SUMMARY

        Excite, Inc., or "Excite", is a global Internet media company offering
consumers and advertisers comprehensive Internet navigation services with
extensive personalization and targeting capabilities. The Excite Network,
consists of the Excite, WebCrawler and Classifieds2000 brands. Excite provides a
gateway to the World Wide Web, or 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 that combine
proprietary search technology, editorial Web reviews, aggregated content from
third parties, bulletin boards, chat and other community features and
personalization capabilities. Through its MatchLogic subsidiary, Excite provides
innovative Internet ad campaign management tools and services in the form of
reporting, measurement and analytical techniques and sophisticated direct and
database marketing services. In addition, Excite believes there will be a
significant opportunity to derive revenues from online transactions and,
therefore, Excite has entered into, and is continuing to pursue,
transaction-based arrangements which are designed to allow Excite to benefit
from online purchases directed through advertisements on the Excite Network.

THE COMPANY

        Excite was formed in June 1994. Excite first launched its Excite search
and directory service in October 1995. In April 1997, Excite launched a
channels-based format 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. In April 1998, Excite launched, My Excite
Start Page that enables consumers to personalize their home page Web interface
and choose the information they want delivered to their personal page, thereby
delivering a personalized Web experience for each consumer each time they visit
Excite. In addition, Excite acquired Classifieds2000, Inc. in April 1998, which
provides consumers using Excite's Classifieds channel with access to a
nationwide database of online classified advertisements in a number of
categories. Localized versions of Excite are available in Australia, China,
France, Germany, Italy, Japan, Sweden, Netherlands and the United Kingdom.

        Over the past several years, Excite has grown by both developing new
services, and by acquiring a number of businesses, technologies, services and
content.

o       In 1996, Excite acquired The McKinley Group Inc., or "McKinley", the
        creator of the Magellan Internet Guide.

o       During 1997, Excite completed its acquisition of the WebCrawler search
        and directory technology, or the "WebCrawler Acquisition", from America
        Online, Inc., or "AOL", and acquired Netbot, Inc., or "Netbot", an
        Internet software developer of advanced search technology.

o       In 1998, Excite acquired MatchLogic, Inc., or "MatchLogic", a provider
        of solutions for the management and optimization of Internet advertising
        campaigns, Classifieds2000, Inc., or "Classifieds2000", a provider of
        online classified ads, and Throw, Inc., or "Throw", a development stage
        company focused upon the creation of community products.




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        All of the above acquisitions were accounted for as pooling of
interests, except for the acquisition of Throw and WebCrawler, which were
accounted for as purchases. See Note 2 of Notes to Consolidated Financial
Statements.

        On January 19, 1999, Excite, At Home Corporation, or "At Home", an
Internet service provider aimed at broadband cable subscribers, and Countdown
Acquisition Corporation, entered into a definitive Agreement and Plan of
Reorganization, or the "Merger Agreement". Pursuant to the Merger Agreement,
Excite will become a wholly-owned subsidiary of At Home. At the effective time
of the Merger, all outstanding shares of Excite's Capital Stock will be
exchanged for shares of At Home's Series A Common Stock, and options and
warrants to purchase Excite's Capital Stock will be exchanged for options or
warrants, as applicable, to purchase shares of At Home's Series A Common Stock.
Each share of Excite's Common Stock will be exchanged for 1.041902 shares of At
Home's Series A Common Stock. At Home has announced that it intends to effect a
2-for-1 stock split in the future. If this stock split occurs before the merger
closes, each Excite Stockholder will receive 2.083804 shares of At Home's Series
A Common Stock for each share of Excite Common Stock. The exercise price and
number of shares of Excite's Capital Stock subject to Company options or
warrants, will be appropriately adjusted to reflect the exchange ratio. Any
outstanding convertible debt at the effective time of the Merger, will
thereafter be convertible into the number of shares of At Home's Series A Common
Stock to which a holder of Excite's Common Stock would have been entitled to
receive if the holder had converted the convertible debt into Excite's Common
Stock prior to the Merger. The transaction is intended to qualify as a tax-free
reorganization and will be accounted for as a purchase.

        In connection with the execution of the Merger Agreement, Excite and At
Home entered into a Stock Option Agreement, or the "Stock Option Agreement",
pursuant to which Excite granted to At Home an option to purchase up to 19.9% of
the outstanding shares of Excite's Common Stock, which is exercisable upon the
occurrence of certain events specified in the Stock Option Agreement.

        The Merger, which is expected to close in the second quarter of 1999, is
subject to various conditions, including clearance under the Hart-Scott-Rodino
Antitrust Improvements Act and approval of the Excite's and At Home's
stockholders.

        Excite may be required to pay a substantial termination fee if the
Merger Agreement is terminated for certain specific reasons. Excite has filed
the Merger Agreement with the Securities and Exchange Commission on January 20,
1999 under its Report on Form 8-K.

THE EXCITE NETWORK

        As the Web has evolved, Excite has grown from being a provider of a
single-function Web search utility to offering a branded Internet media network
consisting of Excite, WebCrawler and Classifieds2000 brands.

EXCITE SERVICES

        Excite's services consist of:

o       personalization services, such as My Excite Start Page, a personalized
        home page which can be customized simply and easily by a consumer to
        satisfy his or her personal interests.

o       navigation, such as Excite Search and Excite Channels, which help
        consumers more easily find relevant information;

o       and community, such as chat, e-mail, bulletin board and instant
        messaging services, which help consumers connect and communicate.

        MY EXCITE START PAGE. Excite delivers a personalized Web experience for
each consumer by allowing them to personalize their home page Web interface and
choose the information they want delivered. 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 December 31, 1998, Excite had
approximately 4.5 million registered users of My Excite Start Page.

        EXCITE SEARCH. Excite maintains an extensive index of Web documents
which is refreshed by its automatic spider technology on a regular basis.
Excite's search technology allows consumers to search the 




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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 approximately 100,000 Web sites.

        EXCITE CHANNELS. Excite's channels-based format for its services and
content provides consumers with a more intuitive interface that reflects the way
they navigate through other forms of media, such as television. This format also
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.
Excite also has channel specific bulletin boards, communities, chat and search
capabilities.

        The Excite brand currently includes the following channels:

Autos                               Home & Real Estate
Careers                             Lifestyle
Classifieds & Auctions              Money & Investing
Computers & Internet                News
Education                           People & Chat
Entertainment                       Shopping
Games                               Sports
Health                              Travel

        EXCITE COMMUNITIES. Excite offers a number of services, which allow
users to connect and communicate with each other. Excite believes that users who
habitually check their e-mail on Excite's 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 Communities, 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.

        EXCITE SHOPPING. The Excite Shopping Channel offers a safe and
convenient online shopping service for consumers. This channel is arranged
around 20 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 and also
offers Excite Product Finder powered by Jango. After the consumer enters a
product request, Excite Product Finder 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 the opportunity to market products to shoppers at the point of
decision.

WEBCRAWLER SERVICES

        WebCrawler was created in early 1994 and was one of the first Internet
search engines. In November 1996, Excite acquired the WebCrawler search and
directory technology from AOL. In March 1998, Excite redesigned the WebCrawler
service to focus on speed, simplicity and practicality.

        Similar to the Excite brand, content on WebCrawler is organized within
21 channels such as Autos, Business & Investing, Entertainment, Home & Real
Estate, News, Travel and Relationships. 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 Start
Page feature, selects and delivers information of interest such as stock quotes
and news headlines.




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CLASSIFIEDS SERVICES

        Excite's Classifieds service provides consumers with access to a
nationwide database of online classified advertisements in a number of
categories. Users can place their own advertisements directly and can search the
aggregated classifieds of Excite and its partners. Excite's Classifieds service
is featured as the provider of classified advertising, other than career-related
advertising, on Netscape's Netcenter.

                The Classifieds2000 brand currently includes the following
channels:

        Collectibles                      Personals & Friends
        Computers & Software              Real Estate
        Employment                        Rentals & Roommates
        General Merchandise               Travel
        Opportunities & Services          Vehicles

        Excite believes it will need to constantly update its service offerings
in order to attract and retain users. If any new service is not favorably
received, it may adversely affect Excite's reputation, brand and user traffic.
Excite may also experience difficulties or delays in developing new services. In
addition new services may contain undetected errors. Excite may need to
significantly redesign these services to correct any errors. Any difficulty or
delays may cause user dissatisfaction or result in lost or delayed advertising
revenues. Excite's business may be adversely affected if it does not
successfully develop new services that are well received.

        The following table indicates the average daily number of page views
derived each month during 1998, the number of registered users of the Excite
Network and the reach of the Excite Network (Excite.com and Webcrawler.com).
"Reach" is defined by Media Metrix as the percentage of Internet users who used
the Excite Network at least once during the month.

<TABLE>
<CAPTION>
                                         AVG. DAILY  REGISTERED   EXCITE     WEBCRAWLER
                                         PAGE VIEWS   USERS(1)   REACH(2)      REACH(2)
                                         ----------  ----------- --------    ----------
                                               (IN MILLIONS)             (%)
<S>                                          <C>          <C>       <C>         <C>
FIRST QUARTER OF 1998
January                                      31.6         5.1       19.0        8.5
February                                     36.1         5.7       20.7        7.6
March                                        40.0         6.1       22.0        8.8

SECOND QUARTER OF 1998
April                                        40.9         7.2       23.8        8.7
May                                          38.9         5.5       23.3        8.8
June                                         43.6         8.9       22.9        7.3

THIRD QUARTER OF 1998
July                                         45.3         9.0       23.2        6.1
August                                       45.5        11.8       21.2        5.1
September                                    50.0        12.8       20.7        5.1

FOURTH QUARTER OF 1998
October                                      52.7        14.4       19.8        4.9
November                                     54.6        15.9       20.8        5.7
December                                     57.7        20.0       21.3        4.8
</TABLE>

(1)     The fourth quarter registered users include "opt-in" e-mail
        registrations. See "Matchlogic - "Opt-in" Electronic-Mail Messaging."

(2)     Data is obtained from Media Metrix World Wide Audience Ratings Report
        home sample.

ADVERTISING AND COMMERCE

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




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        SPONSORSHIP ADVERTISING. During the second quarter of 1997, Excite 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 in the same spot on the page
each time the user calls for that page of channel content. Some of these
sponsorships include relationships with Amazon.com, Inc., AT&T, Barnes & Noble,
Inc., Foot Locker, Office Depot and Preview Travel, Inc.

        Sponsorships have a longer duration than Excite's banner advertisement
agreements and typically have a two or three year term. In some instances,
Excite has entered into exclusive sponsorship arrangements for certain channels.
Some sponsorship arrangements provide that Excite 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. Excite has not received any online transaction
revenues to date from these sponsorship arrangements and does not anticipate
receiving any significant amount of online transaction revenues in 1999. Through
December 31, 1998, Excite had entered into approximately 74 sponsorship
arrangements, of which approximately 42 included some form of transaction
revenue or margin sharing arrangement.

        Through Excite's various advertising programs, advertisers can combine
multiple advertising packages in order to develop an 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 for 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 Excite's related services.

        BANNER ADVERTISEMENTS. Banner advertisements are prominently displayed
throughout the Excite Network and as the consumer interacts with the Excite
Network, new advertisements are displayed. Excite 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. Targeted advertising is for an audience with a
specific content interest on one of Excite's services; these advertisers can
target general interest topics such as "sports" or can target advertisements to
more specific sub-categories such as "college basketball" or a particular team.
Excite charges higher per impression fees for advertising products based upon
the specificity of the target audience. Excite's standard rates for advertising
range from $24 per thousand impressions, or "CPMs", for general rotation across
undifferentiated users, to $170 per thousand impressions for targeted affinity
or keyword packages.

        Excite'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. These advertising purchases are also often
negotiated on a case-by-case basis. Because of these factors, actual CPM rates
experienced by Excite have been lower than its standard rates.

NETCENTER

        CO-BRANDED SERVICES. In April 1998, Excite and Netscape Communications
Corporation, or "Netscape", entered into a two-year agreement, or the "Netcenter
Agreement", with respect to Netscape's "Netcenter" online service. Under the
Netcenter Agreement, Excite provides programming and content for certain
channels on Netcenter which are co-branded and provides a Web search and
directory service for Netscape, collectively, the "co-branded services". In
addition, Excite's Classifieds service is featured as the provider of classified
advertising, excluding career and job posting classified ads, for the Netcenter
service. Excite is responsible for advertising sales for, and will pay to
Netscape a percentage of advertising revenues generated from, the co-branded
services and is also required to make payments based upon the amount of traffic
generated from the Net Search page and the Netcenter Widget Tool.

        DISTRIBUTION. Under the Netcenter Agreement, Excite is featured as a
"premier provider" on Netscape's Net Search page and will be similarly featured
on the Netcenter Widget Tool accessible from Netscape's Home Page. Excite's
services were allocated 25% of the random rotation of premier provider listings
from the Net Search page for the two-year term of the Netcenter Agreement, with
Excite receiving 25% and 50% of the rotation during the first and second years
of the term of the agreement, respectively. Netscape guaranteed that Excite will
receive a certain minimum number of impressions from the Net Search page 




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and a certain minimum number of click-throughs from the Netcenter Widget Tool
over the term of the Netcenter Agreement. Netscape also guaranteed that the
co-branded search service will receive a certain minimum number of impressions
and click-throughs, and that the co-branded channels will receive a certain
minimum number of initial page views over the term of the Netcenter Agreement.
Excite will be responsible for developing, programming and hosting the
co-branded services. Excite will also be responsible for selling advertising on
the co-branded services. Excite will bear all costs incurred by it in connection
with the Netcenter Agreement, without a right of reimbursement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Netscape and Sales and Marketing."

        TERMINATION. The Netcenter Agreement expires in June 2000 and may be
terminated sooner in the event of certain types of changes in control with
respect to Excite or Netscape. If the proposed acquisition of Netscape by
America Online is consummated, Excite would have the right to terminate the
Netcenter Agreement. Excite has not determined whether it will exercise this
termination right if that acquisition is consummated. The early termination
provisions will not be triggered as a result of the proposed acquisition of
Excite by At Home. Neither party is obligated to renew the Netcenter Agreement
at the end of its two-year term.

        Upon the termination of the Netcenter Agreement, other than a
termination in connection with certain acquisitions of or by Netscape, Excite
will be obligated to deliver to Netscape certain technology used in connection
with the operation, production, development, management and support of the
co-branded services for which Excite has granted Netscape a license, or the
"Licensed Technology". This license is a perpetual, royalty-free license,
including the right to sublicense the Licensed Technology. If Excite elects to
terminate the Netcenter Agreement as a result of the proposed acquisition by
America Online, Netscape would be required to repay Excite a certain portion of
the $70.0 million cash prepayment Excite previously paid to Netscape, as well as
reimburse Excite for certain costs and expenses. Excite will be required to
provide Netscape certain limited engineering support with respect to the
Licensed Technology. In addition, if Netscape believes that Excite's own
service, or the content provided by Excite for the Netcenter service, contains
material that Netscape deems likely to cause it material harm, and if Excite
does not revise such objectionable content in a timely manner, Netscape may
terminate the Netcenter Agreement with no obligation to repay any portion of the
$70.0 million cash prepayment or to reimburse Excite for any costs or expenses.

DISTRIBUTION

        Excite 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. Excite seeks to obtain new
consumers by providing multiple gateways into the Excite Network, thereby
increasing its visibility on Web access points. Excite has established premier
positions on the Web through the Netcenter Agreement, a co-branding relationship
with AOL, as well as co-branding relationships with several major personal
computer manufacturers, or "OEMs", to make Excite the personal computer's
default website for their consumers. In addition, Excite has established a
number of distribution relationships under which the Excite brand is typically
featured as the default Web navigation network. These distribution relationships
include AT&T, Prodigy and PointCast.

        Excite 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.

MATCHLOGIC

        In February 1998, Excite acquired MatchLogic, a provider of Internet
advertising campaign management and database and direct marketing solutions.
Excite operates MatchLogic as an independent subsidiary, in order to assure Web
advertisers and agencies of the independence of MatchLogic campaign management
services, and of the confidentiality of consumer data collected from these
services.

        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. For large advertisers
planning to place advertisements on multiple sites, this process was inefficient
and ineffective, because a single Web site only provides information about its
own activity and cannot provide consistent reporting of advertising 




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results from multiple Web sites. MatchLogic provides campaign management
services directly to large advertisers and agencies that are planning targeted
ad campaigns across multiple sites. Using MatchLogic's services, individual
advertisers or advertising agencies can deliver ads based on a user's particular
demographic traits, geographic location, connection capabilities and/or keyword
and virtual keyword data input. MatchLogic serves ad campaigns simultaneously to
multiple Web sites or e-mail messages to "opt-in" e-mail audiences. MatchLogic
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 are
then 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. Land-based data channels, such as warranty
cards, are costly to create and may require longer periods of time to collect
and assemble, and may become obsolete in a short period of time. On the other
hand, 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 in real time.

        MatchLogic operates as an independent subsidiary of Excite with its own
sales force, research and development and operations departments; however,
Excite intends to utilize the ad serving, "opt-in" e-mail direct marketing and
targeting technology of MatchLogic to improve results for advertisers on the
Excite Network.

        MatchLogic maintains four data centers in the U.S. which served an
average of approximately 39 million advertising impressions per day during the
quarter ended December 31, 1998 to over 1,200 Web sites for approximately 350
advertisers. MatchLogic's customers include large advertisers, such as General
Motors Corporation, Bank One, Schwab, Procter & Gamble, AT&T and leading
advertising agencies, such as, DDB Needham, Thunderhouse Online Marketing
Communications and Bronner SIG. MatchLogic is based in Westminster, Colorado,
and as of December 31, 1998 had 173 full-time employees.

TECHNOLOGY, RESEARCH AND DEVELOPMENT

        PERSONALIZATION. Excite has devoted significant resources in developing
its personalization technology, which provides users the ability to personalize
their Web experience. Excite uses a flexible architecture, which allows the
reuse of a user's personalized information throughout the Excite Network. With
Excite's dynamic page generation technology, customized and personalized pages
can be delivered to each Excite user, allowing for many different types of
frequently updated content, such as sports, stock quotes or news, to be
displayed each time a user returns to the Excite Network. Modular templates
allow Excite to quickly add new types of data to personal pages or produce
different appearances for use with different sponsorship arrangements.

        AD SERVING. Excite's ad serving technology delivers targeted advertising
in a fast, accurate and efficient manner. Scheduling algorithms ensure delivery
of ad impressions in the quantities required and support a pool of general
rotation ads. Excite's reporting infrastructure provides advertisers with daily
online reports of advertising performance.

        "OPT-IN" ELECTRONIC-MAIL MESSAGING. MatchLogic offers an e-mail push
program called DeliverE which is an "opt-in" e-mail service. DeliverE gives
advertisers the ability to distribute their selling offers and branding messages
to highly targeted audiences on the Web via e-mail.

        EXCITE'S SHOPPING SEARCH. Excite's Shopping Search, which built upon
Excite's proprietary programming language, called the Adapter Language, is used
to aggregate and homogenize data gathered from various Web sites in response to
user queries regarding a particular product.

        UNIVERSAL REGISTRATION. Excite has developed a user registration system
that allows users to register for the Excite Network and subsequently
authenticates them when they access specific services. Excite's universal
registration utilizes front-end caching which enables fast read access to user
data needed to support the Excite Network's user volume. Users can be
authenticated even if they have multiple user names and Excite also stores user
demographic information with its universal registration system.




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<PAGE>   9

        As of December 31, 1998, there were 228 employees on Excite's research
and development staff. Excluding charges for purchased in-process technology,
research and development costs were $29.6 million, $18.2 million and $8.3
million for the years ended December 31, 1998, 1997, and 1996, respectively.
Excite believes that developing new and enhanced services and technology is
necessary to remain competitive. Accordingly, Excite intends to continue to make
investments in research and development, including developing, licensing or
acquiring new technologies.

        The market in which Excite competes is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
announcements, introductions and enhancements, and changing customer demands.
These market characteristics are exacerbated by the emerging nature of the Web
and the apparent need of companies from a multitude of industries to offer
Web-based products and services. Accordingly, Excite's future success will
depend on its ability to adapt to rapidly changing technologies, to adapt its
services to evolving industry standards and to continually improve the
performance, features and reliability of its network in response to competitive
service and product offerings, and evolving demands of the marketplace. The
failure of Excite to adapt to such changes and evolution would have a material
adverse affect on Excite's business. In addition, if new Internet, networking or
telecommunications technologies are adopted or if other technological changes
occur, Excite may incur substantial expenses to modify or adapt its services or
infrastructure.

SALES AND MARKETING

        As of December 31, 1998, Excite had a direct sales organization of 74
professionals located in Chicago, Dallas, Detroit, Los Angeles, New York and San
Francisco. This direct sales force sells to advertisers and advertising agencies
and is responsible for selling banner advertisements and sponsorships on the
Excite Network. Excite believes that an internal sales force dedicated to
selling advertising on the Excite Network provides a higher level of customer
service and satisfaction to advertisers during both the buying and reporting
process. In addition, Excite has a dedicated group of professionals focused on
advertising reporting and measurement. Because of the campaign management,
digital marketing and data asset management capabilities of MatchLogic,
advertisers on the Excite Network can receive one cohesive aggregated report on
the placement, analysis and effectiveness of their online advertisements. Excite
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. As part of the
Netcenter Agreement, Excite's sales organization is responsible for selling
advertising on the co-branded services and on most of the Netcenter classified
advertisement services. Therefore, Excite has significantly expanded its direct
sales force.

        Excite's marketing goal is to build the brands of the Excite Network and
its services into well recognized consumer brands. Excite 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. In December 1998, Excite
launched a national television advertising campaign, which it refers to as the
"You Can Too" campaign, designed to raise consumer brand and product benefit
awareness.

USER SUPPORT

        Excite 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 December 31, 1998, Excite had 23 support personnel.
Excite also offers a "New to the Net" section of its help service for Web
novices. This service offers an overview of the Web and the Excite Network 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, Excite offers Web and e-mail based support for it's My Excite Start
Page, Mail, Excite Chat, Excite PAL and Excite Communities services.

INTERNATIONAL

        Excite believes that there are significant opportunities to leverage the
Excite service internationally and offers localized versions of the Excite
service in Australia, China, France, Germany, Italy, Japan, Sweden, the
Netherlands and the United Kingdom. Excite seeks to enter relationships with
business partners who offer content, technology and distribution capabilities,
as well as marketing and cross-promotional opportunities internationally. Excite
has established the following international relationships.




                                       9
<PAGE>   10

        In October 1997, Excite and Itochu Corporation and certain affiliated
entities, or collectively "Itochu", entered into a joint venture agreement with
respect to Excite's wholly-owned subsidiary, Excite Japan, in order to provide
comprehensive localized Excite services in Japan. Advertising sales are made
through CTC Create Corporation, a wholly-owned subsidiary of Itochu. Excite
currently holds 50% of the outstanding capital stock of Excite Japan.

        In August 1998, Excite and Telecom Italia S.p.A. formed Excite Italia
BV, which is owned 50% by Excite and 50% by Telecom Italia. Excite Italia will
program certain portions of www.tin.lit, the Internet site of TIN, a division of
Telecom Italia and one of Italy's Internet access providers, as well as provide
an Italian language search directory service under the Excite brand. Telecom
Italia has committed to provide the initial start-up capital for the venture,
while Excite will provide the core technology, related services and brand name.

        In August 1998, Excite and LibertyOne Limited, a publicly listed
Australian corporation, formed Excite Asia Pacific Pty Ltd, which is owned 50%
by Excite and 50% by LibertyOne. Excite Asia Pacific will build an Excite
branded, advertising and commerce supported Web portal for the Australian and
the Asia-Pacific Internet markets. Liberty One will contribute cash as its
contribution to the venture, while Excite will provide the core technology,
related services and brand name.

        In January 1999, Excite and BT Holdings Ltd, or "BT", a subsidiary of
British Telecommunications, entered into a joint venture agreement whereby BT
purchased 50% of the shares of Excite UK Ltd, that had been a wholly-owned
subsidiary of Excite. The joint venture company, which will continue to be known
as Excite UK Ltd, will be owned 50% by Excite and 50% by BT, and will continue
to provide an Excite branded, advertising and commerce supported Web portal for
the United Kingdom market. BT will contribute cash as its contribution to the
venture and Excite will contribute the core technology, related services and
brand name.

        Excite has a multi-year 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,
Japan and the United Kingdom, and is also featured on Netscape's international
search page.

        During 1998, 1997 and 1996, less than 10% of Excite's user traffic and
less than 10% of Excite's total revenues were derived from international
sources. See Note 10 of Notes to Consolidated Financial Statements.

        Expansion into international markets has required and will continue to
require management attention and resources. Excite has limited experience in
localizing its services and many of Excite's competitors are also undertaking to
expand into foreign markets. Excite may not succeed in expanding into
international markets. In addition to the uncertainty regarding Excite's ability
to generate revenues from foreign operations and expands its international
presence, there are certain risks inherent in doing business on an international
basis. These include, among others:

o       regulatory requirements, legal uncertainty regarding liability, tariffs
        and other trade barriers;

o       difficulties in staffing and managing foreign operations;

o       longer payment cycles, different accounting practices, problems in
        collecting accounts receivable;

o       and political instability, seasonal reductions in business activity and
        potentially adverse tax consequences.

        To the extent Excite expands its international operations and has
additional portions of its international revenues denominated in foreign
currencies, Excite may become subject to increased risks relating to foreign
currency exchange rate fluctuations. Any one or more of the factors discussed
above may adversely affect Excite's future international operations and,
consequently, Excite's business.

COMPETITION

        The market for Web services and Web advertising is intensely
competitive. There are no substantial barriers to entry in these markets and
Excite expects competition to intensify. Excite believes that the number of
companies relying on fees from Web-based advertising has increased substantially
during the past year. Accordingly, Excite may face increased pricing pressure
for the sale of advertisements on its 




                                       10
<PAGE>   11

network, which may have a material adverse affect on Excite's business. Excite
believes the main competitive factors in this market are brand recognition, user
base, performance, ease of use, variety of value-added services, features and
quality of support.

        Excite competes with a number of companies both for users and
advertisers. Excite expects this competition will intensify, particularly
because there are few barriers to entry in Excite's market. Excite's competitors
include:


o       Web "portal" companies such as Infoseek's Go Network, Lycos, Netscape's
        Netcenter, Yahoo!, Alta Vista, and Snap;

o       online service providers such as America Online, CompuServe, Microsoft's
        MSN and Prodigy services;

o       Web content broadcasting services, such as PointCast;

o       large media companies, such as CBS, NBC and Time-Warner, who have
        announced initiatives to develop Web services;

o       and other smaller companies providing Web-based and advertising
        supported content.

        As Excite increases the content offerings and services on the Excite
Network, it will increasingly 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.

        Excite also expects to compete with Internet and online service
providers, 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. Many of these potential
competitors have announced plans to offer competing Web services and may take
actions that make it more difficult for consumers to find and use the Excite
Network. For example, Netscape introduced Netcenter, which competes directly
with the Excite Network for traffic and advertisers. Microsoft recently licensed
products and services from Inktomi Corporation, a direct competitor of Excite,
and has announced that it will feature and promote Inktomi services in the
Microsoft Network and other Microsoft online properties. In addition, Microsoft
has announced that it will offer personalized Web services through Microsoft's
Start service. Such search services may be tightly integrated with Microsoft's
operating systems, Internet Explorer Web browser and other software
applications, and Microsoft may promote such services within MSN or through
other end-user services such as MSNBC or WebTV. As Microsoft's search services
may be more conveniently accessed, this may provide Microsoft with significant
competitive advantages that may have a material adverse affect on Excite's user
traffic.

        As the market continues to develop and competition intensifies, Excite's
competitors may merge or form strategic alliances that would increase their
ability to compete with Excite for traffic and advertisers. Such mergers may
also negatively impact Excite's ability to form or maintain strategic
relationships with those companies. For example, in November 1998, AOL announced
that it will acquire Netscape in a transaction that will extend AOL's services.
The merger may strengthen Netscape's Netcenter and AOL as competitors of Excite
for traffic and advertisers. In addition, this merger may also reduce the
probability of the renewal of any existing or new strategic relationships with
either company in the future.

        Many providers of Web services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other strategic
partnering arrangements with Internet and online service providers, 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 Excite's services. In addition, many large media companies
have either launched or have announced that they are contemplating developing
Internet navigation services and are attempting to become Web "gateway" sites
for Web users. For example, Infoseek Corporation and the Walt Disney Company
have partnered to launch Go Network, which features ABCNEWS.com for news,
ESPN.com for sports, Disney.com for kids and family, Infoseek for search, and
Disney and ABC for entertainment and will compete directly with the Excite
Network for traffic and advertisers. In addition, both Time-Warner and CBS 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 "gateway" sites, Excite could lose a substantial portion
of its user traffic, which would have a material adverse affect on Excite's
advertising revenues and on its business.




                                       11
<PAGE>   12

        As a result of Excite's acquisition of MatchLogic in 1998, a portion of
its revenues were 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. MatchLogic competes in this
area primarily with CMG Information Services, Inc., and competes indirectly in
this area with DoubleClick Inc., which offers Internet advertising solutions for
advertisers and Web sites, and NetGravity, Inc. and AdForce, Inc., which provide
advertising management software. MatchLogic expects to face competition in this
area from additional companies in the future.

        Many of Excite'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 Excite. 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, these competitors may
develop Web search and retrieval services or other online services that are
equal or superior to those of Excite or that achieve greater market acceptance
than Excite's offerings.

        Excite also competes with traditional advertising media, such as print,
radio and television, for a share of advertisers' total advertising budgets. If
advertisers do not perceive Internet advertising to be as effective as
traditional media, Excite's business may be adversely affected.

INTELLECTUAL PROPERTY

        Excite 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. Excite has filed
three patent applications with respect to other aspects of its technology. These
applications may not result in a patent being issued. One of these applications
relates to additional features of Excite's search technology. Excite anticipates
that a patent will be issued from this application no sooner than the end for
the second quarter of 1999. Another application relates to Excite's shopping
search technology acquired in connection with the acquisition of Netbot. Excite
anticipates that a patent will be issued from this application no sooner than
the end of 1999. Excite also has a patent application on file with respect to
some of the community technology acquired in the Throw acquisition used in its
Excite Communities service. At this time, Excite does not know if a patent will
be issued with respect to this technology or if a patent is issued, when it may
be issued. Excite does not believe that any of its existing patents or the
technologies offered by these patent applications are critical to its current
business model.

        Furthermore, any patents that may be issued from these pending
applications, may not be sufficiently broad to protect Excite's technology. In
addition, despite having patents, it is possible that Excite's patents may be
challenged, invalidated or circumvented. The failure of any patents to protect
Excite's technology may make it easier for Excite's competitors to offer
technology equivalent or superior to Excite's technology.

        Excite 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 Excite'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. Policing unauthorized use of Excite's technology is
difficult. The steps taken by Excite may not prevent misappropriation or
infringement of its technology. In addition, litigation may be necessary in the
future to enforce Excite's intellectual property rights, to protect Excite's
trade secrets or to determine the validity and scope of the proprietary rights
of others. Such litigation may result in substantial costs and diversion of
resources and may have a material adverse affect on Excite's financial
condition.

        Many parties, including competitors of Excite, are actively developing
search, indexing and related Web technologies. Some of these parties have taken,
and Excite believes that others will take, steps to protect these technologies,
including seeking patent protection and enforcement of such patents through
licensing and litigation. As a result, Excite believes that disputes regarding
the use of such technologies are likely to arise in the future. Competitors or
others may initiate lawsuits against Excite asserting patent infringement.
Excite may not be able to defend successfully any such litigation either on the
grounds that patents are invalid or that Excite's search technology does not
infringe on patents of others. Even if Excite 




                                       12
<PAGE>   13

is successful, there can be no assurance that the costs and resources required
to defend any such litigation will not have a material adverse affect on
Excite's financial condition.

        In addition, from time to time, Excite has received, and may receive in
the future, notice of claims of infringement of other parties' proprietary
rights, including claims for infringement resulting from users downloading of
materials by the service operated by Excite. Although Excite 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, may not be asserted or prosecuted against Excite or that
any assertions or prosecutions will not materially and adversely affect Excite's
financial condition. Irrespective of the validity or the successful assertion of
such claims, Excite would incur significant costs and diversion of resources to
defend any such claims which may have a material adverse affect on Excite's
financial condition. If any claims or actions were asserted against Excite,
Excite might seek to obtain a license under a third party's intellectual
property rights. Such a license may not be available on commercially reasonable
terms, or at all.

        Excite also licenses from third parties certain of its technologies as
well as developing them internally. For example, Excite licenses commercially
available technology for many of its internal systems such as accounting and
human resources. Excite also licensed other technology for certain features
offered on the Excite Network. For example, Excite licensed Software.com's
InterMail electronic messaging product during 1998 as part of its electronic
mail service and licensed Total Entertainment Networks online game service
during 1998. Excite also licensed a variety of content for the Excite Network
during 1998. Excite does not believe that any one of these licenses is material
to its business as a whole. However, if a license were to terminate or if the
licensed software did not function properly, Excite may incur additional
expenses by having to obtain replacement licenses, having to integrate the new
technology in the Excite Network and causing a diversion of resources from other
projects. As it continues to introduce new services that incorporate new
technologies, it may be required to license additional technology from others.
These third-party technology licenses may not be available on commercially
reasonable terms, if at all. If Excite does not obtain any of these technology
licenses it may experience delays or reductions in the introduction of new
services or may 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 may materially and adversely affect Excite's business.

        During 1998, Excite also entered into the Netcenter Agreement with
Netscape, which provides for the license of Excite's search technology to
Netscape. See " - Netcenter."

GOVERNMENT REGULATION

        There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet or other online services. However,
laws and regulations may be adopted in the future that address issues such as
user privacy, pricing and other aspects of the sale of products or services. Any
new laws or regulations may increase the costs of conducting business or
transmitting data over the Internet or online services or may otherwise affect
Excite's business.

EMPLOYEES

        As of December 31, 1998, Excite had 711 full-time employees, including
228 in research and development, 370 in sales and marketing, 74 in finance and
administration and 39 in operations and support. Excite's employees are not
represented by any collective bargaining unit, and Excite has never experienced
a work stoppage. Excite believes its relations with its employees are good.

        Excite depends on the performance and continued performance of its
executive officers and other key employees. Excite must also attract, train,
retain and motivate high quality personnel, especially its management and
engineering and development teams. Competition for such personnel is intense,
particularly in the San Francisco Bay Area. The loss of the services of any of
Excite's executive officers or other key employees or the failure of Excite to
attract, integrate, motivate and retain additional key employees may adversely
affect Excite's business. Excite does not have "key person" life insurance
policies on any of its employees.




                                       13
<PAGE>   14

                                     PART II

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/A.

FINANCIAL SUMMARY (1):

<TABLE>
<CAPTION>
                                                               AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                  -------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)               1998           1997          1996         1995         1994
                                                  ---------      --------      --------      -------      -----
<S>                                               <C>            <C>           <C>           <C>          <C>  
Revenues                                           $155,360       $55,826       $14,823       $  953       $293
Gross Profit                                        125,874        34,225        10,654          725        205
Operating Expenses (2)                              160,062        80,429        55,888        7,115        851
Net loss                                            (37,559)      (46,814)      (44,179)      (6,435)      (650)
Net loss per share (3)                                (0.79)        (1.57)        (2.37)       (3.08)     (0.94)
Total assets                                        220,673        79,156        48,810        3,801        157
Working capital (deficit)                            89,480        24,097         8,761         (878)      (442)
Long-term obligations                                18,236         9,689         4,073          995        100
Stockholders' equity (net capital deficiency)       143,399        36,450        25,886       (4,034)      (542)
</TABLE>


(1)     Reflects restatements for all pooling of interests. See Note 2 of Notes
        to Consolidated Financial Statements. Also reflects, the Company's July
        1998 two-for-one stock split. See Note 1 of Notes to Consolidated
        Financial Statements.

(2)     Includes charges of $6.2 million, $2.3 million, $3.5 million and
        $331,000 for the years ended December 31, 1998, 1997, 1996 and 1995,
        respectively, for in-process technology charges. For the years ended
        December 31, 1998, 1997 and 1996, merger and acquisition related costs,
        including amortization of goodwill and other purchased intangibles of
        $4.9 million, $4.0 million and $3.1 million, respectively, were
        included. In addition, amortization of prepaid Netscape service of $17.7
        million was included for the year ended December 31, 1998.

(3)     The net 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>   15

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. Excite's actual results may differ materially
from those anticipated in these forward-looking statements as a result of the
Merger with At Home, which is expected to close during the second quarter of
1999, and certain other factors, including, without limitation, 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 be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
Report.

OVERVIEW

        Excite, Inc., or "Excite", operates the Excite Network, which includes
the Excite and WebCrawler brands, and provides a gateway to the Web that
organizes, aggregates and delivers information to meet the needs of individual
consumers. Excite was formed in June 1994 and first launched its Excite search
and directory service in October 1995.

        Historically, Excite's advertising revenues have been derived
principally from short-term advertising contracts in which Excite 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, or "CPMs", charged.
Excite generally charges higher rates for advertisements focused on targeted
groups, either by keyword associations or affiliations with specific content,
than for general rotation advertisements. During its limited operating history,
Excite has experienced seasonal fluctuations in the amount of banner
advertisements sold 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.

        In 1997, Excite also 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 generating
impressions that in some instances are guaranteed. Sponsorship customers
accounted for approximately 25% and 24% of advertising revenues for 1998 and
1997, respectively. Revenues are generally recognized ratably over the term of
the agreement, provided that Excite 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, Excite
defers recognition of the corresponding revenues. 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 were insignificant through 1998, and are expected to be
insignificant through 1999. See "Risk Factors that May Affect Future Results -
Excite Depends on Sponsorship Agreements for Revenues" and " - Risks Associated
with Banner Advertising."




                                       15
<PAGE>   16

Over the past several years, Excite has grown by both developing new products
and services, and by acquiring a number of businesses, technologies, services
and content through mergers and acquisitions. During the three years ended
December 31, 1998, Excite completed the following acquisitions:

<TABLE>
<CAPTION>
                                                                          SHARES OF EXCITE
                                                               SHARES OF      SERIES E      SHARES OF
                                                                EXCITE       CONVERTIBLE   OPTIONS AND
                                                                COMMON     PREFERRED STOCK   WARRANTS
COMPANY OR TECHNOLOGY ACQUIRED          DATE ACQUIRED        STOCK ISSUED       ISSUED        ASSUMED
------------------------------          --------------       ------------ ---------------- -----------
<S>                                     <C>                  <C>           <C>             <C>
(IN THOUSANDS)
McKinley                                August    1996           1,700              --           28
AOL's WebCrawler                        November  1996              --           1,950           --
Netbot                                  November  1997           1,708              --          422
MatchLogic                              February  1998           6,122              --        1,049
Classifieds2000                         April     1998           1,730              --           50
Throw                                   April     1998             330              --          318
</TABLE>


        All of the above acquisitions were accounted for as pooling of
interests, except for the acquisition of Throw and WebCrawler which were
accounted for as purchases. Excite's financial information has been restated to
reflect all pooling of interests. See "Risk Factors that May Affect Future
Results - Acquisition Strategy; Integration of Past and Future Acquisitions" and
Note 2 of Notes to Consolidated Financial Statements.

        Excite has incurred significant operating losses since inception, and as
of December 31, 1998, Excite had an accumulated deficit of approximately $135.6
million. Although Excite experienced significant revenue growth during 1998 and
1997, Excite may not be able to sustain the growth of its revenues. Excite's
historical operating results may not be indicative of future operating results.
In addition, as Excite has grown, its operating expenses have increased, and
Excite expects that its operating expenses will continue to increase as a result
of its acquisitions, the performance of its obligations under the Netcenter
Agreement, its increased sales and marketing efforts, its increased funding for
development activities and the increased general and administrative staff needed
to support Excite's growth. To the extent that revenues do not grow at
anticipated rates or that increases in such operating expenses precede or are
not subsequently followed by commensurate increases in revenues, Excite's
financial condition will be materially and adversely affected. Excite may never
attain profitability on a quarterly or annual basis.

NETSCAPE AGREEMENT

        In April 1998, Excite and Netscape Communications Corporation, or
"Netscape", entered into a two-year agreement, or the "Netcenter Agreement",
under which Excite will, among other things, provide, host and sell advertising
for certain co-branded services for Netscape's Netcenter service. In connection
with the Netcenter Agreement, Excite has paid to Netscape a total of $70.0
million, or the "Cash Payment". Also in connection with the Netcenter Agreement,
Excite has issued to Netscape a warrant to purchase 846,158 shares of Excite's
Common Stock at an exercise price of approximately $29.55 per share, or the
"First Warrant", and a second warrant to purchase shares of Excite's Common
Stock at an aggregate exercise price of $10.0 million, or the "Second Warrant".
The First Warrant is exercisable for a two-year period commencing on April 30,
1998. The Second Warrant will be exercisable for a two-year period commencing
April 30, 1999. The exercise price per share of Common Stock covered by the
Second Warrant will be determined by dividing $10 million by the average closing
price of Excite's Common Stock for the 30 most recent trading days ending on the
third trading day preceding April 30, 1999. The fair value of the First Warrant
and the aggregate $10.0 million exercise price of the Second Warrant was valued
at $19.9 million. The Cash Payment and the value assigned to the warrants
totaling $89.9 million were capitalized as Prepaid Netscape Distribution Costs
and Trademarks during the second quarter of 1998 and are being amortized ratably
over the two-year term of the Netcenter Agreement. The unamortized amount to be
expensed under the Netcenter Agreement as of December 31, 1998, is separated
into two components as follows: the amount which represents the anticipated
future net revenues from the Netcenter Agreement, or $23.5 million, will be
charged to Distribution License Fees and Data Acquisition Costs; and the
remaining amount, or $42.9 million, representing the combined value of marketing
and distribution rights, trademarks and other exclusive benefits derived from
the agreement will be charged ratably over the term of the agreement to
Amortization of Prepaid Netscape Service.




                                       16
<PAGE>   17

        Under the Netcenter Agreement, Excite will only recognize revenues
generated from the co-branded services and not from any other part of Netcenter.
A portion of the revenues will be credited against Excite's revenue-sharing
obligation to Netscape until Excite recoups a specified amount of the Cash
Payment. Thereafter, Excite must pay Netscape a portion of additional revenues
generated from the co-branded services. Excite does not expect that the revenue
generated from the co-branded services will exceed 10% of Excite's total revenue
over the term of the Netcenter Agreement. Excite has incurred expenses for the
start-up and development of the services contemplated in the Netcenter
Agreement, including the costs of personnel, content creation, facilities and
depreciation of assets purchased for Netcenter. Unless Netscape generates
impressions significantly greater than the guaranteed amount as specified in the
agreement, the increased revenues to Excite resulting from the co-branded
services under the Netcenter Agreement will not be sufficient to recover the
combined costs of the prepayment, the warrant value and the incremental
operating costs that will be incurred by Excite as a result of the agreement. On
this basis, Excite anticipates that the Netcenter Agreement will serve to
generate losses for Excite during its term.

        Netscape has made guarantees for the number of times a link to Excite is
displayed on the NetSearch page. The actual delivery of impressions between the
launch of the Netcenter co-branded service in June 1998 to September 1998 were
significantly below expectations. However, during the fourth quarter of 1998,
the delivery of impressions improved from the previous quarter due to the
implementation of certain changes made by Netscape and Excite. Such improvements
include: Excite's search rotation increased on Netscape's home page search and
Netscape added another slot to its list of providers on the NetSearch page,
which is dedicated to Excite and has the same prominence as all the "premier
providers". There are no interim, month to month or quarterly performance
milestones to the agreement. If Netscape does not achieve its impression
guarantees within the two-year term of the agreement, then the term would be
extended until the guarantees are met. To the extent the impression flow from
Netscape falls short of the guaranteed level, Excite's ability to recover the
prepayment within the term of the agreement may be impaired. See "Risk Factors
that May Affect Future Results - Significant Risks Associated with the Netcenter
Agreement" and see Note 13 of Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

REVENUES

        Revenues increased 178% to $155.4 million in 1998 as compared to $55.8
million in 1997 and $14.8 million in 1996. The increase in 1998 revenue compared
to 1997 and 1996 revenue resulted primarily from a $40.0 million increase in
advertising revenues, which was due to both an increase in the number of
advertisers purchasing advertising banners on Excite's Web sites, and to a
lesser extent, an increase in sales of targeted advertisements with higher
rates. Also contributing to the increase was a $24.0 million increase in
sponsorship advertising revenue and a $25.0 million increase in revenues
attributable to MatchLogic, which began operations in May 1997.

        No one customer accounted for more than 10% of revenues for 1998 and
1997. One customer accounted for approximately 12% of revenues for 1996.
Revenues generated from international operations was approximately 3% and 2% of
revenues in 1998 and 1997, respectively. There were no revenues generated from
international operations in 1996. See Notes 1 and 11 of Notes to Consolidated
Financial Statements.

        Excite expects to continue to derive a substantial majority of its total
revenues from selling advertisements. Because the market for advertising on the
Web is intensely competitive, advertising rates may be subject to pricing
pressures in the future. If Excite is forced to reduce its advertising rates or
experiences lower CPMs as a result of such competition or otherwise, future
revenues may be adversely affected. Beginning in the second quarter of 1997,
Excite started to sell a combination of sponsorship and banner advertising
contracts in addition to the banner advertising contracts historically sold by
Excite. Excite does not expect revenue growth relating to sponsorship
advertising revenues to continue at the current rate in future periods as
availability of exclusive sponsorships may be limited.

COST OF REVENUES

        Cost of revenues consists primarily of 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, and are
comprised principally of personnel costs, telecommunications costs, equipment
depreciation and overhead allocations. Royalties and other cost of revenues
include expenses related to 



                                       17
<PAGE>   18

royalties, license agreements and revenue sharing agreements for content and
other services such as e-mail and chat room services. In 1997 and 1996, Excite
recognized, as a component of cost of revenues, amortization of purchased
developed technology of $8.2 million and $186,000, respectively, related to the
WebCrawler acquisition. There were no corresponding costs for 1998 as the cost
of this technology was fully amortized at December 31, 1997.

        Total cost of revenues increased in absolute dollars by $7.9 million to
$29.5 million, or 19% of revenues in 1998 from $21.6 million, or 39% of revenues
in 1997 and by $17.4 from $4.2 million, or 28% of revenues for 1996 as compared
with 1997. Hosting costs for 1998 increased in absolute dollars to $16.2
million, or 10% of revenues, from $8.6 million, or 15% of revenues for 1997 and
from $3.3 million, or 22% of revenues for 1996. The increase in hosting costs is
due primarily to an increase in personnel expenses and equipment costs relating
to maintenance and support of Excite's Web sites and services. Royalties and
other cost of revenues increased in absolute dollars to $13.3 million, or 9% of
revenues for 1998, from $4.7 million, or 8% of revenues for 1997, and from
$687,000, or 5% of revenues for 1996. The increase in royalties and other cost
of revenues was primarily due to increased royalties and margin sharing payments
from revenue sharing agreements.

        Cost of revenues in future periods is expected to increase in absolute
dollars and may increase as a percentage of revenues as Excite increases costs
to support expanded services and content.

GROSS PROFIT

        Gross profit was $125.9 million or 81% of revenues, $34.2 million or 61%
of revenues and $10.7 million or 72% of revenues for 1998, 1997 and 1996,
respectively. The increase in gross profit in absolute dollars and as a
percentage of revenues in 1998 compared to 1997 was primarily due to the fact
that revenues grew at a faster rate than hosting costs and royalties and other
cost of revenues, a favorable mix of advertising services, and the elimination
of amortization of purchased technology. The decline in gross profit as a
percentage of revenues from 1997 compared to 1996 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. In the future, gross
profit may be affected by the types of advertisements sold and revenue sharing
provisions of distribution and content agreements.

        These items 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, Excite 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 Excite's advertising revenue sharing
obligations may adversely affect gross margins in the future.

OPERATING EXPENSES

        Excite's operating expenses have generally increased in absolute dollar
amounts since inception. This trend reflects Excite's rapid transition from the
product development stage to marketing and offering its services. Excite
believes that continued expansion of its operations is essential to achieving
and maintaining market leadership. As a consequence, Excite intends to continue
to increase expenditures in all operating areas for the foreseeable future.

        RESEARCH AND DEVELOPMENT. Research and development expenses consist
principally of engineering and editorial personnel costs, equipment
depreciation, consulting fees, supplies and allocation of overhead. Research and
development expenses increased to $29.6 million or 19% of revenue in 1998, from
$18.2 million or 33% of revenues in 1997 and $8.3 million or 56% of revenues in
1996. The increase in absolute dollars in 1998 compared to 1997 and in 1997
compared to 1996 was due to an increase in engineering and editorial headcount
to support Excite's channels format and personalization capabilities for the
Excite Network. Research and development headcount increased to 227 employees in
1998 from 164 in 1997 and 83 in 1996. In addition, an increase in expenses in
1997 compared to 1996 was due to the commencement of operations of Matchlogic in
May 1997. Matchlogic's research and development expenses contributed $7.0
million to the increase from 1997 to 1998.

        Excite believes that a significant level of research and development
expense is required to remain competitive and, accordingly, Excite anticipates
that it will continue to devote substantial resources to 




                                       18
<PAGE>   19

research and development and that these costs will increase in absolute dollars
in future periods. Excite also expects to continue to experience increased
research and development expenses in order to integrate any technologies
acquired in the future and provide programming and content for the co-branded
services of Netcenter.

        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 were $63.1 million or 41% of revenue in 1998, compared to
$34.3 million or 61% of revenue in 1997 and $21.4 million or 144% of revenue in
1996. The increase in absolute dollars in 1998 compared to 1997 was primarily
due to the hiring of additional sales and marketing personnel, increased sales
and marketing expenses and to a lesser extent, a national television advertising
campaign that launched in December 1998. The increase in absolute dollars in
1997 from 1996 was primarily due to the continuation of a significant media
advertising campaign that launched in the fourth quarter of 1996 and continued
into the first quarter of 1997, and the hiring of additional sales and marketing
personnel and the launching of the redesigned WebCrawler brand. Sales and
marketing headcount increased by 183 employees to 376 in 1998 from 193 in 1997
and 81 in 1996. In addition, other sales and marketing expenses increased, such
as commissions, advertising expenses and Matchlogic sales and marketing expenses
in 1998 by $16.2 million and in 1997 by $2.2 million.

        Excite expects to continue to incur significant promotional and
advertising expenses and anticipates that these costs will increase in absolute
dollars in future periods as Excite promotes its brands and introduces new
services in order to create and maintain brand loyalty among consumers. Excite
also expects to continue to experience increased sales and marketing expenses as
it is responsible for all advertising sales on the co-branded services of
Netcenter. Excite may also seek to enter into additional third party
relationships which it believes will help promote its brand. As a result, Excite
may need to divert resources from other areas. These brand building efforts may
not be successful, which may adversely affect Excite's business.

        DISTRIBUTION LICENSE FEES AND DATA ACQUISITION COSTS. Distribution
license fees and data acquisition costs consist principally of fees paid to
third-party Internet companies such as Netscape to provide entry points to the
Excite Network and costs to update and maintain the ad targeting and tracking
database which is continually being updated by Excite's MatchLogic subsidiary.
Distribution license fees and data acquisition costs increased to $21.7 million
in 1998 from $9.4 million in 1997 and $11.9 million in 1996. The 1998 and 1997
costs included distribution license fees related to agreements previously
entered into with Netscape in March 1997, which have expired, as well as data
acquisition costs incurred by MatchLogic during 1998 of $6.8 million and $1.8
million in 1997. In addition, during 1998, a total of $5.8 million was amortized
to Distribution License Fees and Data Acquisition Costs relating to the April
1998 Netcenter Agreement. See "Risk Factors that May Affect Future Results -
Significant Risks Associated with the Netcenter Agreement."

        In June 1997, Excite entered into a co-marketing services agreement and
a trademark license agreement with Netscape. Under these agreements, Excite is
responsible for the programming, production, operations and advertising sales of
"International Netscape Guide by Excite", a service being made available in
Australia, France, Germany, Japan and the United Kingdom. In connection with
these agreements, Excite 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. In March 1997, Excite entered into an
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, Excite made a payment of $8.3
million.

        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 Excite's
premier provider agreements with Netscape in the second quarter of 1996.

        In the future, high traffic Web sites, Internet service providers,
providers of Web browsers or other distribution channels may require cash
payments or other types of consideration as compensation for listing or
promoting the Excite Network, which may result in increased distribution license
fees.

        GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
principally of administrative and executive personnel costs, provision for
doubtful accounts, fees for professional services and allocation 




                                       19
<PAGE>   20

of overhead. General and administrative expenses increased in absolute dollars
to $16.9 million or 11% of revenue in 1998, from $12.2 million or 22% of revenue
in 1997 and $7.8 million or 52% of revenue in 1996. The increase in absolute
dollars in 1998 compared to 1997 is primarily due to increased personnel costs
to support the expansion and infrastructure of Excite's operations and
international expansion efforts. In particular, the growth in Excite's finance
and administrative departments contributed to this increase. The increase in
absolute dollars in 1997 compared to 1996 was primarily due to increased
personnel, professional service fees and relocation to new facilities to support
Excite's growth. General and administrative headcount increased to 71 employees
in 1998 from 54 in 1997 and 16 in 1996. Professional service fees, provision for
doubtful accounts and facilities costs increased during 1998 by $2.9 million and
1997 by $0.7 million. General and administrative expenses attributable to
Matchlogic increased $0.8 million from 1997 to 1998.

        Excite anticipates that its general and administrative expenses may
continue to increase in absolute dollars as Excite expands its administrative
and executive staff, adds infrastructure and integrates acquired technologies
and businesses. In addition, Excite plans to continue to run MatchLogic as an
independent subsidiary with its own administrative function.

        IN-PROCESS TECHNOLOGY. During 1998, 1997 and 1996, Excite incurred
charges for in-process technology of $6.2 million, $2.3 million and $3.5 million
respectively.

        In April 1998, Excite acquired all of the assets of Throw, Inc.,
including an Internet-based community technology that creates environments,
centered around common themes, where users can interact on both an asynchronous
as well as a synchronous basis. These communities are being developed to contain
numerous linked features that facilitate communication amongst multiple users,
including event calendars, photo albums, address books, chat rooms and threaded
discussions.

        The purchase price approximated $17.0 million, which consisted of $16.2
million of stock issued and $800,000 of direct acquisition costs. In connection
with the acquisition, Excite accounted for the transaction as a purchase and
allocated $6.2 million to in-process technology and $10.8 million to goodwill.
Purchased in-process technology represents the present value of the estimated
after-tax cash flows expected to be generated by the purchased technology,
which, at the acquisition date, had not yet reached technological feasibility
and does not have alternative future uses. The goodwill is being amortized on a
straight-line basis over three years.

        The technology projects in-process as of the acquisition date consisted
of the development of the system's Solaris 2.6 platform, the Oracle database,
and the objects, areas and applications that will comprise the templates and
supporting feature applets.

        These projects were grouped into three categories as of the acquisition
date:

<TABLE>
<CAPTION>
           PROJECT                                             PERCENT COMPLETE 
           -------                                             ---------------- 
<S>                                                                   <C>
Standard templates and features                                       35%
First generation templates and features                               65%
Second generation templates and features                              55%
</TABLE>

        The expected costs to complete these projects in aggregate as of the
acquisition date totaled approximately $1.5 million. The standard templates and
features were completed in the third quarter of 1998 and had reached
technological feasibility. The first and second generation templates and
features are projected by Excite's management to be completed by May 1999.

        The cash flow projections for revenues were based on the projected
incremental increase in revenue attributable to the in-process technology that
Excite will receive as a result of the acquisition. Revenues derived from the
in-process technology were expected to increase through 2000 and then decrease
in 2001. No revenue was assigned to in-process technology in 2002 or beyond
because 2001 is estimated to be the end of the in-process technology's economic
life. Estimated operating expenses and income taxes were deducted from estimated
revenue projections to arrive at estimated after-tax cash flows. Projected
operating expenses include:


o       cost of revenues;

o       general and administrative expenses;




                                       20
<PAGE>   21

o       sales and marketing expenses;

o       and research and development, including estimated costs to maintain the
        technology once it has achieved technological feasibility.

        Operating expenses were estimated as a percentage of revenue and were
based primarily on projections prepared Excite's management and industry
averages.

        The discount rate used to discount the net cash flows back to their
present values is based on the weighted average cost of capital, or "WACC". A
discount rate of 35% was used for valuing the in-process technology. This
discount rate is higher than the implied WACC due to the inherent uncertainties
surrounding the successful development of the purchased in-process technology,
the useful life of such technology, the profitability levels of such technology,
and the uncertainty of technological advances that are unknown at this time. As
is standard in the appraisal of high growth markets, projected revenues,
expenses and discount rates reflect the probability of technical and marketing
success.

        The 1997 charge of $2.3 million related to the value of acquired
in-process technology that had not reached technological feasibility at the time
of MatchLogic's formation in May 1997. The 1996 charge of $3.5 million for
purchased in-process technology related to the acquisition of the WebCrawler
search and directory technology. See Note 2 of Notes to Consolidated Financial
Statements.

        OTHER MERGER AND ACQUISITION RELATED COSTS, INCLUDING AMORTIZATION OF
GOODWILL AND OTHER INTANGIBLE ASSETS. During 1998, 1997 and 1996, Excite
incurred merger and acquisition related costs of $4.9 million, $4.0 million and
$3.1 million respectively. In 1998, Excite incurred charges of approximately
$700,000 and $743,000 for the acquisition of MatchLogic and Classifieds2000,
respectively, which primarily related to legal and other professional fees. In
addition, Excite incurred charges during 1998 of approximately $2.7 million
relating to the amortization of goodwill and other purchased intangibles
resulting from the acquisition of Throw and approximately $800,000 relating to
the amortization of goodwill and other purchased intangibles resulting from the
WebCrawler acquisition. In 1997, Excite incurred other merger and acquisition
costs of $1.8 million resulting from the amortization of other WebCrawler
intangible assets, $1.5 million from the Netbot merger and $700,000 from the
amortization of other acquired intangible assets. The 1996 charge included
approximately $2.2 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.

        AMORTIZATION OF PREPAID NETSCAPE SERVICE. During 1998, Excite incurred
costs of $17.7 million related to the amortization of the Prepaid Netscape
Service associated with the April 1998 Netcenter Agreement, which has an
original term of two-years. Excite anticipates incurring a total amortization
charge of approximately $7.6 million per quarter relating to the Netcenter
Agreement for the duration of the agreement, which is currently scheduled to
expire in June 2000.

        INTEREST INCOME (EXPENSE) AND OTHER. Interest income was $1.6 million,
$1.3 million and $1.5 million for 1998, 1997 and 1996, respectively. The
increase in interest income for 1998 was primarily due to interest earned on
cash received in June 1998 from Excite's public offering, which was used to fund
operations and to satisfy Excite's obligations under the Netcenter Agreement.
The decrease in 1997 was primarily the result of the use of cash received from
the 1996 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 in the second quarter of 1997. The increase in 1996 reflected
interest earned on investments from cash received from Excite's Series D
Preferred Stock financing and its initial public offering. Interest expense and
other increased to $2.9 million for 1998, from $1.5 million for 1997 and
$409,000 for 1996. The increase in 1998 was due primarily to an increase in
interest expense resulting from the $50 million note payable due to Intuit, as
well as additional capital lease obligations, non-lease financing obligations
and interest on the convertible note issued to Itochu Corporation in October
1997. The increases in 1997 from 1996 were due primarily to increased expenses
associated with an increased amount of capital lease obligations and bank
borrowings.

        INVESTMENT PORTFOLIO. Excite does not use derivative financial
instruments in its investment portfolio. Excite considers investments in highly
liquid instruments purchased with an original maturity of 90 days or less to be
cash equivalents. Excite places its investments in instruments that meet high
credit quality standards, as specified in Excite's investment policy guidelines;
the policy also limits the amount of credit exposure to any one issue, issuer,
and type of instrument. All of Excite's cash equivalents and short-term
investments, consisting principally of commercial paper, equity securities and
governmental securities, are 




                                       21
<PAGE>   22

classified as available-for-sale as of December 31, 1998. Excite does not expect
any material loss with respect to its investment portfolio.

        The table below provides information about Excite's investment
portfolio. For investment securities, the table presents principal cash flows
for 1999 and the related average interest rates. Excite maintains its cash and
cash equivalents in short-term investment-grade interest-bearing securities
until required for other purposes. Excite's investment policy requires that all
investments mature in one year or less.

        Principal (Notional) Amounts by Expected Maturity in U.S. Dollars:

<TABLE>
<CAPTION>
                                                                         FAIR VALUE AT
(IN THOUSANDS, EXCEPT INTEREST RATES)                          1999    DECEMBER 31, 1998
                                                             -------   -----------------
<S>                                                          <C>              <C>    
Cash Equivalents                                             $11,382          $11,389
   Average Interest Rate                                        4.00%
Investments                                                  $11,265          $11,270
   Average Interest Rate                                        6.63%
Total Portfolio, excluding Equity Securities                 $22,647          $22,659
   Average Interest Rate                                        6.34%

Equity Securities                                                              $4,411
</TABLE>

        EQUITY SHARE OF LOSSES OF AFFILIATED COMPANY. In October 1997, Excite
and Itochu Corporation and certain affiliated entities, or collectively
"Itochu", entered into a joint venture agreement with respect to Excite's
wholly-owned subsidiary, Excite Japan, in order to provide Web-based information
services to the Japanese market. Excite currently holds, and intends to retain,
a 50% equity interest in Excite Japan. As of December 31, 1998, Excite held a
50% equity interest in Excite Japan. Excite's share of the losses of Excite
Japan for 1998 and 1997 was $2.1 million and $477,000, respectively. Excite
expects that it will record increased losses from Excite Japan during 1999. See
Note 10 of Notes to Consolidated Financial Statements.

        INCOME TAXES. At December 31, 1998, Excite had federal and state net
operating loss carryforwards of approximately $143.4 million and $71.0 million,
respectively. The federal net operating loss carryforwards will expire beginning
in 2009 through 2013, if not utilized. The state net operating loss
carryforwards will expire at various dates beginning in 1999 through 2003. 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 Excite. See Note 9 of Notes
to Consolidated Financial Statements.

YEAR 2000 IMPLICATIONS

        Many currently installed computer systems, hardware and software
products are coded to accept only two digit entries in the date code field and
cannot distinguish 21st century dates from 20th century dates. These date code
fields will need to distinguish 21st century dates from 20th century dates and,
as a result, many companies' software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements.
Excite's business is dependent on the operation of numerous systems that may
potentially be adversely impacted by Year 2000 related problems. Those systems
include, among others:

o       hardware and software systems used by Excite to deliver services to its
        consumers, including Excite's proprietary software systems as well as
        hardware and software supplied by third parties;

o       communications networks, such as the Internet, which Excite depends on
        to provide services;

o       the internal systems of Excite's consumers, users and suppliers;

o       the hardware and software systems used internally by Excite in the
        management of its business;

o       and non-information technology systems and devices used by Excite in its
        business, such as telephone and building systems.

STATE OF READINESS

        Excite has implemented a six-phase plan to mitigate possible Year 2000
affects on Excite's business and systems. Excite has designated a Year 2000
project team to develop and implement that plan. This plan has 




                                       22
<PAGE>   23

executive sponsorship and is regularly reviewed by senior management. This
six-phase plan includes the following:

o       Phase one, awareness: involves increasing company awareness by educating
        and involving all appropriate levels of management regarding the need to
        address Year 2000 issues.

o       Phase two, inventory: consists of identifying all of Excite's systems,
        technology, services and relationships that may be impacted by Year
        2000.

o       Phase three, assessment: involves determining Excite's current state of
        Year 2000 readiness for those areas identified in the inventory phase
        and prioritizing areas that need to be addressed.

o       Phase four, remediation: consists of developing a plan and repairing,
        replacing or retiring those systems identified as needing correction in
        the assessment phase.

o       Phase five, validation: involves developing test plans, conducting tests
        and analyzing the results of these tests to assure all key systems are
        Year 2000 compliant.

o       Phase six, implementation and contingency planning: consists of moving
        compliant systems back into the production environment and to assure
        systems' Year 2000 status remains unaffected by subsequent changes. The
        contingency plan includes developing Excite's response to failure of
        mission critical systems, and other major risks related to Year 2000
        compliance.

CONTINGENCY PLAN

        Excite's business planning for year 2000 is currently being implemented.
The plan includes the creation of contingency plans in the second half of 1999.
Excite currently has no contingency plans.

        Excite has completed phase one, awareness and currently is in phase two,
inventory, which is scheduled to be substantially complete by the end of the
first quarter of 1999. Phase three, assessment, and phase four, remediation, are
scheduled to be substantially complete by the end of the second quarter of 1999.
Phase five, validation, is scheduled to be substantially complete by the third
quarter of 1999 and phase six, implementation and contingency planning, is
scheduled to be substantially complete early in the fourth quarter of 1999.

        In addition to the systems used by Excite in its business, Excite
utilizes third-party equipment and software in the delivery of its services and
in the management of its business that may not be Year 2000 compliant. Excite
has made preliminary contacts with some of its key vendors, which have
informally indicated that their products are Year 2000 compliant. As part of
phase two, inventory, Excite will make formal inquiries of other equipment and
software vendors and take steps to monitor vendor compliance. Failure of such
third-party equipment or software, or of non-information technology systems and
devices used by Excite, to operate properly with regard to the Year 2000 and
thereafter may require Excite to incur unanticipated expenses to remedy
problems, which may have a material adverse affect on Excite's financial
condition.

        Excite also relies, both domestically and internationally, upon various
vendors, governmental agencies, utility companies, telecommunication service
companies, including Internet service and online service providers, delivery
service companies and other service providers who are outside Excite's control.
Further, Excite has not fully determined the progress of its joint venture
partners and content partners in identifying and addressing systems that may
potentially be impacted by Year 2000 related problems. Failure of such parties
to operate properly with regards to the onset of Year 2000 and thereafter, may
have a material adverse affect on Excite's business.

RISKS RELATED TO YEAR 2000 ISSUES

        In the event any third parties cannot timely provide Excite with
content, products, services or systems that are Year 2000 ready or if there are
remediated problems with Excite's proprietary systems, the content on Excite's
services, access to Excite's services, the ability to offer page views,
products, services and the ability to recognize or process sales may be
materially adversely affected. Further, consumers may experience outages, delays
and other difficulties due to system failures unrelated to Excite's services or
systems which may have a material adverse affect on the satisfaction of Excite's
consumers and advertisers. In addition, any failure of the equipment or systems
utilized by consumers of Excite's services as a result of failure to be Year
2000 compliant may result in decreased utilization of Excite's services and
adversely affect Excite's advertising relationships.




                                       23
<PAGE>   24

        Any failure of Excite to address Year 2000 issues may have a material
adverse affect on Excite's business. These affects may include, but are not be
limited to:

o       a reduction in Excite's ability to provide services for Excite's
        customers such as having specific content or services available;

o       a reduction in Excite's ability to deliver, track and measure Internet
        advertisements;

o       outservice could experience outages, delays and other difficulties due
        to system failures, which would make the Excite Network unavailable for
        consumers.

        Excite is also subject to external forces that generally affect
similarly situated business over which it has no control, such as possible
interruptions of utility or Internet-related data network services as a result
of Year 2000 failures, any of which may have similar material affects.

        Furthermore, the purchasing patterns of advertisers may be affected by
Year 2000 issues as companies expend significant resources to correct their
current systems for Year 2000 readiness. These expenditures may result in
reduced funds available for Internet advertising or sponsorship of Internet
services, which may have a material adverse affect on Excite's financial
condition.

        The results of Excite's Year 2000 compliance plan's testing and
implementation phase activities and responses received from third-party vendors
and service providers will be taken into account in determining the nature and
extent of any contingency plans.

COSTS

        While Year 2000 costs incurred through 1998 by Excite have not been
material, Excite does expect to incur internal staff costs and expenditures to
remedy any Year 2000 related problems. Based on current and partial information
derived from pre-inventory/assessment activities, Excite estimates for 1999 it
will incur approximately $2.5 million in support of its Year 2000 compliance
initiative. Excite does not expect to incur additional material operational
costs such as diverted employee time. Such costs have been and will be funded
through current operations or available lines of credit and Excite has not
separately accounted for these costs. There is risk that additional costs could
be incurred, but based on management's current knowledge it is unable to fully
ascertain those costs. Excite believes that its further research through
inventory, assessment, remediation and testing activities will enable it to
determine the costs with greater certainty.

        The above discussion regarding costs, risks and estimated completion
dates for the Year 2000 is based on Excite's best estimates given information
that is currently available, and is subject to change.

LIQUIDITY AND CAPITAL RESOURCES

        At December 31, 1998 Excite had $61.0 million in unrestricted cash, cash
equivalents and short-term investments, an increase of $29.3 million from
December 31, 1997. Excite maintains its cash and cash equivalents in short-term
and medium-term investment-grade interest-bearing securities until required for
other purposes.

        Excite's operating activities used cash of $54.1 million, $44.3 million,
$27.0 million in 1998, 1997, and 1996, respectively. The increased use of cash
in 1998 was mainly attributable to the $70.0 million cash prepayment to Netscape
under the Netcenter Agreement, see Note 13 of Notes to Consolidated Financial
Statements. Excite borrowed $50.0 million from Intuit, which is a principal
stockholder of Excite, in April 1998 to fund a portion of this payment to
Netscape. In June 1998, Excite repaid the loan in full, plus interest of
approximately $410,000, with proceeds from Excite's public offering, which
closed in June 1998. Excite's cash flows from operating activities was positive
for the third and fourth quarters of 1998. 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 Excite'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 14 of 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 and an increase in accrued liabilities. The increased
use of cash in 1996 was primarily attributable to increased operating expenses
and increases in accounts receivable and prepaid expenses, reduced in part by
increases in accrued distribution license fees, accounts payable and other
accrued 




                                       24
<PAGE>   25

liabilities. Excite 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.

        Investing activities used cash of $15.9 million, $6.3 million and $19.6
million in 1998, 1997 and 1996, respectively. In 1998 and 1997, cash was used
for purchases of short-term investments, property and equipment, and
contributions towards its investment in Excite Japan, offset by the sales of
short-term investments. The decrease in 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. The 1996 increase was primarily
attributable to net purchases of short-term investments as well as property and
equipment from cash proceeds of Excite's initial public offering in April 1996.
Capital expenditures have been, and future expenditures are anticipated to be,
primarily for facilities and equipment to support expansion of Excite's
operations and management information systems. Excite expects that its capital
expenditures will increase as its employee base grows. As of December 31, 1998,
Excite did not have any material commitments for capital expenditures, although
Excite anticipates that its planned purchases of capital equipment and leasehold
improvements will require additional expenditures during 1999, a portion of
which may be financed through equipment leases and bank borrowings. At December
31, 1998 Excite had $5.5 million available on equipment lease lines, and Excite
believes that additional lease financing will be available to it if necessary.

        Financing activities generated cash of $99.3 million, $61.9 million and
$50.7 million in 1998, 1997 and 1996, respectively. Financing activities for
1998 primarily consisted of cash received in connection with the issuance of
stock through Excite's public offering which was completed in June 1998 for net
proceeds of $84.3 million and, to a lesser extent, option exercises under
Excite's equity incentive plan and warrants exercised by Netscape in July 1998.
Financing activities for 1997 primarily consisted of a bank line of credit
borrowing of $6.0 million, a convertible promissory note of $5.0 million, the
sale of convertible preferred stock by acquired companies for net proceeds of
$14.0 million, and the sale of Common Stock for net proceeds of $41.1 million,
of which $38.4 million represented net proceeds from the sale of Common Stock to
Intuit. Financing activities in 1996 primarily consisted of the sale of
Redeemable Convertible Preferred Stock and debt securities totaling $14.2
million and the sale of Excite's Common Stock for net proceeds of $37.2 million,
of which $35.4 million represented net proceeds from Excite's initial public
offering.

        In January and February 1999, Netscape exercised a portion of the
warrant issued under the Netcenter Agreement and paid approximately $19.1
million to purchase 646,158 shares of Excite's Common Stock.

        Excite's commitments at December 31, 1998 consisted of obligations under
operating leases, capital leases and other non-lease financings of $45.0
million, $21.8 million and $3.4 million, respectively, as well as bank and other
borrowings. See Note 5 of Notes to Consolidated Financial Statements.

        In March 1997, Excite entered into and borrowed on a $6.0 million line
of credit. This line of credit bears interest at the bank's prime rate,
approximately 7.75% at December 31, 1998, and is secured by substantially all of
Excite'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. Excite was in compliance with these
covenants at December 31, 1998. This line of credit expired in 1998 and Excite
has subsequently received extensions through February 15, 1999, which is the
current maturity of the note. Excite is currently negotiating a new line of
credit. See Note 4 of Notes to Consolidated Financial Statements.

        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 1997, Excite entered into a convertible promissory
note with Itochu for the principal amount of $5.0 million. The note bears
interest at the London Interbank Offered Rate plus 1%, approximately 6.1% at
December 31, 1998, 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 Excite 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. See Note 6 of Notes to Consolidated Financial Statements.




                                       25
<PAGE>   26

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

        Excite 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 next twelve months. Excite 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 stockholders of Excite will be reduced, stockholders
may experience additional dilution and such securities may have rights,
preferences or privileges senior to those of the holders of Excite's Common
Stock.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

        LIMITED OPERATING HISTORY; NO ASSURANCE OF PROFITABILITY. Excite
generated only limited revenues prior to 1996. Accordingly, Excite has a limited
operating history upon which to evaluate its current business. In addition,
Excite's business model is evolving and relies substantially upon the sale of
advertising on the Web, which is a developing industry. Excite'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 Web advertising.
Specifically, such risks include, without limitation:

o       the inability of Excite to maintain and increase levels of traffic on
        the Excite Network;

o       the failure of the market to adopt the Web as an advertising and
        commercial medium;

o       reductions in market prices for Web advertising as a result of
        competition or otherwise;

o       the inability of Excite to achieve higher cost per thousand impression,
        or "CPM", rates for targeted advertising or to increase the percentage
        of its advertising inventory sold;

o       the inability of Excite to derive sufficient revenues from the
        co-branded services of Netcenter and the additional costs Excite expects
        to incur in order to perform its obligations under the Netcenter
        Agreement;

o       the inability of Excite to effectively integrate the technology and
        operations of acquired businesses or technologies with its operations,
        increased operating expenses as a result of Excite's recent
        acquisitions;

o       the inability of Excite to expand its international operations,
        particularly in light of Excite's limited operating experience in the
        international market;

o       the failure by Excite to continue to develop and extend the Excite
        Network brands;

o       the inability of Excite to meet minimum guaranteed impressions under
        sponsorship agreements;

o       the inability of Excite to develop or acquire content for its services;

o       the inability of Excite to generate commerce-related revenues;

o       the failure of Excite to anticipate and adapt to a developing market;

o       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, offer competitive services;

o       government regulation;

o       the inability of Excite to identify, attract, retain and motivate
        qualified personnel;

o       and general economic conditions.

        Excite may not be able to succeed in addressing such risks.

        POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. Excite's operating results
have varied on a quarterly basis during its limited operating history and Excite
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 Excite's control, including but not limited
to:

o       specific economic conditions relating to the Internet and the Web;

o       usage of the Web and demand for Excite's services;

o       demand for advertising on the Excite Network as well as demand for
        Web-based advertising in general;



                                       26
<PAGE>   27

o       changes in advertising rates as a result of competition or otherwise,
        seasonal trends in advertising sales and the advertising budgeting
        cycles of advertisers;

o       mix of types of advertisements sold, such as the amount of targeted
        advertising, which generally has higher CPM rates, sold as a percentage
        of total advertising sold;

o       incurrence of charges in connection with the Netcenter Agreement;

o       Excite's distribution relationships and acquisitions;

o       incurrence of costs relating to acquisitions of businesses or
        technologies; introduction or enhancement of new or existing services by
        Excite and its competitors;

o       market acceptance of new services;

o       delays in the introduction of services or enhancements by Excite or its
        competitors;

o       capacity constraints and dependencies on computer infrastructure;

o       and general economic conditions.

        Due to all of the foregoing factors, Excite's quarterly revenues and
operating results are difficult to forecast. Excite 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 likely that in some future quarter or quarters Excite's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of Excite's Common Stock would be materially
and adversely affected.

        SIGNIFICANT RISKS ASSOCIATED WITH THE NETCENTER AGREEMENT. Excite's
Netcenter services agreement with Netscape has many substantial risks and
uncertainties including:

        REVENUE RISKS

        Excite will only receive revenues from the portions of Netcenter that
are co-branded with Excite. Excite will not receive any revenues from other
areas of the Netcenter service. If Netscape-programmed channels, such as News,
Sports and Entertainment, are more popular than co-branded channels with users
and advertisers, Excite's revenues may be adversely affected.

        EXCITE MAY NOT RECOVER ITS INITIAL INVESTMENT

        Excite paid Netscape a cash payment of $70.0 million when it signed the
Netcenter Agreement. A substantial portion of this amount represented a
prepayment of Excite's royalty obligations under this agreement. If the
co-branded portions of the Netcenter service does not generate enough revenues
over the two-year term of the agreement, Excite would not be able to realize a
sufficient return on its investment. Netscape has not guaranteed any minimum
revenues to Excite. The ability of Netcenter to generate revenues involves a
number of risks, including:

o       general risks relating to an advertising supported service discussed
        elsewhere in this section;

o       pricing competition from Netscape;

o       Netscape's ability to attract users to Netcenter, particularly in light
        of the fact that while Netscape's Web browser features Netcenter,
        Microsoft's Web browser does not;

o       risks that Netscape-programmed channels will have more user traffic;

o       risks that the "premier provider" placements of Excite will not generate
        sufficient traffic to Excite;

o       and risks that Excite may not be able to sell a sufficient number of
        advertisements on the co-branded portions of Netcenter.

        NETSCAPE HAS A LICENSE TO USE EXCITE'S SEARCH TECHNOLOGY

        At the end of the term of the Netcenter Agreement, Netscape will retain
a license to use Excite's Internet search technology. Therefore, after the term
of the Netcenter Agreement, Netscape will be able to operate a competitive
service without paying Excite. Netscape may also sublicense this technology to a
third party. As a result, Excite may face increased competition.

        NON-RENEWAL AND TERMINATION RISKS

        Netscape has no obligation to renew the Netcenter Agreement. In
addition, if Netscape believes that Excite is delivering objectionable content
on Netcenter, it could elect to terminate the agreement if Excite 




                                       27
<PAGE>   28

does not remove that content. If this occurred, Netscape would not be required
to refund Excite any amounts it prepaid or costs it incurred in performing under
the Netcenter Agreement.

        DISTRIBUTION RISKS

        As part of the Netcenter Agreement, Excite will also be featured on the
Net Search page as well as on the Netcenter Widget Tool. Netscape has guaranteed
Excite that it will deliver only a specified number of "impressions", rather
than users who "click-through" to Excite's services from the Net Search page.
Therefore, despite this featured position, Excite may not receive a substantial
amount of user traffic from the Net Search page. Although Netscape has
guaranteed the number of times users "click-through" from the Widget Tool,
Netscape is under no obligation to maintain this tool on Netcenter after
December 1998. Therefore, Excite may not receive substantial amounts of traffic
from this tool either.

        Excite had assumed that it would experience similar "click-through"
rates as it had under its previous agreements with Netscape. This rate is
influenced not only by the brand strength of the search service provider, but
also by the layout and programming of the Netcenter pages. Thus user traffic
from these sources will also depend on Netscape's ability to program the site
and maintain the historical "click-through" rates. Any failure of Netcenter to
gain acceptance may also adversely affect Excite's business, as there would be a
smaller pool of users who would be exposed to the Net Search page and the Widget
Tool.

        The distribution of traffic from Netcenter over the term of the
agreement also affects Excite's ability to recoup the amount it has paid under
the Netcenter Agreement. Netscape may not be able to meet the exposure
guarantees over the term of the agreement. In addition, there is no guarantee as
to the timing and delivery over the term of the agreement. If the fulfillment of
these guarantees is more heavily weighted towards the end of the contract term
than Excite had anticipated, its expectations as to the present value of the
agreement, as well as Excite's future operating results, would be negatively
impacted.

        NETCENTER COMPETES WITH EXCITE

        Most of the services offered on Netcenter compete directly with Excite's
services. Therefore, Excite faces additional competition for both users and
advertisers from Netcenter. If Excite devotes significant resources towards
programming or selling and marketing the co-branded portions of Netcenter, these
efforts may adversely affect Excite's ability to perform similar activities for
the Excite services.

        AMERICA ONLINE'S ACQUISITION OF NETSCAPE

        America Online is a competitor of Excite. In November, 1998, America
Online agreed to acquire Netscape. Excite does not know what effect this
acquisition by America Online will have on its current relationship with
Netscape or on any future potential relationship with Netscape.

        ACQUISITIONS MAY AFFECT EXCITE'S BUSINESS. Excite has in the past
acquired, and may in the future acquire, businesses, technologies, services,
product lines, content databases, or access to content databases. Acquisitions
involve a number of special risks, including, among other things:

o       the difficulty of assimilating the technologies, operations and
        personnel of acquired companies with those of Excite;

o       the potential disruption of Excite's business;

o       the diversion of resources, the incurrence of acquisition-related
        expenses, the write-off or amortization of intangible assets, the
        assumption of unknown liabilities;

o       and 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.

        Any failure to successfully address these acquisition-related risks may
have a material adverse affect on Excite's business.

        EXCITE DEPENDS ON SPONSORSHIP AGREEMENTS FOR REVENUES. Excite derives a
substantial portion of its revenues from third parties to provide sponsored
services and placements on Excite's Web sites. These sponsorships typically last
for a longer period of time than traditional banner advertisement purchases. If




                                       28
<PAGE>   29

these sponsorship arrangements do not meet the advertisers' expectations as to
new customers or increased sales or brand awareness, the sponsors may not renew
their arrangements with Excite. If Excite does not renew its existing
sponsorships or obtain new sponsors, for any reason, its business would be
adversely affected.

        Excite also typically grants exclusivity provisions to certain of its
sponsors. These provisions may prevent Excite from accepting additional sponsors
or advertisers with respect to all or a portion of a channel or across the
entire Excite Network. Certain of these provisions could also conflict with
similar provisions in At Home's sponsorship agreements.

        RISKS ASSOCIATED WITH BANNER ADVERTISING. Excite derives a significant
portion of its revenues from the sale of banner advertisements on the Excite
Network. A majority of Excite'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 Excite will be
successful in maintaining or increasing the amount of banner advertising on the
Excite Network, and the failure to do so would have a material adverse affect on
Excite's business.

        EXCITE'S BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE.
Excite operates in a new and rapidly evolving market. Excite's business may be
adversely affected if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors
including: the adequacy of the Internet's infrastructure to meet increased usage
demands; privacy and security concerns; and availability of cost-effective
service. Any of these issues could cause Internet's performance or level of
usage to decline.

        RISKS ASSOCIATED WITH DEVELOPING WEB ADVERTISING MARKETS. 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.
Therefore the Web is an unproven medium for advertising-supported services.
Accordingly, Excite'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.

        Excite's ability to generate significant advertising revenues will also
depend on, among other things, the development of a large base of users of
Excite's services possessing demographic characteristics attractive to
advertisers, the ability of Excite to accurately measure its user base and the
ability of Excite to develop or acquire effective advertising delivery and
measurement systems. Many of Excite'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. The market for Web advertising may not continue to emerge or become
sustainable. If the market fails to develop or develops more slowly than
expected, Excite's business may 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.
Advertisers may not continue to accept Excite's or other third-party
measurements of impressions, and such measurements may contain errors. In such
event, Excite's advertising revenues may be materially adversely affected, which
may have a material adverse affect on Excite's business.

        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. This 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 Excite's network to the advertiser's Web
pages, instead of rates based solely on the number of impressions displayed on
users' computer screens, would materially adversely affect Excite's revenues. As
a result of these risks, Excite may not succeed in 




                                       29
<PAGE>   30

generating significant future advertising revenues from Web-based advertising.
The failure to do so may have a material adverse affect on Excite's business.

        Advertisers may also determine that banner advertising, is not an
effective or attractive advertising medium. Excite may not be able to
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 may have a material
adverse affect upon the commercial viability of Web advertising.

        EXCITE WILL DEPEND ON A NUMBER OF THIRD PARTY RELATIONSHIPS. Excite will
depend on a number of third party relationships to provide users and content for
its services. Examples of some of these important relationships include:

o       relationships with respect to the positioning of Excite's service on Web
        browsers or other high-traffic Web sites or;

o       arrangements under which third parties provide content for Excite's
        services;

o       arrangements under which third parties provide services such as games or
        e-mail;

o       and relationships with Internet and online service providers and other
        third parties to provide communications infrastructure for Excite.

        If Excite cannot renew these relationships on favorable terms, or if
these relationships terminate, Excite would have to enter into new
relationships. Excite may not be able to replace any of its important third
party relationships on reasonable terms, if at all. If Excite cannot replace any
important relationship, it could lose users or advertisers, which may adversely
affect Excite's revenues. Even if Excite replaces any relationships or enters
into new relationships, Excite may incur increased costs such as distribution
license fees or selling and marketing expenses in order to pay for these
relationships.

        These third parties may not regard their relationship with Excite as
important to their business. Therefore, they could elect to reassess their
commitment to their relationship with Excite in the future or develop
competitive services. Furthermore, the services offered by third parties with
whom Excite has relationships may not be successful. Therefore, Excite's
existing or future relationships may not result in increased user traffic or
revenues.

        RISK OF CAPACITY CONSTRAINTS; SYSTEM FAILURES. Excite 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 Excite's
reputation, its ability to attract advertisers and to achieve market acceptance
of the Excite Network. Any system failure that causes interruptions in the
availability of or that increases response time of Excite'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
Excite, which could lead to slower response time or system failures. In
addition, as the amount of Web pages and traffic on Excite's services increases,
there can be no assurance that the Excite Network will be able to scale
proportionately. Excite is also dependent upon timely feeds and downloads of
information from content providers and is dependent upon providers of Web
browsers and on Internet and online service providers and other Web site
operators, which have experienced significant outages in the past, for access to
its network. In the past, Web consumers have experienced outages, delays and
other difficulties due to system failures unrelated to Excite's systems and
services. Additional difficulties may also materially and adversely affect
consumer and advertiser satisfaction. To the extent that the capacity
constraints described above are not effectively addressed by Excite, such
constraints may have a material adverse affect on Excite's business.

        Substantially all of Excite's communications hardware and certain of its
computer hardware operations are located at leased facilities in Redwood City,
California, an area susceptible to earthquakes. Excite has experienced system
failures or outages from time to time in the past, which have disrupted the
operation of the Excite Network. A system failure at this location may 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. In the event that Excite seeks to
replicate its systems at other locations, it would face a number of technical
challenges, particularly with respect to database replication and the need to
constantly update distributed databases, Excite may not be able to successfully
address these challenges. Although Excite carries property and business
interruption insurance, 




                                       30
<PAGE>   31

its low coverage limits likely will not be adequate to compensate Excite for all
losses that may occur. Excite'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 may have a material adverse affect on
Excite's business.



                                       31
<PAGE>   32

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Excite, Inc.

        We have audited the accompanying consolidated balance sheets of Excite,
Inc. as of December 31, 1998 and 1997, and the related consolidated statements
of operations, stockholders' equity (net capital deficiency) and cash flows for
each of the three years in the period ended December 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

        In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Excite, Inc. at December 31, 1998 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, 1998, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

        As discussed in Note 1, the consolidated financial statements of Excite,
Inc. have been restated.



                                        /s/ ERNST & YOUNG LLP

Palo Alto, California
January 19, 1999 (March 22, 1999 as to Note 1 - Summary of Significant
Accounting Policies, paragraph 4 and Note 2 - Business Combinations and
Purchased Product Rights, paragraph 3 and 6).




                                       32
<PAGE>   33

                                  EXCITE, INC.

                           CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                               ---------------------------
                                                                                 1998              1997 
                                                                               ---------         ---------
                                                                                                (RESTATED-
                                                                                                SEE NOTE 1)
<S>                                                                            <C>               <C>      
                                                  ASSETS
Current assets:
    Cash and cash equivalents                                                  $  45,366          $ 16,073
    Short-term investments                                                        15,681            17,193
    Restricted investments                                                           558               302
    Accounts receivable, net of allowance for doubtful accounts
      of $1,422 in 1998 and $1,120 in 1997                                        36,592            21,397
    Prepaid Netscape distribution costs and trademarks, current portion           45,473                --
    Other prepaid and current assets                                               4,848             2,149
                                                                               ---------         ---------
        Total current assets                                                     148,518            57,114

Property and equipment, net                                                       35,937            15,581
Investment in affiliated company                                                   2,243                --
Prepaid Netscape distribution costs and trademarks                                20,954                --
Intangible assets, net                                                             8,792             1,771
Other assets                                                                       4,229             4,690
                                                                               ---------         ---------
        Total assets                                                           $ 220,673          $ 79,156
                                                                               =========         =========

                                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Bank line of credit and other notes payable                                $   6,100          $  6,589
    Accounts payable                                                              13,079             5,838
    Accrued compensation                                                           9,038             4,794
    Deferred revenue                                                               2,843             4,588
    Capital lease obligations, current portion                                     7,133             3,178
    Non-lease financing, current portion                                           1,531             1,176
    Other equipment financing                                                      7,481                --
    Related party liabilities                                                      5,092             1,575
    Other accrued liabilities                                                      6,741             5,279
                                                                               ---------         ---------
        Total current liabilities                                                 59,038            33,017
Capital lease obligations                                                         11,668             3,076
Non-lease financing                                                                1,568             1,613
Convertible note                                                                   5,000             5,000

Commitments and contingencies

Stockholders' equity:
    Convertible preferred stock, $0.001 par value
        Authorized - 4,000 shares
        issuable in series
        Issuable and outstanding - none and 2,702 shares at
        December 31, 1998 and 1997, respectively                                     813            12,948
    Common stock, $0.001 par value
        Authorized - 100,000 shares
        Issued and outstanding - 52,660 and 39,800 shares at
        December 31, 1998 and 1997, respectively                                      52                39
    Additional paid-in-capital ("APIC")                                          277,759           122,966
    Deferred compensation                                                           (907)           (1,440)
    Unrealized gain on available-for-sale securities                               1,319                15
    Accumulated deficit                                                         (135,637)          (98,078)
                                                                               ---------         ---------
        Total stockholders' equity                                               143,399            36,450
                                                                               ---------         ---------
            Total liabilities and stockholders' equity                         $ 220,673          $ 79,156
                                                                               =========         =========
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.





                                       33
<PAGE>   34

                                  EXCITE, INC.

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

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                      -------------------------------------------
                                                                        1998              1997             1996 
                                                                      ---------         --------         --------
                                                                                 (RESTATED - SEE NOTE 1)
<S>                                                                   <C>               <C>              <C>     
Revenues(1)                                                            $155,360         $ 55,826         $ 14,823

Cost of revenues:
   Hosting costs                                                         16,161            8,647            3,296
   Royalties and other cost of revenues                                  13,325            4,740              687
   Amortization of purchased technology                                      --            8,214              186
                                                                      ---------         --------         --------
      Total cost of revenues                                             29,486           21,601            4,169
                                                                      ---------         --------         --------

Gross profit                                                            125,874           34,225           10,654

Operating expenses:
   Research and development                                              29,557           18,200            8,263
   Sales and marketing                                                   63,074           34,311           21,358
   Distribution license fees and data acquisition costs                  21,723            9,365           11,878
   General and administrative                                            16,932           12,218            7,755
   In-process technology                                                  6,200            2,346            3,500
   Merger and acquisition related costs, including
      amortization of goodwill and other purchased intangibles            4,903            3,989            3,134
   Amortization of prepaid Netscape service                              17,673               --               --
                                                                      ---------         --------         --------
      Total operating expenses                                          160,062           80,429           55,888
                                                                      ---------         --------         --------
Operating loss                                                          (34,188)         (46,204)         (45,234)
Interest income                                                           1,625            1,317            1,464
Interest expense and other                                               (2,862)          (1,450)            (409)
Equity share of losses of affiliated company                             (2,134)            (477)              --
                                                                      ---------         --------         --------
Net loss                                                               $(37,559)        $(46,814)        $(44,179)
                                                                      =========         ========         ========
Basic and diluted net loss per share                                   $  (0.79)        $  (1.57)        $  (2.37)
                                                                      =========         ========         ========
Shares used in computing net loss per share                              47,475           29,729           18,648
                                                                      =========         ========         ========
</TABLE>


(1)     Includes $4.8 million from America Online and $3.5 million from another
        related party for the year ended December 31, 1998. See Note 12.



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       34
<PAGE>   35
                                  EXCITE, INC.

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                            COMMON STOCK                        
                                                               PREFERRED STOCK                AND APIC               DEFERRED   
                                                             SHARES       AMOUNT          SHARES      AMOUNT      COMPENSATION  
                                                             ------       ------          ------      ------      ------------  
<S>                                                          <C>        <C>               <C>        <C>          <C>           

BALANCE AT DECEMBER 31, 1995                                    --       $     --          4,896      $  3,530       $   (631)  
                                                                
   Net loss                                                     --             --             --            --             --   
   Unrealized loss on available-for-sale investments            --             --             --            --             --   
                                                                
        Comprehensive loss                                      --             --             --            --             --   
                                                                
   Issuance of common stock for cash                            --             --            566         1,412             --   
   Notes payable conversions                                    --             --            174           400             --   
   Issuance of warrants in connection with
      distribution agreement                                    --             --             --         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                                                 --             --          7,302        36,418             --   
   Conversion of redeemable preferred stock in
      in connection with the Company's IPO                      --             --         10,648        16,129             --   
   Issuance of common stock under employee plans                --             --            600           375             --   
   Amortization of deferred compensation, net
      of cancellations                                          --             --             --             7            243   
   Other equity transactions of acquired companies             320          1,890            861             7             --   
   Issuance of common and preferred stock in
      connection with asset purchase agreements              1,950         15,816             30           103             --   
                                                             ------     ---------          -----     ---------      ---------   
BALANCE AT DECEMBER 31, 1996 (RESTATED)                      2,270         17,706         25,077        60,006           (388)  
                                                                
   Net loss                                                     --             --             --            --             --   
   Unrealized gain on available-for-sale investments            --             --             --            --             --   
                                                                
        Comprehensive loss                                      --             --             --            --             --   
                                                                
   Issuance of common stock for cash, net of
      issuance costs of $800                                    --             --          5,800        38,350             --   
   Conversion of common stock warrant to
      preferred stock warrant                                   --          1,625             --        (1,625)            --   
   Exercise of outstanding warrants                            229             --             86            --             --   
   Issuance of common stock under employee plans                --             --          1,184         2,319             --   
   Compensation expense from accelerated deferred
      compensation and stock option vesting                     --             --             --         1,658             --   
   Deferred compensation related to stock options,
      net of amortization and cancellations                     --             --             --         1,407         (1,052)  
   Acquisition of Netbot, Inc.:
      Conversion of preferred stock to common stock           (409)        (3,730)           820         3,730             --   
   Issuance of preferred stock by acquired companies
      for cash, net of issuance costs of $115                1,772          6,385             --            --             --   
   Other equity transactions of acquired company             1,019          7,590          2,475           532             --   
   Conversion of preferred stock to common stock            (2,179)       (16,628)         4,358        16,628             --   
                                                             ------     ---------          -----     ---------      ---------   
BALANCE AT DECEMBER 31, 1997  (RESTATED)                     2,702         12,948         39,800       123,005         (1,440)  
                                                                
   Net loss                                                     --             --             --            --             --   
   Unrealized gain on available-for-sale investments            --             --             --            --             --   
                                                                
      Comprehensive loss                                        --             --             --            --             --   
   Acquisition of MatchLogic, Inc.:
      Conversion of preferred stock to common stock         (2,291)        (8,705)         4,582         8,705             --   
   Acquisition of Classifieds2000, Inc.:
      Conversion of preferred stock to common stock           (411)        (3,430)           822         3,430             --   
   Acquisition of Throw, Inc.:
      Issuance of common stock                                  --             --            330        16,242             --   
   Issuance of common stock for cash, net of
      issuance costs of $650                                    --             --          2,870        84,331             --   
   Issuance of warrants                                         --             --             --        19,876             --   
   Exercise of outstanding warrants                             --             --            432         6,130             --   
   Issuance of common stock under employee plans                --             --          3,774        13,269             --   
   Compensation expense from accelerated deferred
      compensation and stock option vesting                     --             --             --           298             --   
   Amortization of deferred compensation, net
      of cancellations                                          --             --             --            --            533   
   Issuance of common stock for equity securities               --             --             50         2,525             --   
                                                             ------     ---------          -----     ---------      ---------   
BALANCE AT DECEMBER 31, 1998                                    --       $    813         52,660      $277,811       $   (907)  
                                                             ======     =========         ======     =========      =========   
</TABLE>


<TABLE>
<CAPTION>

                                                                 OTHER
                                                            COMPREHENSIVE
                                                             INCOME/(LOSS)     DEFICIT          TOTAL
                                                             -------------     -------          -----
<S>                                                         <C>              <C>            <C>

BALANCE AT DECEMBER 31, 1995                                   $    152       $ (7,085)      $ (4,034)
                                                                                            ---------
   Net loss                                                          --        (44,179)       (44,179)
   Unrealized loss on available-for-sale investments               (326)            --           (326)
                                                                                            ---------
        Comprehensive loss                                           --             --        (44,505)
                                                                                            ---------
   Issuance of common stock for cash                                 --             --          1,412
   Notes payable conversions                                         --             --            400
   Issuance of warrants in connection with
      distribution agreement                                         --             --          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                                                      --             --         36,418
   Conversion of redeemable preferred stock in
      in connection with the Company's IPO                           --             --         16,129
   Issuance of common stock under employee plans                     --             --            375
   Amortization of deferred compensation, net
      of cancellations                                               --             --            250
   Other equity transactions of acquired companies                   --             --          1,897
   Issuance of common and preferred stock in
      connection with asset purchase agreements                      --             --         15,919
                                                              ---------      ---------      --------- 
BALANCE AT DECEMBER 31, 1996 (RESTATED)                            (174)       (51,264)        25,886
                                                                                            ---------
   Net loss                                                          --        (46,814)       (46,814)
   Unrealized gain on available-for-sale investments                189             --            189
                                                                                            ---------
        Comprehensive loss                                           --             --        (46,625)
                                                                                            ---------
   Issuance of common stock for cash, net of
      issuance costs of $800                                         --             --         38,350
   Conversion of common stock warrant to
      preferred stock warrant                                        --             --             --
   Exercise of outstanding warrants                                  --             --             --
   Issuance of common stock under employee plans                     --             --          2,319
   Compensation expense from accelerated deferred
      compensation and stock option vesting                          --             --          1,658
   Deferred compensation related to stock options,
      net of amortization and cancellations                          --             --            355
   Acquisition of Netbot, Inc.:
      Conversion of preferred stock to common stock                  --             --             --
   Issuance of preferred stock by acquired companies
      for cash, net of issuance costs of $115                        --             --          6,385
   Other equity transactions of acquired company                     --             --          8,122
   Conversion of preferred stock to common stock                     --             --             --
                                                              ---------      ---------      --------- 
BALANCE AT DECEMBER 31, 1997  (RESTATED)                             15        (98,078)        36,450
                                                                                            --------- 
   Net loss                                                          --        (37,559)       (37,559)
   Unrealized gain on available-for-sale investments              1,304             --          1,304
                                                                                            --------- 
      Comprehensive loss                                             --             --        (36,255)
   Acquisition of MatchLogic, Inc.:
      Conversion of preferred stock to common stock                  --             --             --
   Acquisition of Classifieds2000, Inc.:
      Conversion of preferred stock to common stock                  --             --             --
   Acquisition of Throw, Inc.:
      Issuance of common stock                                       --             --         16,242
   Issuance of common stock for cash, net of
      issuance costs of $650                                         --             --         84,331
   Issuance of warrants                                              --             --         19,876
   Exercise of outstanding warrants                                  --             --          6,130
   Issuance of common stock under employee plans                     --             --         13,269
   Compensation expense from accelerated deferred
      compensation and stock option vesting                          --             --            298
   Amortization of deferred compensation, net
      of cancellations                                               --             --            533
   Issuance of common stock for equity securities                    --             --          2,525
                                                              ---------      ---------      --------- 
BALANCE AT DECEMBER 31, 1998                                   $  1,319      $(135,637)      $143,399
                                                              =========      =========      =========

</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       35
<PAGE>   36


                                  EXCITE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
        (INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS, IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                             YEARS ENDED DECEMBER 31,
                                                                                    ---------------------------------------
                                                                                       1998           1997           1996
                                                                                    ---------      ---------      ---------
                                                                                            (RESTATED - SEE NOTE 1)
<S>                                                                                 <C>            <C>            <C>       

CASH FLOWS USED BY OPERATING ACTIVITIES:
Net loss                                                                             $(37,559)      $(46,814)      $(44,179)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Amortization of deferred compensation                                               533            355            243
      Compensation expense from accelerated deferred compensation
        charges and stock option vesting                                                  298          1,658             --
      Depreciation                                                                     12,911          6,438          2,189
      Issuance of warrants                                                                 --             55          1,625
      Amortization of intangibles                                                       3,780         10,670            954
      In-process technology                                                             6,200          2,346          3,500
      Amortization of Netscape service, distribution costs and trademarks              23,451             --             --
      Loss on disposal of property and equipment                                           90             --             96
      Provision for loan impairment                                                        --             --            629
      Equity share of losses in affiliated company                                      2,134            477             --
   Changes in assets and liabilities:
        Accounts receivable                                                           (15,195)       (18,044)        (2,970)
        Prepaid Netscape distribution costs and trademarks                            (70,000)            --             --
        Prepaid expenses and other current assets                                      (2,929)        (3,819)          (895)
        Other assets                                                                      461         (4,221)          (896)
        Accounts payable                                                                7,077         (1,067)         5,721
        Accrued compensation                                                            3,869          3,904            454
        Related party liabilities                                                       3,692          1,401             --
        Other accrued liabilities                                                       7,101          2,336          6,512
                                                                                    ---------      ---------      ---------
           Net cash used by operating activities                                      (54,086)       (44,325)       (27,017)
                                                                                    ---------      ---------      ---------

CASH FLOWS USED IN INVESTING ACTIVITIES:
   Purchases of property and equipment                                                (16,774)        (7,347)        (1,109)
   Proceeds from disposal of property and equipment                                       186             --             --
   Purchases of investments                                                           (26,266)       (48,182)       (49,811)
   Sales and maturities of investments                                                 31,353         49,235         31,936
   Investment in affiliated company                                                    (4,377)            --             --
   Notes and advances to Novo MediaGroup, Inc.                                             --             --           (629)
                                                                                    ---------      ---------      ---------
           Net cash used in investing activities                                      (15,878)        (6,294)       (19,613)
                                                                                    ---------      ---------      ---------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
   Payments on capital lease and other financing obligations                           (3,904)        (4,105)        (1,787)
   Net (payments) proceeds on bank line of credit and other notes payable                (564)         5,878          1,064
   Proceeds from issuance of convertible note                                              --          5,000             --
   Proceeds from sale of redeemable convertible preferred stock                            --         13,975         14,172
   Proceeds from issuance of common stock                                             103,725         41,146         37,219
                                                                                    ---------      ---------      ---------
           Net cash provided by financing activities                                   99,257         61,894         50,668
                                                                                    ---------      ---------      ---------

Net increase in cash and cash equivalents                                              29,293         11,275          4,038
Cash and cash equivalents at beginning of period                                       16,073          4,798            760
                                                                                    ---------      ---------      ---------
Cash and cash equivalents at end of period                                           $ 45,366       $ 16,073       $  4,798
                                                                                    =========      =========      =========
NON-CASH FINANCING ACTIVITIES:
   Conversion of convertible preferred stock to common stock                         $ 12,135       $ 20,358       $ 16,129
   Property and equipment acquired under capital leases and other non-
      lease financing                                                                $ 16,763       $  7,400       $  7,652
   Preferred stock issued by acquired company for ownership interest                 $     --       $  1,720       $     --
   Conversion of notes payable to common stock                                       $     --       $     --       $  1,400
SUPPLEMENTAL CASH FLOW DISCLOSURE:
   Cash paid for interest                                                            $  2,725       $  1,050       $    379

</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       36

<PAGE>   37



                                  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 Internet media company offering
consumers and advertisers comprehensive Internet navigation services with
extensive personalization capabilities. The Excite Network consists of the
Excite (www.excite.com), WebCrawler (www.webcrawler.com) and Classifieds2000
(www.classifieds2000.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,
chat and other community features and personalization capabilities. Localized
versions of Excite are available in Australia, China, France, Germany, Italy,
Japan, Sweden, the Netherlands and the United Kingdom. The Company conducts its
business within two industry segments, including the selling of banner and
sponsorship advertising on the Excite Network to customers in various
industries, and, through the merger with MatchLogic, Inc. ("MatchLogic"), ad
serving and targeting services. See Note 2 and "Risk Factors that May Affect
Future Results - Acquisition Strategy; Integration of Past and Future
Acquisitions."

   The Company has incurred operating losses to date and incurred a net loss of
approximately $37.6 million for the year ended December 31, 1998. Management
believes that available resources will provide sufficient funding to enable the
Company to meet its obligations through at least December 31, 1999. 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.

   Basis of Presentation

   The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. The consolidated financial statements have been restated for
all pooling of interests. See Note 2.

   Restatement of Financial Statements

   In April 1998 and November 1997, the Company acquired Classifieds2000 and
Netbot in a transaction accounted for as a pooling of interests (See Note 2).
The financial statements prior to the date of acquisition were not restated as
Excite had determined that the results of operations and financial position of
Netbot and Classifieds2000 were not material to the Company's consolidated
financial statements in any period. After discussions with the Staff of the
Securities and Exchange Commission, the Company revised the original accounting
for these transactions and restated its consolidated financial statements for
1998, 1997 and 1996 to reflect the combined results of operations and financial
position of the Company and both Netbot and Classifieds2000. These financial
statements reflect the impact of this restatement.

   The effect of this restatement on previously reported consolidated financial
statements is as follows:
<TABLE>
<CAPTION>

                                                Year Ended                       Year Ended                    Year Ended
                                            December 31, 1998                 December 31, 1997             December 31, 1996 
                                       ---------------------------      ----------------------------    ---------------------------
                                       As Reported     As Restated      As Reported      As Restated     As Reported    As Restated
                                       -----------     -----------      -----------      -----------     -----------    -----------

<S>                                      <C>             <C>            <C>             <C>           <C>              <C>       
Net loss                               $   (36,974)    $  (37,559)      $  (41,392)      $  (46,814)     $  (43,117)    $  (44,179)
Basic and diluted net loss per share   $     (0.78)    $    (0.79)      $    (1.47)      $    (1.57)     $    (2.38)    $    (2.37)
</TABLE>

   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.


                                       37
<PAGE>   38
   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 consolidated financial statements and
accompanying notes. Actual results may differ from those estimates.

   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 credit losses and such
losses have been within management's expectations and have not been material in
any year. The Company's services are provided to customers in several
industries, primarily in North America.

   No customers accounted for 10% or more of total revenues for the year ended
December 31, 1998 and 1997. One customer accounted for approximately 12% of
total revenues for the year ended December 31, 1996.

   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,
                                                    ----------------------
(IN THOUSANDS)                                        1998          1997 
                                                    --------       -------

<S>                                                 <C>            <C>     
Computer equipment and internal use software        $ 43,746       $18,639
Furniture and fixtures                                 6,581         3,006
Leasehold improvements                                 7,125         2,607
                                                    --------       -------
                                                      57,452        24,252
Less: accumulated depreciation and amortization      (21,515)       (8,671)
                                                    --------       -------
                                                    $ 35,937       $15,581
                                                    ========       =======
</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.
Goodwill represents the excess of the aggregate purchase price over the fair
value of the tangible and intangible assets acquired in various acquisitions.
These purchased intangibles and goodwill relate to the acquisitions of certain
assets from other companies. See Note 2.
<TABLE>
<CAPTION>

                                             LIFE IN           DECEMBER 31,        
(IN THOUSANDS)                               MONTHS          1998        1997    
                                            ---------      --------    --------

<S>                                       <C>              <C>         <C>          
Goodwill                                        36         $ 11,163    $    362
Trademarks, trade names and other             24-36           2,346       2,346
Developed technology                            13            8,400       8,400
Operating agreement                              4            1,200       1,200
Distribution agreement                          24              500         500
                                                           --------    --------
                                                             23,609      12,808
Less: accumulated amortization                              (14,817)    (11,037)
                                                           --------    --------
                                                           $  8,792    $  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
recognize the amount of the impairment based on discounted expected future cash
flows from the impaired assets. The cash 


                                       38
<PAGE>   39

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, 1998. See Note 3.

   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. These revenues, as well as contract and other
revenues, are generally recognized ratably over the term of the agreements,
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. 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.

   Advertising

   Costs related to advertising are expensed as incurred. Advertising expense
was approximately $13.9 million, $7.4 million and $10.4 million for the years
ended December 31, 1998, 1997 and 1996, respectively.

   Per Share Data

   In 1997, the FASB issued SFAS No. 128, "Earnings per Share." SFAS No. 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 SFAS No. 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 7 and 8 for further information on these securities. The following
table sets forth the computation of basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31, 
                                                      ------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)                   1998          1997          1996 
                                                      --------      --------      --------
<S>                                                   <C>           <C>           <C>      
Net loss                                              $(37,559)     $(46,814)     $(44,179)
                                                      ========      ========      ========
  Weighted average shares outstanding                   48,180        30,862        19,868
  Weighted average common shares issued subject
    to repurchase agreements                              (705)       (1,133)       (1,220)
                                                      --------      --------      --------
Shares used to compute basic and diluted net loss
  per share                                             47,475        29,729        18,648
                                                      ========      ========      ========
Basic and diluted net loss per share                   $ (0.79)      $ (1.57)      $ (2.37)
                                                      ========      ========      ========
</TABLE>

   Stock Split

   In June 1998, the Board of Directors of the Company declared a two-for-one
stock split which was in the form of a 100% stock dividend. The dividend was
paid on July 20, 1998 to stockholders of record on July 6, 1998. All of the
Common Stock share and per share data have been adjusted to reflect this stock
split.

   Reclassifications

                                       39
<PAGE>   40

   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 Consolidated Statements of Stockholders' Equity (Net Capital
Deficiency).

   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. Previously reported information has been restated
to reflect the addition of an operating segment resulting from the merger with
MatchLogic in 1998. See Note 2.

   In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", which establishes
guidelines for the accounting for the costs of all computer software developed
or obtained for internal use. The Company adopted SOP 98-1 effective for the
year ended December 31, 1998. The adoption of SOP 98-1 is not expected to have a
material impact on the Company's consolidated financial statements.

   In April, 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." The statement is effective for fiscal years beginning
after December 15, 1998. The statement requires costs of start-up activities and
organization costs to be expensed as incurred. The Company is required to adopt
SOP 98-5 for the year ended December 31, 1999. The adoption of SOP 98-5 is not
expected to have a material impact on the Company's consolidated financial
statements.

   In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the type of
hedge transaction. The Company does not expect that the adoption of SFAS No. 133
will have a material impact on its consolidated financial statements because the
Company does not currently hold any derivative instruments.

2.      BUSINESS COMBINATIONS AND PURCHASED PRODUCT RIGHTS

   During the three years ended December 31, 1998, Excite completed the
following acquisitions:

<TABLE>
<CAPTION>
                                                                          SHARES OF EXCITE
                                                             SHARES OF       SERIES E          SHARES OF
                                                              EXCITE        CONVERTIBLE       OPTIONS AND
                                                              COMMON       PREFERRED STOCK     WARRANTS
COMPANY OR TECHNOLOGY ACQUIRED    DATE ACQUIRED            STOCK ISSUED       ISSUED            ASSUMED 
------------------------------    -------------            ------------    ---------------    -----------
(IN THOUSANDS)
<S>                               <C>                      <C>             <C>                <C>
McKinley                          August   1996                  1,700            --                28
AOL's WebCrawler                  November 1996                     --         1,950                --
Netbot                            November 1997                  1,708            --               422
MatchLogic                        February 1998                  6,122            --             1,049
Classifieds2000                   April    1998                  1,730            --                50
Throw                             April    1998                    330            --               318
</TABLE>

   In August 1996, the Company acquired McKinley, the creator of the Magellan
Internet Guide, in a transaction 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. All consolidated financial information for 1996 was restated to
reflect the combined operations of the Company and McKinley.

                                       40
<PAGE>   41

   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 search and directory technology
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 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 capitalized as 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.

   In November 1997, the Company acquired Netbot, a private company and
developer of advanced search technology utilized for electronic commerce, in a
transaction accounted for as a pooling of interests. 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. All consolidated financial information has been restated to
reflect the combined operations of the Company and Netbot.

   In February 1998, the Company acquired MatchLogic, a private company
providing advertisers and agencies with Internet advertising management services
that began operations in May 1997, in a transaction accounted for as a pooling
of interests. In connection with the acquisition of MatchLogic, the Company
incurred approximately $700,000 in merger related expenses primarily for legal
and other professional fees. All consolidated financial information has been
restated to reflect the combined operations of the Company and MatchLogic.

   Separate results of the combined entities through the periods preceding the
merger (February 2, 1998) are as follows:

<TABLE>
<CAPTION>
                   PERIOD ENDED         YEARS ENDED DECEMBER 31,
                    FEBRUARY 2,        ---------------------------
(IN THOUSANDS)         1998              1997              1996
                     --------          --------          --------
                   (UNAUDITED)
<S>                <C>                 <C>               <C>     
Revenues:
  Excite              $ 6,016           $51,863           $14,823
  MatchLogic              376             3,963                --
                     --------          --------          --------
                      $ 6,392           $55,826           $14,823
                     ========          ========          ========

Net Loss:
  Excite              $(1,851)         $(35,581)         $(44,179)
  MatchLogic           (1,388)          (11,233)               --
                     --------          --------          --------
                      $(3,239)         $(46,814)         $(44,179)
                     ========          ========          ========
</TABLE>

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

   In April 1998, the Company acquired Classifieds2000, a provider of Web-based
classified ads that began operations in July 1996, in a transaction accounted
for as a pooling of interests. In connection with the acquisition of
Classifieds2000, the Company incurred approximately $743,000 in merger-related
expenses primarily for legal and other professional fees. All consolidated
financial information has been restated to reflect the combined operations of
the Company and Classifieds2000.

   Separate results of the combined entities through the periods preceding the
merger (April 1, 1998) are as follows:
<TABLE>
<CAPTION>

                         PERIOD ENDED          YEARS ENDED DECEMBER 31,
                            APRIL 1,        --------------------------
(IN THOUSANDS)               1998             1997              1996
                          -----------       --------          --------
                           (UNAUDITED)
<S>                       <C>               <C>               <C>     
Revenues:
  Excite                   $23,001           $54,280           $14,757
  Classifieds2000            1,255             1,546                66
                          --------          --------          --------
                           $24,256           $55,826           $14,823
                          ========          ========          ========

Net Loss:
  Excite                   $(6,959)         $(45,169)         $(43,900)
  Classifieds2000             (584)           (1,645)             (279)
                          --------          --------          --------
                           $(7,543)         $(46,814)         $(44,179)
                          ========          ========          ========

</TABLE>


                                       41
<PAGE>   42

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

   In April 1998, the Company acquired Throw, a development stage company
focused on community products that began operations in April 1996, in a
transaction accounted for as a purchase. The total purchase price was allocated
to the acquired assets and liabilities based on their estimated fair values as
of the date of the acquisition. This included an original purchase price
allocation of approximately $800,000 to other intangibles assets, which were
being amortized on a straight-line basis through 1999 and approximately, $16.2
million was allocated to in-process technology and charged to operations at the
time of acquisition. Accordingly, the Company expensed this amount in its
originally reported June 30, 1998 operating results.

   In response to recent Securities and Exchange Commission ("SEC")
interpretative guidance surrounding acquisition-related in-process research and
development, the Company has revised the original accounting for the purchase
price allocation related to the 1998 acquisition of Throw and the related
amortization of intangibles. This adjustment decreased the amount previously
allocated to in-process technology by $10.0 million, which has been capitalized
as goodwill and will be amortized on a straight-line basis over three years. As
a result, in the second quarter of 1998, the Company allocated $6.2 million to
in-process technology, and during the year ended December 31, 1998, the Company
amortized a total of $2.7 million of goodwill to operations. Pro-forma results
of operations have not been presented because the effect of this acquisition was
not material to the Company's consolidated financial position, results of
operations, and cash flows.

   To determine the value of the in-process research and development, the
Company considered, among other factors, the state of development of each
project, the time and cost needed to complete each project, expected income, 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. This
analysis results in amounts assigned to in-process research and development
projects that had not yet reached technological feasibility and does not have
alternative future uses.

3.      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, equity securities and government securities, are classified as
available-for-sale as of December 31, 1998. These securities are recorded at
fair market value. Unrealized gains and losses on these investments are included
in stockholders' 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, 1998 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.

   The estimated fair value of cash, cash equivalents and short-term investments
are as follows:
<TABLE>
<CAPTION>

                                     YEARS ENDED DECEMBER 31,
                                     ------------------------
(IN THOUSANDS)                          1998            1997
                                     -------         -------

<S>                                  <C>             <C>    
Cash and cash equivalents:
  Cash                               $33,977          $5,995
  Money market funds                     126              62
  Commercial paper                        --           1,958
  U.S. Government securities          11,263           8,058
                                     -------         -------
                                     $45,366         $16,073
                                     =======         =======
Short-term investments:
  Commercial paper                    $3,104          $7,791
  Equity securities                    4,411              --
  U.S. Government securities           8,166           9,402
                                     -------         -------
                                     $15,681         $17,193
                                     =======         =======
Restricted investments:
  Cash                                $  223          $   --
  Certificates of deposit                335              --
  Equity securities                       --             302
                                     -------         -------
                                      $  558          $  302
                                     =======         =======
</TABLE>

                                       42
<PAGE>   43

   The restricted cash at December 31, 1998 is being held for tenant
improvements at the Company's corporate facilities in Redwood City, California.
The restricted certificates of deposit at December 31, 1998 includes a $250,000
security deposit for one of the Company's facilities. The restricted investment
in common stock at December 31, 1997 was being held as collateral by a financial
institution against the Company's line of credit borrowings. See Note 4.

   The net unrealized gains for the year ended December 31, 1998 was $1.3
million, which was attributable to equity securities that the Company held
during 1998. The net unrealized gains for the year ended December 31, 1997, were
not material. At December 31, 1998, the fair values of cash and cash
equivalents, available-for-sale investments and restricted investments
approximated cost. The realized gains and losses on sales of each type of
security for the years ended December 31, 1998 and 1997, were not material. For
the purpose of determining gross realized gains and losses, the cost of the
securities sold is based upon specific identification.

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,   
(IN THOUSANDS)                                 1998           1997 
                                              ------         ------
<S>                                           <C>            <C>   
Borrowings under bank line of credit          $6,000         $6,000
Borrowings under credit facility loan             --            489
Other notes payable                              100            100
                                              ------         ------
                                              $6,100         $6,589
                                              ======         ======
</TABLE>

   In March 1997, the Company entered into and borrowed on a $6.0 million line
of credit. This line of credit bears interest at the bank's prime rate
(approximately 7.75% at December 31, 1998) 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, 1998. This line of credit
expired in 1998 and the Company has subsequently received extensions through
February 15, 1999, which is the current maturity of the note. The Company is
currently negotiating a new line of credit.

   In connection with the Company's acquisition of Classifieds2000, the Company
assumed $489,000 outstanding on a $500,000 credit facility loan at an interest
rate of 9.5%. The outstanding balance under this credit facility loan was paid
in full and canceled in 1998.

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 30 to 36 months. At December 31, 1998 the Company had an additional
$5.5 million available under a lease line of credit expiring on March 31, 1999.

   Equipment under capital leases consist of the following:
<TABLE>
<CAPTION>

                                                                DECEMBER 31,   
                                                        --------------------------
(IN THOUSANDS)                                              1998              1997 
                                                        --------          --------

<S>                                                     <C>               <C>     
Computer equipment and internal use software             $25,855           $ 9,914
Furniture and fixtures                                     3,232               785
                                                        --------          --------
                                                          29,087            10,699
Less: accumulated depreciation and amortization          (13,929)           (5,490)
                                                        --------          --------
                                                         $15,158           $ 5,209
                                                        ========          ========
</TABLE>

                                       43
<PAGE>   44

   Non-lease Financing Arrangements

   During 1998 and 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, 1998, property and equipment under
non-lease financing arrangements totaled $2.7 million, net of $2.3 of
accumulated depreciation. At December 31, 1997, property and equipment under
non-lease financing arrangements totaled $2.5 million, net of $401,000 of
accumulated depreciation.

   Building Leases

   During the three years ended December 31, 1998, the Company entered into
several leases relating to its corporate facilities located in Redwood City,
California. In 1998, the Company's subsidiary, MatchLogic, entered into a lease
for its new facility located in Westminster, Colorado. The Company leases these
facilities under non-cancelable operating leases that have terms of
approximately ten years. The Company leases additional space, primarily for
sales offices, in various states as well as in the United Kingdom. Rent expense
under operating leases was approximately $4.6 million, $2.7 million and $772,000
for the years ended December 31, 1998, 1997 and 1996, respectively. The Company
has subleased a portion of its facilities to third parties under non-cancelable
sublease agreements, which expire in June 1999 and March 2003. Sublease rental
income was $852,000 for the year ended December 31, 1998. There was no sublease
rental income for the years ended December 31, 1997 and 1996.

   Annual minimum commitments under these leases and other financing
arrangements are as follows:
<TABLE>
<CAPTION>

                                                CAPITAL          OTHER           OPERATING           SUBLEASE
(IN THOUSANDS)                                   LEASES        FINANCING            LEASES             RENT 
                                               --------        ---------          --------         -------- 
Years Ended December 31,
<S>                                            <C>               <C>               <C>              <C>      
                                  1999          $ 8,873           $ 1,756           $ 5,434          $  (911)
                                  2000            7,857             1,176             4,970             (445)
                                  2001            4,981               495             5,065             (457)
                                  2002              113                --             4,858             (469)
                                  2003               --                --             4,454             (120)
   Thereafter                                        --                --            20,264               --
                                               --------          --------          --------         --------
Total minimum payments required                 $21,824           $ 3,427           $45,045          $(2,402)
                                               ========          ========          ========         ========
Less amounts representing interest               (3,023)             (328)
                                               --------          --------
Present value of future lease payments           18,801             3,099
Less current portion                             (7,133)           (1,531)
                                               --------          --------
                                                $11,668           $ 1,568
                                               ========          ========
</TABLE>

Other Equipment Financing

   Other equipment financing consists of the liability for computer equipment,
which the Company may enter into capital leases in 1999. Due to the timing of
these computer equipment purchases at the end of 1998, $7.5 million has been
recorded as other equipment financing at December 31, 1998. Equipment under
other equipment financing arrangements totaled $7.1 million, net of $400,000 of
accumulated depreciation at December 31, 1998.

6.      CONVERTIBLE NOTE

   In 1997, the Company entered into a convertible promissory note with Itochu
Corporation and certain affiliated entities (collectively "Itochu") for the
principal amount of $5.0 million. See Note 12. The note bears interest at the
London Interbank Offered Rate plus 1% (approximately 6.1% at December 31, 1998),
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.      STOCKHOLDERS EQUITY

   The Company was incorporated on June 9, 1994 in California and reincorporated
in Delaware on August 27, 1998. The Company's Preferred Stock and Common Stock
have a par value of $0.001 per share. The classification of the capital accounts
reflects the effect of the reincorporation for all periods presented.

                                       44
<PAGE>   45

   Convertible Preferred Stock

   Of the 4,000,000 authorized shares of Convertible Preferred Stock ($0.001 par
value), 3,280,000 shares were designated as Series E. In November 1996, the
Company issued to AOL in connection with the acquisition of AOL's WebCrawler
Assets, 1,950,000 shares of Series E and a warrant to purchase 650,000 shares of
Series E (see Note 2). As a result of the Company's two-for-one stock split in
July 1998, which was in the form of a stock dividend, the Series E are
convertible into Common Stock at a ratio of two-for-one. In September 1997, AOL
exercised 325,000 of its 650,000 warrant to purchase shares of Series E, with
the holder electing to receive a lesser number of shares in exchange for a
reduction in the total exercise price, resulting in the issuance of 229,000
shares of Series E. The 2,179,000 outstanding shares of Series E were converted
into 4,358,000 shares of Common Stock in December 1997. The remaining shares of
Preferred Stock authorized and unissued at December 31, 1997 were retired in
August 1998.

   Excite assumed 409,000, 2,291,000 and 411,000 shares of Convertible Preferred
Stock related to equity transactions of Netbot, MatchLogic and Classifieds2000,
respectively, prior to mergers with Excite. These shares converted into shares
of Excite Common Stock upon the closing of the respective mergers (see Note 2).

   In August 1998, the Company authorized 4,000,000 shares of Convertible
Preferred Stock ($0.001 par value) of which 350,000 shares are designated as
Series E for the unexercised portion of AOL's warrant to purchase Series E
shares and 230,000 shares are designated as Series F for the Stock Holders Right
Plan dated September 24, 1998. At December 31, 1998, the remaining 3,420,000
authorized shares of Convertible Preferred Stock are undesignated.

   Common Stock

   In April 1996, the Company completed its initial public offering and issued
4,600,000 shares of its Common Stock at a price of $8.50 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 $8.50 per share, resulting in the issuance of 2,382,000 shares of
Common Stock, and $1.0 million principal amount of notes payable was converted
into 320,000 shares of Common Stock.

   On March 3, 1997 the Company filed a registration statement on Form S-1 with
the Securities and Exchange Commission with respect to the sale of shares of the
Company's Common Stock. The Company sold all of the 5,800,000 shares of the
Company's Common Stock offered to Intuit Inc. ("Intuit") on June 26, 1997 at a
price of $6.75 per share (see Note 14). 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.

   In May 1998, the Company filed a registration statement on Form S-3 with the
Securities and Exchange Commission for the sale of shares of the Company's
Common Stock in a public offering. The Company sold 3,105,000 shares of Common
Stock in June 1998 at a price of $31.50 per share. Of the 3,105,000 shares sold,
2,870,000 shares (including 405,000 shares, which were purchased on the exercise
of the underwriters over-allotment option) were offered directly by the Company
and 235,000 shares were offered by selling stockholders. The Company did not
receive any proceeds from the sale of shares by selling stockholders. Proceeds
to the Company from this offering were approximately $84.3 million net of
offering costs.

   At December 31, 1998, 705,000 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.

   In December 1998, the Company issued 50,000 shares of Common Stock to
LibertyOne Ltd. ("LibertyOne"), a partner in the Company's Australian joint
venture (see Note 10), in exchange for 1,000,000 shares of LibertyOne. These
equity securities were recorded at the fair market value of the Company's stock
at the date of the transaction. As a result, the fair market value of $2.5
million was recorded to short-term investments and the unrealized gain as of
December 31, 1998 of $1.4 million was included in stockholder's equity. The
Company has classified this equity security as an available-for-sale investment.

                                       45
<PAGE>   46

   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 an
exercise price of $0.67 and $1.25 per share, respectively, 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 87,000 shares of Common Stock.

   During 1995, the Company issued warrants to purchase 2,400,000 shares of
Common Stock at an exercise price of $0.0625 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 72,000 and
57,000 shares of Common Stock at an exercise price of $0.34 and $0.63 per share,
respectively, in connection with an employment offer. These warrants were
exercised in 1996.

   In connection with the acquisition of McKinley, in August 1996, the Company
assumed warrants under which the holder can purchase 4,712 shares and 14,190
shares of Common Stock at an exercise price of $16.33 and $50.64 per share,
respectively. The warrant for 4,712 shares of Common Stock was exercised in
1998. At December 31, 1998, 14,190 warrants were outstanding at an exercise
price of $50.64 per share 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
1,300,000 shares of Common Stock at an exercise price of $4.00 per share. The
warrant expires in March 2001. The value of the warrant was established through
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 WebCrawler, this warrant to purchase 1,300,000 shares of Common
Stock was converted into a warrant to purchase 650,000 shares of Series E
("Series E warrant") at the same exercise price per share. The value attributed
to the amendment of the warrant terms from Common Stock warrant to the Series E
warrant 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 Series E warrant, with the holder electing to
receive a lesser number of shares in exchange for a reduction in the total
exercise price, resulting in the issuance of 229,000 shares of Series E, which
were converted into 458,000 shares of Common Stock in December 1997. The
remaining Series E warrant for 325,000 shares outstanding at December 31, 1998,
if exercised, is convertible into 650,000 shares of Common Stock.

   In connection with the acquisition of Netbot, in November 1997, the Company
assumed warrants under which the holder can purchase 4,100 shares of the
Company's Common Stock at an exercise price of approximately $5.75 per share.

   In connection with the acquisition of MatchLogic, in February 1998, the
Company assumed warrants under which the holder can purchase 167,000 shares of
the Company's Common Stock at an exercise price of approximately $2.36 per
share. These warrants were exercised in 1998.

   In April 1998, the Company acquired Classifieds2000 and Throw. In connection
with these acquisitions, the Company assumed warrants under which the holder can
purchase 4,000 and 68,000 shares of the Company's Common Stock at an exercise
price of approximately $16.67 and $0.345 per share, respectively. These warrants
were exercised in 1998.

   In April 1998, the Company issued a warrant to Netscape Communication
Corporation ("Netscape") to purchase 846,158 shares of the Company's Common
Stock at an exercise price of approximately $29.55 per share, exercisable for a
two-year period commencing on April 30, 1998, and a second warrant to purchase
shares of the Company's Common Stock at an aggregate exercise price of $10.0
million, which is exercisable for a two-year period commencing April 30, 1999.
The exercise price per share of Common Stock covered by the second warrant will
be determined by dividing $10 million by the average closing price of the
Company's Common Stock for the 30 most recent trading days ending on the third
trading day preceding April 30, 1999.


                                       46
<PAGE>   47




8.      EMPLOYEE BENEFIT PLANS

   Stock Option Plans

   During 1995, the Company adopted the 1995 Equity Incentive Plan (the "1995
Plan") which authorized for issuance under the 1995 Plan 3,300,000 shares of
Common Stock, under which incentive stock options and 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. In March
1996, the Company increased the number of shares authorized under the 1995 Plan
from 3,300,000 to 4,400,000 shares. The 1995 Plan was terminated in April 1995.
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.

   In March 1996, the Company adopted the 1996 Equity Incentive Plan ("1996
Plan") which authorized for issuance under the 1996 Plan 3,000,000 shares of
Common Stock for granting of either incentive or non-qualified stock options.
The Company increased the number of shares authorized under the 1996 Plan from
3,000,000 shares to 4,600,000 shares in November 1996 and from 4,600,000 shares
to 9,928,000 in June 1997. Additionally, the company increased the number of
shares authorized under the 1996 Plan from 9,928,000 shares to 16,528,000 in
June 1998.

   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 or the issuance of restricted stock,
at a price no less than 85% of the fair value on the date of grant as well as
stock bonuses by the Company to eligible participants. 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. As
of December 31, 1998, 4,676,000 shares of Common Stock were reserved for future
grants.

   Assumed Options

   In connection with the acquisition of McKinley in August 1996, the Company
assumed 9,000 outstanding options to purchase Common Stock originally issued
under McKinley's stock option plan. In 1997, the Company acquired Netbot, and in
connection with this acquisition, the Company assumed 418,000 outstanding
options to purchase Common Stock originally issued under Netbot's stock option
plan. In connection with the acquisitions of MatchLogic, Classifieds2000 and
Throw during 1998, the Company assumed options to purchase Common Stock under
these companies' stock option plans of 882,000, 46,000 and 250,000,
respectively. Additionally, the Company assumed 854,000 options authorized for
future grants under the MatchLogic stock option plan, which increased the total
number of shares authorized in 1997. See Note 2.

   Directors Plan

   In February 1996, the Company adopted the 1996 Directors Stock Option Plan
(the "Directors Plan") under which it authorized 300,000 shares of Common Stock
for granting of non-qualified stock options to directors of the Company who are
not employees of the Company ("Outside Directors") at exercise prices not less
than the fair market value on the date of grant. Upon initial election or
appointment, an Outside Director shall be automatically be granted an Option for
30,000 shares of Common Stock. An Outside Director is automatically granted an
additional 15,000 shares of Common Stock on each of the Outside Directors
anniversary dates. The options granted under the Directors Plan generally vest
at a rate of 2.08% each month and have a term of ten years. During 1998 the
Company granted 30,000 shares of Common Stock under the Directors Plan. As of
December 31, 1998, 265,000 shares of Common Stock were reserved for future
grants.

   Stockholders Rights Plan

   On September 24, 1998, the Board of Directors of the Company approved a
Stockholders Rights Plan, which declared a dividend of one Preferred Share
purchase right (a "Right") for each outstanding share of Common Stock, par value
$0.001 per share (the "Common Shares"), of the Company. The dividend is payable
to 


                                       47
<PAGE>   48

stockholders of record on October 30, 1998 (the "Record Date"). In addition, one
Right shall be issued with each Common Share that becomes outstanding (i)
between the Record Date and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such terms are defined in the
Rights Agreement) or (ii) following the Distribution Date and prior to the
Redemption Date or Final Expiration Date, pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company, which options or
securities were outstanding prior to the Distribution Date. Each Right entitles
the registered holder to purchase from the Company one one-thousandth of a share
of Series F Junior Participating Preferred Stock, par value $0.001 per share
(the "Preferred Shares"), of the Company, at a price of $175.00, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and BankBoston, as Rights
Agent.

   A summary of activity under the Plans is as follows:

<TABLE>
<CAPTION>


                                         SHARES                OPTIONS OUTSTANDING               WEIGHTED
                                       AVAILABLE      -----------------------------------        AVERAGE
                                          FOR          NUMBER OF                                 EXERCISE
(SHARES IN THOUSANDS)                    GRANT           SHARES           PRICE PER SHARE          PRICE
                                       ----------      ---------         ----------------        ---------

<S>                                    <C>             <C>               <C>                     <C>   
Balance at December 31, 1995               550            2,748            $0.018-$17.306          $0.16
  Additional shares authorized           6,418               --                        --             --
  Options granted and assumed           (5,844)           5,844              0.260-33.879           3.13
  Options exercised                         --             (600)              0.018-2.875           0.17
  Options canceled                         526             (526)             0.018-33.879           5.25
  Options expired                       (1,056)              --                        --             --
                                       -------          -------          ----------------         ------
Balance at December 31, 1996               594            7,466              0.018-33.879           2.33
  Additional shares authorized           5,810               --                        --             --
  Options granted and assumed           (4,647)           4,647              0.018-14.188           4.86
  Options exercised                         --           (1,128)              0.018-8.063           1.31
  Options canceled                       1,272           (1,272)             0.018-33.879           2.58
  Options expired                         (420)              --                        --             --
                                       -------          -------          ----------------         ------
Balance at December 31, 1997             2,609            9,713              0.018-33.879           3.60
  Additional shares authorized           6,850               --                        --             --
  Options granted and assumed           (6,014)           6,014              0.315-52.375          28.64
  Options exercised                         --           (3,630)             0.018-44.313           3.34
  Options canceled                       1,741           (1,741)             0.063-35.875           6.24
  Options expired                         (245)              --                        --             --
                                       -------          -------          ----------------         ------
Balance at December 31, 1998             4,941           10,356            $0.018-$52.375         $17.19
                                       =======          =======          ================         ======
</TABLE>


   Employee Stock Purchase Plan

   In February 1996 the Company's Board of Directors adopted, and in March 1996
the Company's stockholders 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, 900,000 shares of
Common Stock have been reserved for issuance, subject to anti-dilution
adjustments. The 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 fair market price of the Company's Common Stock on the offering
date of the applicable period or (ii) the fair market price of the Company's
Common Stock on the purchase date. As of December 31, 1998 and 1997, 165,000 and
55,000 shares respectively, had been purchased under the ESPP. Included in the
accrued compensation at December 31, 1998 and 1997, the Company has accrued $1.2
million and $329,000, respectively for employee contributions under the ESPP. At
December 31, 1998, 680,000 shares of Common Stock were reserved for future
purchases 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, 


                                       48
<PAGE>   49

as discussed below, the alternative fair value accounting provided for under
SFAS No. 123, "Accounting for Stock-Based Compensation", 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 SFAS No. 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 SFAS No. 123. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model, assuming no expected dividends and the following
weighted-average assumptions:

<TABLE>
<CAPTION>

                                                 YEARS ENDED DECEMBER 31, 
                                         --------------------------------------
                                           1998            1997            1996 
                                         ------          ------          ------
<S>                                      <C>             <C>             <C> 
Average risk-free interest rate            5.1%            6.1%            5.9%
Average expected life (in years)            3.0             3.0             4.5
Volatility (1)                             106%             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.

   For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period and the
six-month purchase period (for stock purchases under the ESPP). The Company's
pro forma information follows:

<TABLE>
<CAPTION>

                                                          YEARS ENDED DECEMBER 31,     
                                              --------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)             1998                1997                1996 
                                              ----------          ----------          ----------
<S>                                           <C>                 <C>                 <C>        
Net loss:
  As reported                                 $  (37,559)         $  (46,814)         $  (44,179)
  Pro forma                                   $  (80,302)         $  (58,188)         $  (45,890)

Basic and diluted net loss per share:
  As reported                                 $    (0.79)         $    (1.57)         $    (2.37)
  Pro forma                                   $    (1.69)         $    (1.96)         $    (2.46)
</TABLE>

   The weighted average fair value of options granted during 1998, 1997 and 1996
was approximately $22.15, $3.45 and $1.77 per share, respectively, and was
approximately $7.42 and $3.87, respectively, for shares granted under the ESPP
in 1998 and 1997.

   The following table summarizes information about fixed stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                          ----------------------------------------------------      ---------------------------------
                                              WEIGHTED-
                                               AVERAGE
                              NUMBER          REMAINING           WEIGHTED-             NUMBER           WEIGHTED-
   RANGE OF                OUTSTANDING     CONTRACTUAL LIFE        AVERAGE           EXERCISABLE          AVERAGE
EXERCISE PRICES           (IN THOUSANDS)      (IN YEARS)        EXERCISE PRICE      (IN THOUSANDS)     EXERCISE PRICE  
---------------           --------------      ----------        --------------      --------------     --------------  
<S>                       <C>              <C>                  <C>                 <C>                   <C>      
 $0.018- $0.220               1,014                7.5            $    0.16              362              $    0.13
 $0.290- $2.875                 500                7.8            $    1.41              145              $    1.44
 $2.938- $4.375               1,699                8.0            $    3.39              329              $    3.38
 $4.500-$10.063               1,427                8.4            $    6.81              292              $    6.24
$10.969-$14.938                 568                8.9            $   12.70               88              $   12.17
$15.969-$28.250               2,620                9.3            $   23.88              106              $   23.79
$28.907-$43.625               2,207                9.6            $   34.52               89              $   34.45
$44.313-$52.375                 321                9.8            $   49.10                5              $   45.36
                             ------              -----            ---------           ------              ---------
 $0.018-$52.375              10,356                8.8            $   17.19            1,416              $    7.11
                             ======              =====            =========           ======              =========
</TABLE>

                                       49
<PAGE>   50

   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% or $10,000 per year, whichever is less) of their pretax earnings up
to the Internal Revenue Service's annual contribution limit. All full time
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 to the Savings Plan since its
inception.

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 1998, 1997 or 1996.

   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,  
(IN THOUSANDS)                                             1998       1997       1996  
                                                        ---------  ---------  ---------
<S>                                                      <C>        <C>        <C>     
Net operating loss carryforwards                         $ 53,000   $ 29,160   $ 15,200
Research credits                                            1,900        910        400
Acquired intangible assets                                  5,700      5,670      1,865
Depreciation                                                4,300      1,730        390
Capitalized research & development expenses                 1,100         --         --
Other                                                       2,300        710      1,345
                                                        ---------  ---------  ---------
   Total deferred tax assets                             $ 68,300   $ 38,180   $ 19,200
Valuation allowance for deferred tax assets               (68,300)   (38,180)   (19,200)
                                                        ---------  ---------  ---------
   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 $30.1 million and $19.0 million during the years ended December 31,
1998 and 1997, respectively. Approximately $26.0 million of the valuation
allowance at December 31, 1998 is attributable to stock option deductions, the
benefit of which will be credited to paid in capital when realized.

   As of December 31, 1998, the Company had federal and state net operating loss
carryforwards of approximately $143.4 million and $71.0 million, respectively.
The federal net operating loss carryforwards will expire at various dates
beginning in 2009 through 2013, and the state net operating loss carryforwards
will expire at various dates beginning in 1999 through 2003. As of December 31,
1998 the Company also had federal and California research and development credit
carryforwards of approximately $1.0 and $1.4 million, respectively. The federal
credits will expire in 2009 through 2013 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.     JOINT VENTURES

   Excite Japan

   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, 1998 and 1997 Excite had
invested $4.9 million and $168,000, respectively, in the joint venture, and had
recognized 50% of the losses through December 31, 1998 and 1997 totaling $2.1
million and $477,000. Condensed financial information of Excite Japan has not
been presented as 


                                       50
<PAGE>   51
its operating results and financial position are not material to the
consolidated financial statements of the Company.

   Excite Italia

   In August 1998, the Company and Telecom Italia S.p.A. ("Telecom Italia")
entered into a joint venture agreement to form Excite Italia BV ("Excite
Italia"). The new company, Excite Italia, which is owned 50% by Excite and 50%
by Telecom Italia, will program certain portions of www.tin.lit, the Internet
site of TIN, a division of Telecom Italia and one of Italy's Internet access
providers, as well as provide an Italian language search directory service under
the Excite brand. Telecom Italia has committed to provide the initial start-up
capital for the venture, while Excite will provide the core technology, related
services and brand name. The cash contributed by Telecom Italia to Excite Italia
is in the form of a loan and is capped at approximately 10.5 billion Lira.
Excite will account for its interest in the joint venture under the equity
method.

   Excite Asia Pacific

   In August 1998, the Company and LibertyOne Limited ("LibertyOne") entered
into a joint venture agreement to form Excite Asia Pacific Pty Ltd ("Excite Asia
Pacific"). The new company, Excite Asia Pacific, is owned 50% by Excite and 50%
by LibertyOne and will build an Excite branded, advertising and commerce
supported Web portal for the Australian and the Asia-Pacific Internet markets.
LibertyOne will contribute a total of 10.0 million Australian Dollars for a 50%
equity ownership in Excite Asia Pacific. Excite will provide the core
technology, related services and brand name for the remaining 50% equity
ownership in Excite Asia Pacific. Excite will account for its interest in the
joint venture under the equity method.

   Excite UK

   In January 1999, the Company and British Telecom Holdings Ltd ("BT") entered
into a joint venture agreement whereby BT purchased 50% of the shares of Excite
UK Ltd, that had been a wholly-owned subsidiary of the Company. The new joint
venture company, which will continue to be known as Excite UK Ltd., will be
owned 50% by the Company and 50% by BT, and will continue to provide an Excite
branded, advertising and commerce supported Web portal for the market in the
United Kingdom. BT will contribute a total of 6,250,000 Pounds Sterling. Excite
will contribute the core technology, related services and brand name. Excite
will account for its interest in the joint venture under the equity method.

11.     SEGMENT INFORMATION

   The Company operates in the Internet navigation industry and the Internet ad
serving and targeting business segments. Prior to the merger with MatchLogic,
which began operations in May 1997, the Company operated only in the Internet
navigation industry. The Company's management has determined the operating
segments based upon how the business is managed and operated. MatchLogic, which
provides Internet ad serving and targeting services, operates as an independent
subsidiary of the Company with its own sales force, research and development and
operations departments.

   Information by Operating Segment:

<TABLE>
<CAPTION>
                                                              INTERNET         AD SERVING
(IN THOUSANDS)                                                NAVIGATION       & TARGETING          TOTAL
                                                              ----------       -----------          -----
<S>                                                           <C>               <C>               <C>
Year ended December 31, 1998
----------------------------

Operating information:
  Revenues from external customers                            $ 126,370         $  28,990         $ 155,360
  Gross profit                                                $ 100,308         $  25,566         $ 125,874
  Distribution license fees and data acquisition costs        $  14,899         $   6,824         $  21,723
  Segment operating loss                                      $ (29,269)        $  (4,919)        $ (34,188)
Balance sheet information at December 31, 1998:
  Total assets                                                $ 205,662         $  15,011         $ 220,673

Year ended December 31, 1997
----------------------------

Operating information:
  Revenues from external customers                            $  51,863         $   3,963         $  55,826
  Gross profit                                                $  30,688         $   3,537         $  34,225
  Distribution license fees and data acquisition costs        $   7,615         $   1,750         $   9,365
  Segment operating loss                                      $ (35,273)        $ (10,931)        $ (46,204)
Balance sheet information at December 31, 1997:
  Total assets                                                $  75,893         $   3,263         $  79,156
</TABLE>



                                       51
<PAGE>   52
<TABLE>
<S>                                                           <C>               <C>               <C>
Balance sheet information at December 31, 1997:
  Total assets                                                $  75,893         $   3,263         $  79,156
</TABLE>


   Information by Geographic Area:

<TABLE>
<CAPTION>
                                              YEARS ENDED DECEMBER 31,
                                   ---------------------------------------------
(IN THOUSANDS)                       1998              1997              1996 
                                   ---------         ---------         ---------
<S>                                <C>               <C>               <C>      
Revenues:
  United States operations
    United States customers        $ 151,135         $  53,798         $  14,787
    International customers              211               831                36
                                   ---------         ---------         ---------
                                     151,346            54,629            14,823
  International operations:
    International customers            4,014             1,197                --
                                   ---------         ---------         ---------
      Total revenues               $ 155,360         $  55,826         $  14,823
                                   =========         =========         =========

Operating loss:
  United States operations         $ (31,867)        $ (42,808)        $ (45,105)
  International operations            (2,321)           (3,396)             (129)
                                   ---------         ---------         ---------

      Total operating loss         $ (34,188)        $ (46,204)        $ (45,234)
                                   =========         =========         =========
</TABLE>


<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                  ----------------------------------------
(IN THOUSANDS)                      1998            1997            1996 
                                  --------        --------        --------
<S>                               <C>             <C>             <C>     
Long-lived assets:
  United States operations        $ 72,074        $ 21,729        $ 21,198
  International operations              81             313              --
                                  --------        --------        --------
                                  $ 72,155        $ 22,042        $ 21,198
                                  ========        ========        ========
Total assets:
  United States operations        $217,789        $ 78,051        $ 48,780
  International operations           2,884           1,105              30
                                  --------        --------        --------
                                  $220,673        $ 79,156        $ 48,810
                                  ========        ========        ========
</TABLE>

12.     RELATED PARTY TRANSACTIONS

   Intuit

   In June 1997, the Company sold 5,800,000 shares of the Company's Common Stock
to Intuit at a price of $6.75 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 years ended December 31, 1998 and 1997 the Company recorded
approximately $8.3 million and $1.5 million due to Intuit under this agreement,
of which approximately $5.1 was unpaid as of December 31, 1998.

   The Company borrowed $50.0 million from Intuit, which is a principal
stockholder of the Company, in April 1998 to fund a portion of the Company's
cash payment obligation to Netscape under the Netcenter Agreement. The loan bore
interest at 5.9% per annum and was due no later than October 30, 1998. In June
1998, the Company repaid the loan in full, plus interest of approximately
$410,000, with proceeds from the Company's public offering, which closed in June
1998. See Note 7.

   America Online

   In November 1996, the Company entered into a five-year distribution agreement
with America Online ("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. In 1998, the exclusive period was extended by AOL beyond the initial
two-year term through December 31, 1999. If the exclusive period is not extended
by AOL beyond December 31, 1999, the co-branded service would become the
"default" search and directory service of 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. Revenues
associated with this agreement for the year 


                                       52
<PAGE>   53

ended December 31, 1998 was $4.8 million. Revenues and expenses associated with
this agreement for the years ended December 31, 1997 and 1996 were not material.

   Notes Receivable from an Officer

   In 1998, the Company provided an officer of the Company a loan option for
$750,000. In December 1998, the officer exercised this loan option and borrowed
$675,000 from the Company. This note receivable bears interest at 4.4%
compounded quarterly and is secured by the officer's stock options of the
Company. This note receivable is due upon the earlier of the following events:
at the end of the officer's third year of employment with the Company (August
2001); the fair value of the stock option falls below $750,000; or if employment
with the Company is terminated for any reason. At December 31, 1998, the
outstanding $675,000 note receivable is included in other current assets.
Accrued interest as of December 31, 1998 was not material.

   Other Related Party Transactions

   In December 1998, MatchLogic, a wholly-owned subsidiary of Excite, invested
in a small company that collects and provides user profiles. MatchLogic
contributed targeting technology in exchange for an ownership of 19% in the
company. Revenues associated with providing clickstream data and anonymous
profiles to the Company for the year ended December 31, 1998, was $3.5 million.
This amount was paid in full to the Company in December 1998.

13.     NETSCAPE AGREEMENT

   In April 1998, the Company and Netscape entered into a two-year agreement
(the "Netcenter Agreement") with respect to Netscape's "Netcenter" online
service. Under the Netcenter Agreement, the Company will provide programming and
content for the Co-Branded channels to be offered on Netscape's Netcenter online
service and will develop a Web search and directory service for Netscape
(collectively, the "Co-Branded Services"). In addition, the Company's
Classifieds2000 service will be featured as the provider of classified
advertising (excluding career and job posting classified ads) for the Netcenter
service. The Company will also be featured as a "premier provider" on the "Net
Search" page of Netscape's Web site and will also be similarly featured on the
Netcenter Widget Tool. The Company will be responsible for advertising sales
for, and will pay to Netscape a percentage of advertising revenues generated
from, the Co-Branded Netcenter channels, the search service and the directory
service, and will also be required to make payments based upon the amount of
traffic generated from the Net Search page and the Netcenter Widget Tool. The
Company has paid a total of $70.0 million as a prepayment of its obligations
under the Netcenter Agreement. In addition, the Company has issued a warrant to
Netscape to purchase 846,158 shares of the Company's Common Stock at an exercise
price of approximately $29.55 per share and a second warrant to purchase shares
of the Company's Common Stock at an aggregate exercise price of $10.0 million.
The original fair value assigned to the warrants was $16.1 million.

   In the second quarter of 1998 the Company capitalized $29.3 million as
Prepaid Distribution Fees and charged $56.8 million to operations as a
non-recoverable portion of the prepayment to Netscape. The Company had
previously concluded that there was no reasonable basis to assume a probable
recovery of the value of the prepayment and warrants issued to Netscape.
Specifically, the Company had developed a valuation model to calculate the
anticipated incremental net revenues that would be earned from the Netcenter
Agreement over its term of two-years. This model determined that an amount of
$56.8 million was not expected to be recovered from anticipated future revenue
streams. Accordingly, the Company expensed this amount in its originally
reported June 30 1998 operating results.

   After discussions with the Staff of the Securities and Exchange Commission,
the Company revised the original accounting for this transaction and increased
the fair value of the warrants issued to Netscape by $3.8 million. The total
consideration of $89.9 million has been capitalized as Prepaid Netscape
Distribution Costs and Trademarks. The amount capitalized represents the amount
of the sum of the prepayments ($70.0 million) and the revised valuation of the
warrants issued ($19.9 million) from the Netcenter Agreement. The $89.9 million,
representing the combined value of marketing and distribution rights, trademarks
and other exclusive rights, which extend over the term of the Netcenter
Agreement, will be recognized ratably over the term of the agreement as
distribution services are received, commencing with the launch of the service in
June 1998. Prepaid Netscape Distribution Costs and Trademarks consists of the
following:



                                       53
<PAGE>   54

<TABLE>
<CAPTION>
                                                                  CAPITALIZED      AMORTIZATION        BALANCE
                                                                 AMOUNTS AS OF    JUNE 1, 1998 TO       AS OF
                                                                    APRIL 30        DECEMBER 31,     DECEMBER 31,
(IN THOUSANDS)                                                        1998             1998             1998 
                                                                    --------         --------         --------
<S>                                                              <C>              <C>               <C>
Prepaid distribution license fees and data acquisition costs        $ 29,285         $ (5,776)        $ 23,509
Prepaid Netscape service                                              50,591          (14,757)          35,834
Prepaid trademark license                                             10,000           (2,916)           7,084
                                                                    --------         --------         --------
                                                                    $ 89,876         $(23,449)        $ 66,427
                                                                    ========         ========         ========
</TABLE>

   During the year ended December 31, 1998, the Company amortized $23.5 million
to operations. The $23.5 million charge to operations is as follows: $5.8
million is included in Distribution License Fees and Data Acquisition Costs and
$17.7 million is reported separately as Amortization of Prepaid Netscape
Service.

   In July 1998, Netscape exercised a portion of the warrant issued under the
Netcenter Agreement and paid approximately $5.9 million to purchase 200,000
shares of the Company's Common Stock.

14.     OTHER SIGNIFICANT AGREEMENTS

   In April 1996, Excite and McKinley each entered into agreements with 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 was 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 was 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.

   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 Australia, France, Germany, Japan and the United Kingdom. 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, 1998, the unamortized portion
of this payment of $2.5 million was included in other assets.

15.     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 stockholders 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 judgment to this complaint and entered
judgment 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. It may not be
possible to ascertain the definitive outcome of this litigation at this time, an
unfavorable outcome may have an adverse effect on the Company's business,
results of operations and financial condition.

   The Company is also 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 may be material. Furthermore, any litigation,
regardless of the outcome, may have an adverse impact on the Company's results
of operations as a result of defense costs, diversion of management resources,
and other factors.


                                       54
<PAGE>   55
16.     QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED,
                                                                 ---------------------------------------------------------- 
(IN THOUSANDS, EXCEPT PER SHARE DATA)                            MAR. 31          JUN. 30          SEP. 30          DEC. 31 
                                                                 -------          -------          -------          ------- 
<S>                                                             <C>              <C>              <C>              <C>
1998:
Revenues                                                        $ 24,256         $ 33,005         $ 44,004         $ 54,095
Cost of revenues:
    Hosting costs                                                  2,788            3,667            4,447            5,259
    Royalties and other cost of revenues                           3,219            2,792            3,277            4,037
                                                                --------         --------         --------         --------
        Total cost of revenues                                     6,007            6,459            7,724            9,296
Gross profit                                                      18,249           26,546           36,280           44,799
Operating expenses:
    Research and development                                       6,252            7,291            8,151            7,863
    Sales and marketing                                           10,776           14,918           16,294           21,086
    Distribution license fees and data acquisition costs           3,986            5,179            5,664            6,894
    General and administrative                                     3,115            3,928            4,264            5,625
    In-process technology                                             --            6,200               --               --
    Merger and acquisition related costs, including
      amortization of goodwill and other purchased
      intangibles                                                    977            1,920            1,177              829
    Amortization of prepaid Netscape service                          --            2,525            7,574            7,574
                                                                --------         --------         --------         --------
        Total operating expenses                                  25,106           41,961           43,124           49,871
Operating loss                                                    (6,857)         (15,415)          (6,844)          (5,072)
Interest income                                                      402              385              420              418
Interest expense and other                                          (610)          (1,034)            (561)            (657)
Equity share of losses of affiliated company                        (479)            (551)            (614)            (490)
                                                                --------         --------         --------         --------
Net loss                                                        $ (7,544)        $(16,615)        $ (7,599)        $ (5,801)
                                                                ========         ========         ========         ========

Basic and diluted net loss per share                            $  (0.18)        $  (0.36)        $  (0.15)        $  (0.11)
                                                                ========         ========         ========         ========
Shares used in computing net loss per share                       41,336           46,600           50,339           51,511
                                                                ========         ========         ========         ========

1997:
Revenues                                                        $  8,021         $ 10,476         $ 16,394         $ 20,935
Cost of revenues:
    Hosting costs                                                  1,852            1,701            2,539            2,555
    Royalties and other cost of revenues                             663              679            1,271            2,127
    Amortization of purchased technology                           2,399            1,938            1,939            1,938
                                                                --------         --------         --------         --------
        Total cost of revenues                                     4,914            4,318            5,749            6,620
Gross profit                                                       3,107            6,158           10,645           14,315
Operating expenses:
    Research and development                                       3,373            4,064            4,767            5,996
    Sales and marketing                                            6,745            7,903            8,607           11,056
    Distribution license fees and data acquisition costs              30            1,707            3,216            4,412
    General and administrative                                     2,087            2,412            3,365            4,354
    In-process technology                                             --            2,346               --               --
    Merger and acquisition related costs, including
      amortization of goodwill and other purchased
      intangibles                                                    953              463              530            2,043
                                                                --------         --------         --------         --------
        Total operating expenses                                  13,188           18,895           20,485           27,861
Operating loss                                                   (10,081)         (12,737)          (9,840)         (13,546)
Interest income                                                      251              277              409              380
Interest expense and other                                          (123)            (248)            (348)            (731)
Equity share of losses of affiliated company                          --               --               --             (477)
                                                                --------         --------         --------         --------
Net loss                                                        $ (9,953)        $(12,708)        $ (9,779)        $(14,374)
                                                                ========         ========         ========         ========

Basic and diluted net loss per share                            $  (0.39)        $  (0.48)        $  (0.30)        $  (0.42)
                                                                ========         ========         ========         ========
Shares used in computing net loss per share                       25,394           26,482           32,900           34,139
                                                                ========         ========         ========         ========
</TABLE>



                                       55
<PAGE>   56
<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED,
                                                                 ---------------------------------------------------------- 
                                                                 MAR. 31          JUN. 30          SEP. 30          DEC. 31 
                                                                 -------          -------          -------          ------- 
<S>                                                             <C>              <C>              <C>              <C>     
1996:
Revenues                                                        $  1,374         $  2,816         $  4,082         $  6,551
Cost of revenues:
    Hosting costs                                                    246              413            1,015            1,622
    Royalties and other cost of revenues                             143               14              160              370
    Amortization of purchased technology                              --               --               --              186
                                                                --------         --------         --------         --------
        Total cost of revenues                                       389              427            1,175            2,178
Gross profit                                                         985            2,389            2,907            4,373
Operating expenses:
    Research and development                                       1,376            2,109            2,132            2,646
    Sales and marketing                                            2,489            3,203            6,394            9,272
    Distribution license fees and data acquisition costs           1,625           10,000              253               --
    General and administrative                                     1,141            2,812            2,007            1,795
    In-process technology                                             --               --               --            3,500
    Merger and acquisition related costs, including
      amortization of goodwill and other purchased
      intangibles                                                     --               73            2,292              769
                                                                --------         --------         --------         --------
        Total operating expenses                                   6,631           18,197           13,078           17,982
Operating loss                                                    (5,646)         (15,808)         (10,171)         (13,609)
Interest income                                                       30              492              539              403
Interest expense and other                                           (28)            (121)            (111)            (149)
                                                                --------         --------         --------         --------
Net loss                                                        $ (5,644)        $(15,437)        $ (9,743)        $(13,355)
                                                                ========         ========         ========         ========

Basic and diluted net loss per share                            $  (1.35)        $  (0.67)        $  (0.41)        $  (0.56)
                                                                ========         ========         ========         ========
Shares used in computing net loss per share                        4,170           22,903           23,647           23,872
                                                                ========         ========         ========         ========
</TABLE>

17.     SUBSEQUENT EVENTS (UNAUDITED)

   At Home Merger

   On January 19, 1999, Excite, At Home Corporation ("At Home"), an Internet
service provider aimed at broadband cable subscribers, and Countdown Acquisition
Corporation, entered into a definitive Agreement and Plan of Reorganization,
(the "Merger Agreement").

   Pursuant to the Merger Agreement, Excite will become a wholly-owned
subsidiary of At Home. At the effective time of the Merger, all outstanding
shares of Excite's Capital Stock will be exchanged for shares of At Home's
Series A Common Stock, and options and warrants to purchase Excite's Capital
Stock will be exchanged for options or warrants, as applicable, to purchase
shares of At Home's Series A Common Stock. Each share of Excite's Common Stock
will be exchanged for 1.041902 shares of At Home's Series A Common Stock. At
Home has announced that it intends to effect a 2-for-1 stock split in the
future. If this stock split occurs before the merger closes, each Excite
Stockholder will receive 2.083804 shares of At Home's Series A Common Stock for
each share of Excite Common Stock. The exercise price and number of shares of
Excite's Capital Stock subject to Company options or warrants, will be
appropriately adjusted to reflect the exchange ratio. Any outstanding
convertible debt at the effective time of the Merger, will thereafter be
convertible into the number of shares of At Home's Series A Common Stock to
which a holder of Excite's Common Stock would have been entitled to receive if
the holder had converted the convertible debt into Excite's Common Stock prior
to the Merger. The transaction is intended to qualify as a tax-free
reorganization and will be accounted for as a purchase.

   In connection with the execution of the Merger Agreement, Excite and At Home
entered into a Stock Option Agreement (the "Stock Option Agreement") pursuant to
which Excite granted to At Home an option to purchase up to 19.9% of the
outstanding shares of Excite's Common Stock, which is exercisable upon the
occurrence of certain events specified in the Stock Option Agreement.

   The Merger, which is expected to close in the second quarter of 1999, is
subject to various conditions, including clearance under the Hart-Scott-Rodino
Antitrust Improvements Act and approval of the Excite's and At Home's
stockholders.

   Excite may be required to pay a substantial termination fee if the Merger
Agreement is terminated for certain specific reasons. Excite has filed the
Merger Agreement with the Securities and Exchange Commission on January 20, 1999
under its Report on Form 8-K.


                                       56
<PAGE>   57


   Netscape Warrant Exercise

   In January and February 1999, Netscape exercised a portion of the warrant
issued under the Netcenter Agreement and paid approximately $19.1 million to
purchase 646,158 shares of the Company's Common Stock.

   Related Party Transaction

   In January 1999, AOL sold approximately 4,900,000 shares of Excite Common
Stock. As a result, of this sale, AOL ceased to be the beneficial owner of more
than five percent of Excite's Common Stock on that date.


                                       57
<PAGE>   58
                                     PART IV

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                       EXCITE, INC.

Date:  April 26, 1999                  By: /s/ ROBERT C. HOOD
                                           -------------------------------------
                                           ROBERT C. HOOD
                                           Executive Vice President, Chief
                                           Administrative Officer and Chief 
                                           Financial Officer


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

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

/s/ GEORGE BELL                     Chief Executive Officer and                April 26, 1999
---------------------------------   Director
George Bell                         

PRINCIPAL FINANCIAL AND 
PRINCIPAL ACCOUNTING OFFICER:

/s/ Robert C. Hood                  Executive Vice President, Chief            April 26, 1999
---------------------------------   Administrative Officer and Chief
Robert C. Hood                      Financial Officer
                                    
ADDITIONAL DIRECTORS:

/s/ JOSEPH R. KRAUS                 Senior Vice President and Director         April 26, 1999
---------------------------------
Joseph R. Kraus

/s/ VINOD KHOSLA                    Director                                   April 26, 1999
----------------------------------
Vinod Khosla

/s/ JEFFREY BERG                    Director                                   April 26, 1999
----------------------------------
Jeffrey Berg

/s/ GEOFFREY Y. YANG                Director                                   April 26, 1999
----------------------------------
Geoffrey Y. Yang
</TABLE>



                                       58
<PAGE>   59
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                        DESCRIPTION
------                        -----------
<S>      <C>
23.1     Consent of Ernst & Young LLP, Independent Auditors
27.1     Financial Data Schedule
</TABLE>