<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                             SECURITIES ACT OF 1934

           FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                         COMMISSION FILE NUMBER 0-27890

                          MINDSPRING ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                                    58-2113290
      (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                   Identification Number)

1430 WEST PEACHTREE ST. NW, SUITE 400, ATLANTA, GA             30309
     (Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (404) 815-0770

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

                                             OUTSTANDING AT AUGUST 10, 1999

Common Stock at $.01 par value                         63,442,186
<PAGE>   2

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                          MINDSPRING ENTERPRISES, INC.
                                 BALANCE SHEETS
                   AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                      JUNE 30,                  DECEMBER 31,
                                                                                        1999                        1998
                                                                                     (UNAUDITED)
                                                    ASSETS
<S>                                                                                  <C>                        <C>
CURRENT ASSETS:
   Cash and cash equivalents ....................................................   $ 388,027                   $ 167,743
   Trade receivables, net .......................................................       5,996                       3,278
   Deferred income taxes ........................................................       6,270                       3,421
   Prepaids and other current assets ............................................       1,643                         758
                                                                                    ---------                   ---------
       Total current assets .....................................................     401,936                     175,200
                                                                                    ---------                   ---------

PROPERTY AND EQUIPMENT:
   Computer and telecommunications equipment ....................................      65,548                      35,580
   Assets under capital lease ...................................................       9,007                       9,546
   Other ........................................................................      14,723                       4,821
                                                                                    ---------                   ---------
                                                                                       89,278                      49,947
   Less: accumulated depreciation ...............................................     (22,280)                    (14,106)
                                                                                    ---------                   ---------
       Total property and equipment, net ........................................      66,998                      35,841
                                                                                    ---------                   ---------

OTHER ASSETS:
   Acquired customer base, net ..................................................     235,502                      34,742
   Deferred debt costs ..........................................................       7,572                          --
   Deferred income taxes ........................................................      11,180                       1,123
   Other ........................................................................         768                         693
                                                                                    ---------                   ---------
       Total other assets .......................................................     255,022                      36,558
                                                                                    ---------                   ---------

                                                                                    $ 723,956                   $ 247,599
                                                                                    =========                   =========

<CAPTION>
                                        LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                                  <C>                        <C>
CURRENT LIABILITIES:
   Trade accounts payable .......................................................   $   7,534                   $   4,990
   Current portion of capital lease liability ...................................       2,798                       2,695
   Deferred revenue .............................................................      11,336                       7,443
   Other accrued expenses .......................................................      30,708                      22,966
                                                                                    ---------                   ---------
       Total current liabilities ................................................      52,376                      38,094
                                                                                    ---------                   ---------
LONG-TERM LIABILITIES:
   Convertible notes ............................................................     179,975                          --
   Capital lease obligations ....................................................         997                       2,424
                                                                                    ---------                   ---------
       Total long-term liabilities ..............................................     180,972                       2,424
                                                                                    ---------                   ---------

       Total liabilities ........................................................     233,348                      40,518
                                                                                    ---------                   ---------

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value; 400,000 authorized
    and 63,437 and 56,568 issued and outstanding at
    June 30, 1999 and December 31, 1998, respectively ...........................         634                         566
   Additional paid-in-capital ...................................................     503,544                     209,700
   Accumulated deficit ..........................................................     (13,570)                     (3,185)
                                                                                    ---------                   ---------
     Total stockholders' equity .................................................     490,608                     207,081
                                                                                    ---------                   ---------
                                                                                    $ 723,956                   $ 247,599
                                                                                    =========                   =========
</TABLE>

The accompanying condensed notes to financial statements are an integral part
of these balance sheets.
<PAGE>   3

                          MINDSPRING ENTERPRISES, INC.
                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                      (IN THOUSANDS EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                 JUNE 30,          JUNE 30,           JUNE 30,            JUNE 30,
STATEMENTS OF OPERATIONS DATA:                     1999              1998               1999                1998
                                                ---------         ---------          ---------           ---------

<S>                                             <C>               <C>                <C>                 <C>
REVENUES
   Access                                       $  71,620         $  21,667          $ 124,044           $  39,878
   Business services                               14,044             3,393             23,248               6,566
                                                ---------         ---------          ---------           ---------
     Total revenues                                85,664            25,060            147,292              46,444
                                                ---------         ---------          ---------           ---------

COST AND EXPENSES
   Cost of revenues                             $  29,120         $   7,585          $  50,518           $  14,192
   General and administrative                      26,460             8,512             45,891              16,311
   Selling                                         14,366             3,875             24,137               6,928
   Depreciation                                     4,692             1,905              8,215               3,625
   Acquired customer base amortization             23,720             1,189             37,043               2,341
                                                ---------         ---------          ---------           ---------
          Total operating expenses                 98,358            23,066            165,804              43,397
                                                ---------         ---------          ---------           ---------

OPERATING (LOSS) INCOME
                                                  (12,694)            1,994            (18,512)              3,047
INTEREST INCOME (EXPENSE), NET                      1,183                88              1,487                 (75)
                                                ---------         ---------          ---------           ---------

(LOSS) INCOME BEFORE TAXES                        (11,511)            2,082            (17,025)              2,972

   Income tax benefit (provision)                   4,430               (62)             6,640                 (92)
                                                ---------         ---------          ---------           ---------
NET (LOSS) INCOME                               $  (7,081)        $   2,020          $ (10,385)          $   2,880
                                                =========         =========          =========           =========

NET (LOSS) INCOME PER SHARE
                       Basic
                                                $   (0.11)        $    0.04          $   (0.17)          $    0.06
                                                =========         =========          =========           =========
                      Diluted                   $   (0.11)        $    0.04          $   (0.17)          $    0.06
                                                =========         =========          =========           =========

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING
                       Basic                       62,610            47,345             59,899              46,313
                                                =========         =========          =========           =========
                      Diluted                      62,610            50,280             59,899              49,176
                                                =========         =========          =========           =========
</TABLE>

            The accompanying condensed notes to financial statements
                    are an integral part of these statements


<PAGE>   4

Financial Statements - Continued

                          MINDSPRING ENTERPRISES, INC.
                            STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                  (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             1999                1998
                                                                          ---------           ---------
<S>                                                                       <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) income ..........................................         $ (10,385)          $   2,880

     Adjustments to reconcile net (loss) income to net cash
        provided by operating activities:
     Deferred income taxes ......................................           (12,906)                 --
     Depreciation and amortization ..............................            45,258               5,966
     Changes in operating assets and liabilities:
         Other ..................................................               334                  --
         Trade receivables ......................................            (4,389)               (435)
         Other current assets ...................................              (885)                405
         Trade accounts payable .................................             2,544                (975)
         Other accrued expenses .................................            14,742               2,905
         Deferred revenue .......................................             3,893               1,153
                                                                          ---------           ---------
           Total adjustments ....................................            48,591               9,019
                                                                          ---------           ---------
         Net Cash Provided by Operating Activities ..............            38,206              11,899
                                                                          ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment ........................           (26,134)             (7,608)
     Cash paid in conjunction with acquisitions .................          (226,329)             (1,143)
     Other ......................................................              (116)               (158)
                                                                          ---------           ---------
         Net Cash Used in Investing Activities ..................          (252,579)             (8,909)
                                                                          ---------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments of notes payable ..................................                --                (804)
     Cash provided by credit line ...............................            77,987                  --
     Repayment of credit line ...................................           (80,000)                 --
     Payments of capital lease obligations ......................            (1,324)             (1,248)
     Proceeds from issuance of convertible debt .................           174,082                  --
     Issuance of common stock, net of issuance costs ............           263,912              49,933
                                                                          ---------           ---------
         Net Cash Provided by Financing Activities ..............           434,657              47,881
                                                                          ---------           ---------

NET INCREASE IN CASH AND CASH
     EQUIVALENTS ................................................           220,284              50,871
CASH AND CASH EQUIVALENTS, beginning of period ..................           167,743               9,386
                                                                          ---------           ---------

CASH AND CASH EQUIVALENTS, end of period ........................         $ 388,027           $  60,257
                                                                          =========           =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
     Cash paid for interest .........................................$        1,243           $     510
                                                                          =========           =========
     Cash paid for income taxes .....................................$        8,343           $     111
                                                                          =========           =========
SUPPLEMENTAL NONCASH DISCLOSURES:
     Stock issued in conjunction with acquisition ...................$       30,000           $      --
                                                                          =========           =========
</TABLE>


           The accompanying condensed notes to financial statements
                   are an integral part of these statements.
<PAGE>   5

                          MINDSPRING ENTERPRISES, INC.
                    CONDENSED NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 1999 AND 1998

1.       Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been condensed or omitted pursuant to
         Article 10 of Regulation S-X of the Securities and Exchange
         Commission. The accompanying unaudited condensed financial statements
         reflect, in the opinion of management, all adjustments necessary to
         achieve a fair statement of the Company's financial position and
         results for the interim periods presented. All such adjustments are of
         a normal and recurring nature. These condensed financial statements
         should be read in conjunction with the financial statements and notes
         thereto included in the Company's Annual Report on Form 10-K for the
         year ended December 31, 1998 (File No. 0-27890).

         On May 25, 1999, the Company declared a two-for-one stock split in the
         form of a stock dividend which was paid on June 25, 1999 to
         shareholders of record on June 11, 1999. Accordingly, the stock split
         has been recognized in these financial statements by reclassifying
         approximately $317,000, the par value of the additional shares issued
         as a result of the split, from additional paid in capital to common
         stock. For all periods presented, all shares outstanding and per share
         amounts have been restated to reflect the stock split.


2.       Basic (loss) earnings per common share ("EPS") was computed by
         dividing net (loss) income by the weighted average number of shares of
         common stock outstanding for the period then ended. The effect of the
         Company's stock options (using the treasury stock method) was included
         in the computation of diluted EPS for the three and six months ended
         June 30, 1998. For the three and six months ended June 30, 1999, the
         effect of the options is excluded, as it is anti-dilutive. The
         following table summarizes the shares used in the calculations:


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                   SIX MONTHS ENDED
------------------------------------------------------------------------------------------------------------------
                                                           JUNE 30,                             JUNE 30,
------------------------------------------------------------------------------------------------------------------
(in thousands excepts per share                    1999              1998               1999                1998
data)                                           ---------         ---------          ---------           ---------

<S>                                             <C>               <C>                <C>                 <C>
Weighted average shares
  Outstanding-basic                                62,610            47,345             59,899              46,313
Effect of dilutive stock options                       --             2,935                 --               2,863
                                                ---------         ---------          ---------           ---------
Shares used for diluted earnings
  per share                                        62,610            50,280             59,899              49,176
                                                =========         =========          =========           =========

Net (loss) income                               $  (7,081)        $   2,020          $ (10,385)          $   2,880
                                                ---------         ---------          ---------           ---------

Basic (loss) earnings per share                     (0.11)             0.04              (0.17)               0.06
                                                ---------         ---------          ---------           ---------

Diluted (loss) earnings per share                   (0.11)             0.04              (0.17)               0.06
                                                ---------         ---------          ---------           ---------
------------------------------------------------------------------------------------------------------------------
</TABLE>


         The effect of the convertible debt notes, if they had been converted
         to stock, is anti-dilutive and as such diluted earnings per share is
         presented as if the notes had not been converted.

3.       On February 17, 1999 the Company completed its acquisition of certain
         assets used in connection with the United States Internet access and
         Web hosting business operated by NETCOM On-Line Communication Services
         Inc. which subsequently changed its name to ICG Netahead, Inc. and is
         a wholly owned subsidiary of ICG Communications, Inc., In this
         transaction, the Company acquired NETCOM's subscriber base of
         approximately
<PAGE>   6

         408,000 individual Internet access accounts, 25,000 Web hosting
         accounts, and 3,000 dedicated Internet access accounts in the United
         States. The Company paid NETCOM approximately $245 million, consisting
         of $215 million in cash and $30 million in MindSpring common stock
         (752,232 shares, at a price per share of $38.88). The Company also
         incurred expenses of approximately $4.2 million in connection with
         this acquisition.

                  The following table summarizes the net assets purchased in
         connection with the acquisition and the amount attributable to
         intangibles (in thousands) :

<TABLE>
                <S>     <C>                                                         <C>
                --------------------------------------------------------------------------------
                         Working Capital                                            $     (1,672)
                --------------------------------------------------------------------------------
                         Property and Equipment                                           13,200
                --------------------------------------------------------------------------------
                         Acquired subscriber base                                        237,695
                --------------------------------------------------------------------------------
</TABLE>



                  The preliminary estimate of net assets acquired represents
         management's best estimate based on currently available information;
         however, such estimate may be revised up to one year from the
         acquisition date. The Company is amortizing the acquired customer base
         over three years.




4.       In March 1999 the Company filed a universal shelf registration
         statement with the Securities and Exchange Commission for the public
         offering from time to time of up to $800 million of debt and equity
         securities. In April 1999, the Company completed two public offerings
         of securities under this shelf registration statement. The Company
         sold 5,520,000 shares of common stock, raising net proceeds of
         approximately $263.2 million, out of which the Company repaid all
         amounts outstanding under its secured credit facility. The Company
         also sold $179,975,000 aggregate principal amount of 5% Convertible
         Subordinated Notes due 2006, raising net proceeds of approximately
         $174.1 million. The remaining proceeds will be used for expansion of
         our business, as additional working capital for general corporate
         purposes, and for strategic acquisitions of subscriber accounts and
         complementary businesses.


<PAGE>   7

ITEM 2-

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. All statements regarding our expected financial position and
operating results, our business strategy and our financing plans are
forward-looking statements. These statements can sometimes be identified by our
use of forward-looking words such as "may," "will," "anticipate," "estimate,"
"expect," or "intend." Known and unknown risks, uncertainties and other factors
could cause our actual results to differ materially from those contemplated by
these statements. Such risks and uncertainties include our ability to retain
and grow our subscriber base, our ability to successfully integrate new
subscribers and/or assets obtained through acquisitions, the highly competitive
markets in which we operate and our ability to respond to technological
developments affecting the Internet. The Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, filed with the Securities and
Exchange Commission on March 30, 1999, discusses some additional important
factors that could cause the Company's actual results to differ materially from
those in such forward-looking statements.

         All common stock numbers and per share amounts in this report give
effect to a 3-for-1 stock split effected by MindSpring in July 1998 and a
2-for-1 stock split effected by MindSpring in June 1999.


OVERVIEW

         MindSpring is a leading national Internet service provider, or ISP. We
focus on serving individuals and small businesses. Our subscribers use their
MindSpring accounts to, among other things, communicate, retrieve information,
and publish information on the Internet. Our primary service offerings are
dial-up Internet access and business services which we offer in various price
and usage plans designed to meet the needs of our subscribers. Our business
services include Web hosting, which entails maintaining a customer's Web site;
high-speed, dedicated Internet access; Web page design; domain name
registration; and customer Web server co-location. Web hosting, our principal
business service, complements our Internet access business and is one of the
fastest growing segments of the Internet marketplace.

         We offer our subscribers:

         -        user-friendly and easy to install software, containing a
                  complete set of the most popular Internet applications
                  including electronic mail, World Wide Web access, Network
                  News, File Transfer Protocol and Internet Relay Chat;

         -        highly responsive customer service, and technical support
                  which is available 24 hours a day, seven days a week; and

         -        a reliable nationwide network that enables subscribers in the
                  48 contiguous United States and the District of Columbia to
                  access the Internet via a local telephone call.

         Our nationwide network consists of MindSpring-owned points of
presence, or "POPs," and POPs that are owned by other companies with which we
have service agreements. Through these service agreements, we have the
flexibility to offer Internet access in a particular market through a
MindSpring-owned POP, a third party network provider's POP or a combination of
the two. As part of our efforts to control quality and cost, we typically seek
to increase the number of MindSpring-owned POPs in markets where we have higher
numbers of subscribers.

         MindSpring has grown rapidly by:

<PAGE>   8

         -        providing superior customer service and technical support;

         -        expanding marketing and distribution activities;

         -        making strategic acquisitions; and

         -        creating additional revenue streams by offering value-added
                  services such as Web hosting that build on our basic
                  operating capabilities and services.

         We have increased our subscriber base from approximately 12,000
subscribers at December 31, 1995 to approximately 1,228,000 subscribers at June
30, 1999, including approximately 55,000 Web hosting subscribers.

         In addition, we have rapidly increased revenues. From our inception in
February 1994 through 1997, we experienced annual net operating losses, as a
result of efforts to build our network infrastructure and internal staffing,
develop our systems, and expand into new markets. During 1997, we generated
positive cash flows from operations, with EBITDA of approximately $5 million.
We had our first year of profitability in 1998, with net income of
approximately $8.8 million, excluding a one-time tax benefit of approximately
$1.7 million. Including the one-time tax benefit, our net income for 1998 was
approximately $10.5 million. For the three months ended June 30, 1999, we had
revenues of approximately $85.7 million, EBITDA of approximately $15.7 million,
a net loss of approximately $(7.1) million and net loss per share of $(0.11).
Excluding tax-effected amortization expense related to our acquisitions of
subscriber bases, net income for the three months ended June 30, 1999 was
approximately $7.5 million. Excluding tax-effected amortization expense, net
income per share ("EPS+A") for this period was $0.11 per diluted share. For the
six months ended June 30, 1999, we had revenues of approximately $147.3
million, EBITDA of approximately $26.7 million, a net loss of approximately
$(10.4) million and net loss per share of $(0.17). Excluding tax-effected
amortization expense related to our acquisitions of subscriber bases, net
income for the six months ended June 30, 1999 was approximately $12.2 million.
EPS+A for this period was $0.19 per diluted share.

         We expect to continue to focus on increasing our subscriber base.
Increases in our subscriber base will cause our revenues to increase but will
also cause our costs of revenue, selling, general and administrative expenses,
capital expenditures, and depreciation and amortization to increase. Our
purchases of subscriber bases such as the Spry and NETCOM acquisitions,
described below, cause an immediate increase in our amortization expense. We
generally amortize subscriber acquisitions over a three-year period in
approximately equal amounts each year. We expect that annual amortization
expense attributable to these transactions will be between approximately $85
and $90 million per year through 2001.

       We plan to continue to increase our subscriber base through other means
in addition to subscriber base acquisitions. We have substantially completed
integration of the Spry and NETCOM acquisitions. Although we intend to continue
considering potential acquisitions, we also plan to move forward with a more
aggressive organic marketing model announced in July 1999 under which we will
increase our sales and marketing expenditures to higher levels beginning in the
third quarter of 1999 and continuing through first quarter of 2000. During this
period, we anticipate spending an additional $50-$55 million in excess of our
previously planned expenditures of approximately 20% of revenues. As currently
planned these increased expenditures will consist of additional expenditures of
$4-$6 million in the third quarter of 1999, additional expenditures of $25 - $30
million in the fourth quarter of 1999 and additional expenditures of $20 to $25
million in the first quarter of 2000. The fourth and first quarters have
historically been periods of stronger subscriber growth for the Company and we
expect that this newly-announced marketing plan will help us to take better
advantage of these favorable conditions for acquiring subscribers. We expect the
average cost of acquiring a subscriber to increase by as much as 50% from the
current levels in the fourth quarter of 1999 and the first quarter of 2000 and
to begin decreasing by the second quarter of 2000.

         This organic growth plan will be two-fold: First, we will focus on
building MindSpring brand recognition through an advertising campaign, and
second, through an increased distribution of the MindSpring software.

<PAGE>   9
The advertising campaign will focus on the top 20 metropolitan markets and will
include TV, radio, print, and outdoor advertising. The increased distribution of
the MindSpring software will be achieved through direct mailings as well as
point of purchase displays. We currently plan for MindSpring discs to be
available in more than 2,700 retail stores by the end of 1999.

         The additional marketing costs to be incurred as a result of this new
marketing initiative are discretionary, consisting primarily of advertising
costs, and can be curtailed in about 90 days if results are not as expected.
This growth plan is expected to have a negative impact on our profitability in
the short term. We believe; however, that this plan will enable us to build the
MindSpring brand nationwide and grow our subscriber base although there can be
no assurance that this plan will be successful. Although this growth plan will
involve increased sales and marketing expenditures, we will continue to operate
our business with the financial discipline that has distinguished our
performance in the past.

         Spry and NETCOM Acquisitions. On October 15, 1998, we completed our
acquisition of the customer base and certain related assets of Spry, Inc. The
total purchase price for the Spry acquisition was approximately $32 million. We
continue to amortize the acquired customer base related to the Spry acquisition
over three years. On February 17, 1999, we completed the purchase of certain
assets used in connection with the United States Internet access and web
hosting business operated by NETCOM On-Line Communication Services for
approximately $245 million, consisting of $215 million in cash and $30 million
in MindSpring common stock (752,232 shares, at a price per share of $39.88). We
are amortizing the acquired customer base related to the Netcom acquisition
over three years.

         We expect to incur negative EBITDA for the fourth quarter of 1999 and
the first quarter of 2000 and net losses through 2000, primarily as a result of
the amortization expense associated with the Spry and NETCOM acquisitions and
the increased sales and marketing expenditures. We expect that annual
amortization expense attributable to these transactions will be between
approximately $85 million and $90 million per year through 2001.


         Credit Facility. On February 17, 1999, we entered into a credit
agreement with First Union National Bank ("First Union") and several other
lenders. The credit agreement provides for a $100 million revolving credit
facility that may be increased at our option to $200 million with the approval
of First Union and the other lenders under the credit agreement. The credit
facility will mature on February 17, 2002. The credit facility is to be used to
fund working capital and for general corporate purposes, including permitted
acquisitions. Our obligations under the credit facility are secured by
substantially all of MindSpring's assets. On February 17, 1999, we borrowed
approximately $80 million under the credit facility to finance the NETCOM
acquisition. We repaid all amounts outstanding under the credit facility with a
portion of the net proceeds from our recently completed offering of 5,520,000
shares of common stock, and we amended the credit facility to permit the
issuance of notes, the payment of interest thereon, and certain redemptions
thereof. For a more detailed description of our secured credit facility,
see our Current Report in form 8-K filed with the Securities and Exchange
Commission on February 25, 1999.


         Recent Security Offerings. In March 1999 we filed a universal shelf
registration statement with the Securities and Exchange Commission for the
public offering from time to time of up to $800 million of debt and equity
securities. In April 1999, we completed two public offerings of securities
under this shelf registration statement. We sold 5,520,000 shares of common
stock, raising net proceeds of approximately $263.2 million, out of which we
repaid all amounts outstanding under the secured credit facility. We also sold
$179,975,000 aggregate principal amount of 5% Convertible Subordinated Notes
due 2006, raising net proceeds of approximately $174.1 million. The remaining
proceeds will be used for use in expansion of our business, as additional
working capital for general corporate purposes, and for strategic acquisitions
of subscriber accounts and complementary businesses.
<PAGE>   10

         Revenues. MindSpring derives revenue primarily by providing
individuals with dial-up access to the Internet. Monthly subscription fees vary
by billing plan. Under MindSpring's current pricing plans, customers have a
choice of two "flat rate" plans (The Works and Unlimited Access) and two "usage
sensitive" plans (Standard and Light). MindSpring also has a prepayment plan
available to all dial-up subscribers which allows subscribers to prepay their
access fees for either one or two years at a discounted rate. For the three
months ended June 30, 1999, the average monthly recurring revenue per dial-up
subscriber was approximately $20. Average monthly recurring revenue is
calculated by dividing monthly recurring revenue plus usage charges for non
"flat rate" subscribers by the total number of subscribers.

          In addition, MindSpring earns revenue by providing Web hosting,
full-time dedicated access connections to the Internet, and other value-added
services such as Web page design, domain registration, and Web server
co-location. MindSpring's Web hosting services allow a business or individual
to post information on the World Wide Web so that the information is available
to anyone who has access to the Internet. MindSpring currently offers
price plans for Web hosting subscribers ranging from $19.95 to $99.95 per
month. MindSpring had approximately 55,000 Web hosting subscribers as of June
30, 1999. Through our domain registration services, MindSpring offers
subscribers the ability to personalize electronic mail addresses and URLs
(Uniform Resource Locators). The revenue from the services described in this
paragraph have been classified as business services in MindSpring's statements
of operations and in the "Results of Operations" table shown below.

         Costs. MindSpring's costs include (1) costs of revenue that are
primarily related to the number of subscribers; (2) selling, general and
administrative expenses that are associated more generally with operations; and
(3) depreciation and amortization, which are related to the number of
MindSpring-owned POPs and servers, and the deferred costs associated with
acquired customer bases.

         Costs of revenue that are primarily related to the number of
subscribers consist primarily of the costs of telecommunications facilities
necessary to provide service to subscribers. Telecommunications facilities
costs include (1) the costs of providing local telephone lines into each
MindSpring-owned POP; (2) costs related to the use of third party networks; and
(3) costs associated with leased lines connecting each MindSpring-owned POP and
third party network to MindSpring's hub and connecting MindSpring's hub to the
Internet backbone.

         Selling, general and administrative costs are incurred in the areas of
sales and marketing, customer service and technical support, network operations
and maintenance, engineering, accounting and administration. Selling, general
and administrative costs will increase over time as MindSpring's scope of
operations increases. As noted above, beginning with the third quarter of 1999,
we anticipate significantly increasing the level of marketing activity to
increase the rate of subscriber growth. Our new marketing strategy is expected
to have a short-term negative impact on net income. We believe that these
increased costs will result in significantly greater subscriber growth; however,
there can be no assurance that these additional sales and marketing expenditures
will result in significantly greater subscriber growth. MindSpring does not
defer any sales or marketing expenses.

         As MindSpring expands into new markets, both costs of revenue and
selling, general and administrative expenses will increase. To the extent
MindSpring opens MindSpring POPs in new markets, these costs and expenses may
also increase as a percentage of revenue in the short term for the period
immediately after a new MindSpring POP is opened. Many of the fixed costs of
providing service in a new market through a new MindSpring POP are incurred
before significant revenue can be expected from that market. However, to the
extent that we expand into new markets by using third party POPs instead of
opening our own POPs, MindSpring's incremental monthly recurring costs will
consist primarily of the fees to be paid to third parties under network
services agreements. In general, the margins on those subscribers will
initially be higher than if we had opened our own POP in new markets. When a
market matures, if the market is served through purchased, third party network
services rather than MindSpring-owned POPs, costs of revenue as a percentage of
revenue will tend to be higher, and therefore, margins on subscribers will tend
to be lower. This is because the full costs of using third party networks is
included in costs of revenue, as compared to the costs of using
MindSpring-owned POPs, a portion of which is included in depreciation and
amortization. In addition, in more mature markets, where we have greater
concentrations of subscribers, we generally can provide services at a lower
cost per subscriber through MindSpring-owned
<PAGE>   11

POPs after the initial period when related expenses are higher. This depends in
part on how much we must pay for local area telecommunications charges.

         In connection with the NETCOM acquisition, ICG Netahead retained the
network assets that they formerly used to serve the customers we acquired. We
purchase access to that network under a network services agreement with a term
of one year and an option for a second year on potentially different terms to be
agreed upon by the parties. During the first year of the network services
agreement with ICG Netahead, we will pay for use of ICG Netahead's POPs at rates
that are generally comparable to the costs of using MindSpring POPs. However,
the cost advantages of providing services to MindSpring subscribers through the
ICG Netahead network agreement may be offset if there are operating
inefficiencies, network reliability issues or technical support difficulties due
to the fact that ICG Netahead is just beginning to offer network services as a
third party provider for companies such as MindSpring.

         We have added, and may in the future continue to add, MindSpring
subscribers by purchasing customer bases from other ISPs. MindSpring amortizes
such purchased customer bases using the straight-line method over a period of
three years, commencing when the purchase is completed. This amortization has a
negative effect on net income. Therefore, to the extent we continue to expand
our subscriber base through acquisitions such as the Spry and NETCOM
acquisitions, we will continue to experience increased amortization expense.
<PAGE>   12

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998

         The following table shows unaudited financial data for the three
months ended June 30, 1999 and 1998. Operating results for any period are not
necessarily indicative of results for any future period. Dollar amounts are
shown in thousands (except per share data)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED             THREE MONTHS ENDED
                                                                  JUNE 30, 1999                  JUNE 30, 1998

                                                                              % OF                            % OF
STATEMENTS OF OPERATIONS DATA:                                (000'S)        REVENUE         (000'S)         REVENUE
                                                            ----------      --------        ----------      --------


<S>                                                         <C>             <C>             <C>             <C>
REVENUES
   Access                                                   $   71,620            84        $   21,667            86
   Business services                                            14,044            16             3,393            14
                                                            ----------      --------        ----------      --------
     Total revenues                                             85,664           100            25,060           100

COST AND EXPENSES
   Cost of revenues                                             29,120            34             7,585            30
                                                            ----------      --------        ----------      --------
     Gross margin                                               56,544            66            17,475            70

   General and administrative                                   26,460            31             8,512            34
   Selling                                                      14,366            17             3,875            15
                                                            ----------      --------        ----------      --------
     EBITDA (1)                                                 15,718            18             5,088            20

   Depreciation                                                  4,692             5             1,905             8
   Acquired customer base amortization                          23,720            28             1,189             5
                                                            ----------      --------        ----------      --------

OPERATING (LOSS) INCOME                                        (12,694)          (15)            1,994             8
INTEREST INCOME (EXPENSE), NET                                   1,183             1                88             0

                                                            ----------      --------        ----------      --------
(LOSS) INCOME BEFORE TAXES                                     (11,511)          (13)            2,082             8

   Income tax benefit (expense)                                  4,430             5               (62)           (0)
                                                            ----------      --------        ----------      --------
NET(LOSS) INCOME                                            $   (7,081)           (8)       $    2,020             8
                                                            ==========                      ==========

NET (LOSS) INCOME PER SHARE
Basic                                                       $    (0.11)                     $     0.04

Diluted                                                     $    (0.11)                     $     0.04
</TABLE>

WEIGHTED AVERAGE COMMON
<PAGE>   13

<TABLE>
<S>                                                             <C>                             <C>
   SHARES OUTSTANDING
Basic                                                                                           47,345
                                                                62,610

Diluted                                                         62,610                          50,280

OTHER OPERATING DATA:

     Approx. number of subscribers at end of period          1,228,000                         393,000
     Number of employees at end of period
                                                                 1,682                             630
</TABLE>


(1) EBITDA represents earnings before interest expense, income taxes,
    depreciation and amortization.
   EBITDA is not a measurement of financial performance under generally
   accepted accounting principles and should not be considered an alternative
   to net income as a measure of performance.

                  REVENUE. Revenues for the three months ended June 30, 1999
totaled approximately $85,664,000 as compared to approximately $25,060,000 for
the three months ended June 30, 1998. This approximately 242% increase in period
revenues resulted primarily from a 212% increase in total subscribers. The
increase in subscribers is primarily due to the acquisition of the NETCOM
subscribers in February 1999, the acquisition of Spry subscribers in October
1998, and organic growth. Revenues from access to the Internet, which include
start-up fees, represented approximately 84% of total revenue for the three
months ended June 30, 1999 vs. 86% for the three months ended June 30, 1998.
Business services revenue, consisting primarily of Web-hosting and dedicated
Internet access, grew to 16% of total revenue for the three months ended June
30, 1999 from 14% for the three months ended June 30, 1998.

                  COSTS OF REVENUES. For the three months ended June 30, 1999,
cost of revenues increased to approximately 34% of total revenue, compared to
approximately 30% of total revenue for the three months ended June 30, 1998.
This increase is attributable to several factors including approximately
$600,000 in discounts in the second quarter of 1998 pursuant to our network
services agreement with PSINet, Inc. Exclusive of these discounts, cost of
revenues would have been 33% of total revenue in the three months ended June
30, 1998. The discounts earned under the network services agreement with PSINet
ended in October 1998. In addition, cost of revenues increased as a percentage
of total revenues as a result of a greater percentage of our subscribers being
served by third party networks rather than MindSpring POPs due to the Spry and
NETCOM acquisitions.

                  SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling,
general, and administrative expenses were approximately 48% of revenue for the
three months ended June 30, 1999, compared to approximately 49% of revenue for
the three months ended June 30, 1998. This decrease was primarily due to
general and administrative costs declining from 34% of revenue for the three
months ended June 30, 1998 to 31% for the three months ended June 30, 1999,
offset by selling expenses increasing from 15% to 17% for the three months
ended June 30, 1998 and 1999, respectively. General and administrative costs
decreased due to efficiencies gained primarily through economies of scale.
Selling costs increased due primarily to increased advertising expenditures.

                  EBITDA MARGIN. EBITDA margin refers to EBITDA as a percentage
of revenues. EBITDA margin decreased to 18% of revenues for the three months
ended June 30, 1999 from 20% of revenues for the three months ended June 30,
1998. This decrease is primarily attributable to higher costs of revenue due to
the expiration of the PSINet discounts in 1998 and a higher percentage of our
subscribers being served by third party networks due to the Spry and NETCOM
acquisitions.

                  DEPRECIATION AND AMORTIZATION. Customer base amortization
expense increased significantly from 5% of revenues for the three months ended
June 30, 1998 to 28% for the three months ended June 30, 1999 due to the
acquisitions of the Spry and NETCOM customer bases, which are being amortized
over three years. Depreciation expense decreased

<PAGE>   14
 from 8% of revenues for the three months ended June 30, 1998 to 5% of revenues
for the three months ended June 30, 1999 due to a smaller percentage of our
subscriber base being served by the company-owned network.

                  INTEREST INCOME (EXPENSE),NET. Interest income (expense), net
was approximately $1,183,000 for the three months ended June 30, 1999 compared
to approximately $88,000 for the three months ended June 30, 1998. This increase
in interest income (expense), net for the three months ended June 30, 1999
compared to the three months ended June 30, 1998 was primarily due to interest
income increasing as a result of the increase in cash available for investment
purposes, net of interest expense increasing, resulting from our equity offering
and a convertible debt offering which were both completed in April of 1999. The
offerings raised net proceeds of approximately $437 million from which we repaid
$80 million outstanding under our secured credit facility. Interest expense
includes interest on our 5% convertible debt offering and on our secured credit
facility as well as the amortization of deferred financing costs associated with
both.

                  INCOME TAX BENEFIT (PROVISION). For the three months ended
June 30, 1999, the Company recorded an income tax benefit of $4,430,000, for an
effective tax rate of 38%, compared to an income tax provision of $62,000, for
an effective tax rate of 3%, for the three months ended June 30, 1998. The
second quarter tax benefit in 1999 results in a tax rate for the six months
ended June 30, 1999 of 39%, the amount the Company expects its effective tax
rate to approximate in future periods.

                  NET (LOSS) INCOME AND (LOSS) INCOME PER SHARE. As a result of
the factors discussed above, and primarily as a result of the increase in
acquired customer base amortization, the Company had a net loss for the three
months ended June 30, 1999 of ($7,081,000) or $(0.11) per basic and diluted
share. The Company's net income for the three months ended June 30, 1998 was
$2,020,000 or $0.04 per diluted share. Excluding tax-effected customer based
amortization expense, the Company recorded earnings of $7,521,000 or $0.11 per
diluted share ("EPS+A") for the three months ended June 30, 1999 and earnings
of $2,733,000 or $0.05 per diluted share for the three months ended June 30,
1998.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

         The following table shows unaudited financial data for the six months
ended June 30, 1999 and 1998. Operating results for any period are not
necessarily indicative of results for any future period. Dollar amounts are
shown in thousands (except per share data)


<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED              SIX MONTHS ENDED
                                                                  JUNE 30, 1999                  JUNE 30, 1998

                                                                              % OF                            % OF
STATEMENTS OF OPERATIONS DATA:                                (000'S)        REVENUE         (000'S)         REVENUE
                                                            ----------      --------        ----------      --------


<S>                                                         <C>             <C>             <C>             <C>
REVENUES
   Access                                                   $  124,044            84        $   39,878            86
   Business services                                            23,248            16             6,566            14
                                                            ----------      --------        ----------      --------
     Total revenues                                            147,292           100            46,444           100

COST AND EXPENSES
   Cost of revenues                                             50,518            34            14,192            31
                                                            ----------      --------        ----------      --------
     Gross margin                                               96,774            66            32,252            69

   General and administrative                                   45,891            31            16,311            35
   Selling                                                      24,137            16             6,928            15
                                                            ----------      --------        ----------      --------
</TABLE>

<PAGE>   15

<TABLE>
<S>                                                         <C>             <C>             <C>             <C>
     EBITDA (1)                                                 26,746            18             9,013            19

   Depreciation                                                  8,215             6             3,625             8
   Acquired customer base amortization                          37,043            25             2,341             5
                                                            ----------      --------        ----------      --------

OPERATING (LOSS) INCOME                                        (18,512)          (13)            3,047             7
INTEREST INCOME (EXPENSE), NET                                   1,487             1               (75)            0

                                                            ----------      --------        ----------      --------
(LOSS) INCOME BEFORE TAXES                                     (17,025)          (12)            2,972             6

   Income tax benefit (expense)                                  6,640             5               (92)           (0)
                                                            ----------      --------        ----------      --------
NET(LOSS) INCOME                                            $  (10,385)           (7)       $    2,880             6
                                                            ==========                      ==========
NET (LOSS) INCOME PER SHARE
Basic                                                       $    (0.17)                     $     0.06

Diluted                                                     $    (0.17)                     $     0.06


WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING
Basic                                                           59,899                          46,313

Diluted                                                         59,899                          49,176

OTHER OPERATING DATA:

     Approx. number of subscribers at end of period          1,228,000                         393,000
     Number of employees at end of period                        1,682                             630
</TABLE>

(1) EBITDA represents earnings before interest expense, income taxes,
    depreciation and amortization.
   EBITDA is not a measurement of financial performance under generally
   accepted accounting principles and should not be considered an alternative
   to net income as a measure of performance.

         REVENUE. Revenues for the six months ended June 30, 1999 totaled
approximately $147,292,000 as compared to approximately $46,444,000 for the six
months ended June 30, 1998. This approximately 217% increase in period revenues
resulted primarily from a 212% increase in total subscribers. The increase in
subscribers is primarily due to the acquisition of the NETCOM subscribers in
February 1999, the acquisition of Spry subscribers in October 1998, and organic
growth. Revenues from dial-up access to the Internet, which include start-up
fees, represented approximately 84% of total revenue for the six months ended
June 30, 1999 vs. 86% for the six months ended June 30, 1998. Business services
revenue, consisting primarily of Web-hosting and dedicated Internet access, grew
to 16% of total revenue for the six months ended June 30, 1999 from 14% for the
six months ended June 30, 1998.

         COSTS OF REVENUES. For the six months ended June 30, 1999, cost of
revenues increased to approximately 34% of total revenue, compared to
approximately 31% of total revenue for the six months ended June 30, 1998. This
increase is attributable to several factors including approximately $1,200,000
in discounts in the six months ended June 30, 1998 pursuant to our network
services agreement with PSINet, Inc. Exclusive of these discounts, cost of
revenues would have been 33% of total
<PAGE>   16

revenue in the six months ended June 30, 1998. The discounts earned under the
network services agreement with PSINet ended in October 1998. In addition, cost
of revenues increased as a percentage of total revenues as a result of a
greater percentage of our subscribers being served through the use of third
party networks rather than MindSpring POPs due to the Spry and NETCOM
acquisitions.


                  SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling,
general, and administrative expenses were approximately 47% of revenue for the
six months ended June 30, 1999, compared to approximately 50% of revenue for
the six months ended June 30, 1998. This decrease was primarily due to general
and administrative costs declining from 35% of revenue for the six months ended
June 30, 1998 to 31% for the six months ended June 30, 1999, offset by selling
expenses increasing from 15% to 16% for the six months ended June 30, 1998 and
1999, respectively. General and administrative costs decreased due to
efficiencies gained primarily through economies of scale. Selling costs
increased due primarily to increased advertising expenditures.

                  EBITDA MARGIN. EBITDA margin refers to EBITDA as a percentage
of revenues. EBITDA margin decreased to 18% of revenues for the six months
ended June 30, 1999 from 19% of revenues for the six months ended June 30,
1998. This decrease is primarily attributable to costs of revenue being
relatively higher in 1999 due to the expiration of the PSINet discounts in 1998
and a higher percentage of our subscribers being served by third party networks
due to the Spry and NETCOM acquisitions.

                  DEPRECIATION AND AMORTIZATION. Customer base amortization
expense increased significantly from 5% of revenues for the six months ended
June 30, 1998 to 25% for the six months ended June 30, 1999 due to the
acquisitions of the Spry and NETCOM customer bases, which are being amortized
over three years. Depreciation expense decreased from 8% of revenues for the six
months ended June 30, 1998 to 6% of revenues for the six months ended June 30,
1999 due to a smaller percentage of our subscriber base being served by the
company-owned network.

                  INTEREST INCOME (EXPENSE), NET. Interest income (expense), net
was approximately $1,487,000 for the six months ended June 30, 1999 compared to
approximately ($75,000) for the six months ended June 30, 1998. This increase in
interest income (expense), net for the six months ended June 30, 1999 compared
to the six months ended June 30, 1998 was primarily due to interest income
increasing as a result of the increase in cash available for investment
purposes, net of interest expense increasing, resulting from equity offerings in
December of 1998 and April 1999 and a convertible debt offering completed in
April of 1999. The offerings raised net proceeds of approximately $562 million
from which we repaid $80 million outstanding under a secured credit facility.
Interest expense includes interest on our 5% convertible debt offering and on
our secured credit facility as well as amortization of deferred financing costs
incurred in conjunction with both.

                  INCOME TAX BENEFIT (PROVISION). For the six months ended
June 30, 1999, the Company recorded an income tax benefit of $6,640,000 for an
effective tax rate of 39%, compared to an income tax provision of $92,000, for
an effective tax rate of 3% for the six months ended June 30, 1998. The Company
expects its effective tax rate to approximate 39% in future periods.

                  NET (LOSS) INCOME AND (LOSS) INCOME PER SHARE. As a result of
the factors discussed above, and primarily as a result of the increase in
acquired customer base amortization, the Company had a net loss for the six
months ended June 30, 1999 of ($10,385,000) or $(0.17) per basic and diluted
share. The Company's net income for the six months ended June 30, 1998 was
$2,880,000 or $0.06 per diluted share. Excluding tax-effected customer based
amortization expense, the Company recorded earnings of $12,211,000 or $0.19 per
diluted share ("EPS+A") for the six months ended June 30, 1999 and earnings of
$4,285,000 or $0.11 per diluted share for the six months ended June 30, 1998.

<PAGE>   17

         LIQUIDITY AND CAPITAL RESOURCES

         For the six months ended June 30, 1999, MindSpring generated net cash
from operations of approximately $38.2 million, compared to $11.9 million for
the six months ended June 30, 1998, an increase of approximately 221%. In March
of 1999, we made a final payment to AOL of approximately $7 million to conclude
our payments related to the Spry acquisition. During the first six months of
1999, we spent a total of approximately $26.1 million primarily related to
purchases of telecommunications equipment necessary for the provision of service
to subscribers. We did not enter into any capital lease agreements in the first
six months of 1999. On February 17, 1999, we paid $215 million in cash to ICG in
connection with the closing of the NETCOM acquisition, approximately $80 million
of which we borrowed under our $100 million secured revolving credit facility,
which we repaid as discussed below, and the remainder from our available cash.

         As of June 30, 1999, we had approximately $388 million of cash. In
March 1999, we filed a universal shelf registration statement with the
Securities and Exchange Commission for the public offering from time to time of
up to $800 million of debt and equity securities. In April 1999, we completed
two public offerings of securities under this shelf registration statement. We
sold 5,520,000 shares of our common stock raising net proceeds of approximately
$263.2 million, from which we repaid $80 million of principal and interest
outstanding under our secured credit facility. We also sold $179,975,000
aggregate principal amount of our 5% Convertible Subordinated Notes due 2006,
raising net proceeds of approximately $174.1 million. Net of expenses and
repayment of debt, the Company raised an aggregate of approximately $357.3
million in these offerings.

         MindSpring's future capital requirements depend on various factors
including, without limitation:

         -        the rate of market acceptance of MindSpring's services;

         -        our ability to maintain and expand our subscriber base;

         -        the rate of expansion of MindSpring's network infrastructure;

         -        the resources required to expand our marketing and sales
                  efforts; and

         -        the availability of hardware and software provided by third
                  party vendors.

         We currently estimate that our cash and financing needs for 1999 can
be met by cash on hand, amounts available under our credit facility, additional
capital financing arrangements, and cash flow from operations. If our credit
facility is unavailable or if our expectations change regarding our capital
needs due to market conditions, strategic opportunities or otherwise, then our
capital requirements may vary materially from those currently anticipated. We
do not currently have any commitments for any additional financing, and there
can be no assurance that if and when we need additional capital it will be
available on terms that are acceptable to us, if at all. If additional capital
financing arrangements, including public or private sales of debt or equity
securities, or additional borrowings from commercial banks are insufficient or
unavailable, or if we experience shortfalls in anticipated revenues or
increases in anticipated expenses, we will be required to modify our growth and
operating plans to match available funding. Any additional equity financing may
be on terms that are dilutive or potentially dilutive to MindSpring's
stockholders. Debt financing, if available, may involve restrictive covenants
with respect to dividends, raising future capital and other financial and
operational matters and incurring additional debt may further limit
MindSpring's ability to raise additional capital. In addition, our credit
facility contains restrictions on our ability to incur additional debt and to
issue some types of convertible or redeemable capital stock.

         MindSpring frequently engages in discussions involving potential
business combinations. Depending on the circumstances, MindSpring may not
disclose material transactions until completion of a definitive agreement.
MindSpring may determine to raise additional debt or equity capital to finance
potential acquisitions and/or to fund accelerated growth. Any significant
acquisitions or increases in MindSpring's growth rate could materially affect
MindSpring's operating and financial expectations and results, liquidity and
capital resources.
<PAGE>   18

         YEAR 2000


         Introduction. The term "Year 2000 issue" is a general term used to
describe the various problems that may result from the improper processing of
dates and date-sensitive calculations by computers and other machinery as the
year 2000 is approached and reached. These problems generally arise from the
fact that most of the world's computer hardware and software have historically
used only two digits to identify the year in a date, often meaning that the
computer will fail to distinguish dates in the "2000's" from dates in the
"1900's." These problems may also arise from other sources as well, such as the
use of special codes and conventions in software that make use of the date
field.

         State of Readiness. We have established a Year 2000 program office to
coordinate appropriate activity and report to the Board of Directors on a
continuing basis with regard to the Year 2000 issue. Our Year 2000 program
office has developed and is currently implementing a comprehensive Year 2000
program for us to become Year 2000 ready. The Year 2000 program consists of six
phases: (1) project planning and inventory of our assets, (2) assessment of
remediation requirements, (3) remediation (whether by upgrade or replacement),
(4) testing and validation of selected critical assets, (5) implementation and
(6) creation of contingency plans in the event of year 2000 failures.

         The Year 2000 program covers the following: (1) internally developed
software products which we provide to our customers, (2) our information
technology systems, (3) our network elements, (4) our operational support
systems, and (5) certain non-information technology systems, including embedded
technology. In addition, the program calls for us to identify and assess the
systems and services of our third party suppliers, such as major vendors, third
party network service providers and other material service providers, and take
appropriate remedial actions and develop contingency plans where appropriate in
connection with such third party suppliers.

         We have recently completed our acquisitions of Spry and NETCOM. We
have identified certain software products, information technology systems,
network elements, operational support systems and non-information technology
systems acquired in the Spry and NETCOM acquisitions which will be supported by
us going forward, and we have revised our Year 2000 program to include these
elements.

         We provide our customers with a software package which, among other
things, allows our customers to access our services. The software package
consists of internally developed software (e.g., the MindSpring Internet
Desktop interface) which is bundled with third party software. We have
conducted operational testing and believe that the current shipping version of
the MindSpring Internet Desktop is Year 2000 ready. In addition, we believe
that, with the possible exception of one shareware product, the third party
software included in the current shipping version of the MindSpring software
package is also Year 2000 ready.

         As of June 30, 1999, we have completed the inventory phase of the Year
2000 program, have completed a substantial majority of the assessment phase of
the Year 2000 program, and are into the remediation and testing and validation
phase of the Year 2000 program. Due to the expansion of the Year 2000 program
to include the Spry and NETCOM elements,(and the associated work involved with
migrating those customers to the MindSpring network),we have revised the
schedule of the Year 2000 program, and expect to complete all six phases by the
end of October, 1999.

         We have performed a technical review of many of the more critical
third party systems and have surveyed the publicly available statements issued
by the vendors of those systems, in an effort to assess their Year 2000
readiness status. Additionally, we have contacted our significant providers of
third party systems requesting information regarding their vulnerability to
Year 2000 issues and whether the products and services purchased from those
entities are Year 2000 ready.
<PAGE>   19

We are evaluating these responses for their accuracy and adequacy, and intend
to develop appropriate contingency plans for any material supplier that does
not provide an adequate response.

         We have not deferred any specific information technology project due
to the Year 2000 program. We have engaged a consulting firm to assist us in
completing the inventory, assessment and testing phases of our Year 2000
program, and to assist us in our Year 2000 program management.

         Costs. As of June 30, 1999, we have incurred expenses of approximately
$335,000 in connection with the implementation of the Year 2000 Program Office
and Year 2000 program. We estimate that an additional $350,000 in expenses will
be incurred through the remainder of the Year 2000 program. These costs will be
expensed as incurred. The costs and estimates provided include our estimate of
the cost of internal resources directly attributable to the Year 2000 program.
We have funded, and anticipate that we will continue funding, the costs of the
Year 2000 program from cash flows. The estimates for the costs of the Year 2000
program are based upon management's best estimates and may be updated or
revised as additional information becomes available. We currently believe these
costs will not have a material effect on our financial condition, liquidity or
results of operations.

         Risks. Our failure to correct a material Year 2000 problem could
result in an interruption in, or a failure of, normal business activities or
operations. Presently, however, we perceive that our most reasonably likely
worst case scenario related to the Year 2000 is associated with potential
concerns with third party services or products.

         Specifically, we are heavily dependent on a significant number of
third party vendors to provide both network services and equipment. A
significant Year 2000-related disruption of the network services or equipment
provided to us by third party vendors could cause customers to consider seeking
alternate providers or cause an unmanageable burden on customer service and
technical support, which in turn could materially and adversely affect our
results of operations, liquidity and financial condition. We are not presently
aware of any vendor related Year 2000 issue that is likely to result in this
type of disruption.

         Furthermore, our business depends on the continued operation of, and
widespread access to, the Internet. To the extent that the normal operation of
the Internet is disrupted by the Year 2000 issue, our results of operations,
liquidity and financial condition could be materially and adversely affected.

         Although there is inherent uncertainty in the Year 2000 issue, we
expect that as we progress in our Year 2000 program the level of uncertainty
about the impact of the Year 2000 issue will be reduced significantly, and we
should be better positioned to identify the nature and extent of material risk
to us as a result of any Year 2000 disruptions.

         Contingency Plans. The Year 2000 program calls for the development of
contingency plans for at-risk functions. We have established a Contingency Plan
Committee to monitor and address the development of contingency plans. Due to
the current phase of the Year 2000 program in which we are in, we are currently
unable at this time to fully assess our risks and determine what contingency
plans, if any, need to be implemented. As we progress in our Year 2000 program
and identify specific risk areas, we intend to timely implement appropriate
remedial actions and contingency plans.

         The estimates and conclusions included in this discussion contain
forward-looking statements and are based on management's best estimates of
future events. Our expectations about risks, future costs and the timely
completion of its Year 2000 modifications may turn out to be incorrect and any
variance from these expectations could cause actual results to differ
materially from what has been discussed above. Factors that could influence
risks, amount of future costs and the effective timing of remediation efforts
include our success in identifying and correcting potential Year 2000 issues
and the ability of third parties to appropriately address their Year 2000
issues. The foregoing Year 2000 discussion and the information contained herein
is provided as a "Year 2000 Readiness Disclosure" as defined in the Year 2000
Information and Readiness Disclosure Act of 1998 (Public Law 105-271, 112 Stat.
2386) enacted on October 19, 1998.
<PAGE>   20

RECENT ACCOUNTING PRONOUNCEMENTS
The FASB has issued Statement No 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. In June 1999, the
FASB issued Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities- Amendment of thE Effective Date of FASB No. 133, which
amends Statement No. 133 to be effective for all fiscal quarters and for all
fiscal years beginning after June 15, 2000 (that is, January 1, 2001 for
companies with calendar-year fiscal years). This statement establishes
accounting and reporting standards for derivative instruments- including
certain derivative instruments embedded in other contracts - and for hedging
activities. Adoption of this statement is not expected to have a material
impact on the Company's financial statements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe our exposure to market rate fluctuations on our investments is
nominal due to the short-term nature of those investments. We have no material
future earnings or cash flow exposures with respect to our outstanding capital
leases, which are all at fixed rates. We have no material earnings or cash flow
exposure with respect to our outstanding convertible notes, which are all at
fixed rates. To the extent MindSpring has borrowings outstanding under the
credit facility, we would have market risk relating to those amounts because
the interest rates under the credit facility are variable. At present, we have
no plans to enter into any hedging arrangements with respect to potential
future borrowings.
<PAGE>   21

PART II  OTHER INFORMATION

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

The following matters were submitted to a vote of security holders at the 1999
Annual Meeting of Stockholders held on May 25, 1999:

1. Election of one Class I Director to the Board of Directors of the Company.
There were 22,881,177 cast for the election of O. Gene Gabbard and 3,840,422
votes to withhold authority.

The term of two Class II Directors, Michael S. McQuary and William H. Scott,
III, and two Class III Directors, Charles M. Brewer and Campbell B. Lanier,
III, did not expire at this Annual Meeting and each of them continue to serve
as directors of the Company.

2. Proposed Amendment to Article 4 of the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of the
Company's Common Stock, described in the proxy statement dated April 22, 1999.
There were 22,608,731 votes cast for approval of the amendment, 4,080,111 votes
cast against approval of the amendment and 34,757 abstentions.

3. Proposed Amendment to 1995 Stock Option Plan described in the proxy
statement dated April 22, 1999. There were 17,118,422 votes cast for approval
of the amendment, 1,599,202 votes cast against approval of the amendment and
48,616 abstentions.

4. Proposed ratification of the appointment of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1999. There were 26,664,914 votes cast for ratification, 29,354 votes cast
against ratification and 29,331 abstentions.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<S>      <C>
(a)      Exhibits

         3.1. Second Certificate of Amendment to Amended and Restated
         Certificate of Incorporation of MindSpring Enterprises, Inc. dated May
         25, 1999 and filed with the Secretary of the State of Delaware on May
         26, 1999.


         27.  Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE>   22

(b)      Reports on Form 8-K

         On April 12, 1999, MindSpring filed a Current Report on Form 8-K that
contained certain exhibits with respect to its debt offering completed in
April 14, 1999.

         On May 27, 1999, MindSpring filed a Current Report on Form 8-K to
report that on May 25, 1999, the Company's Board of Directors had declared a
two-for-one stock split to be effected in the form of a stock dividend.
<PAGE>   23

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<TABLE>
<CAPTION>
                                           MINDSPRING ENTERPRISES, INC.
                                           ----------------------------
                                           (Registrant)


<S>                                        <C>
Date: August 15, 1999                      By: /s/ MICHAEL S. MCQUARY
                                              ----------------------------------
                                           Michael S. McQuary
                                           President and Chief Operating Officer


Date: August 15, 1999                      By: /s/ JULIET M. REISING
                                               ---------------------------------
                                           Juliet M. Reising
                                           Executive Vice President and Chief Financial Officer
</TABLE>
<PAGE>   24

                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit                                                                                                    Numbered
Number                                           Exhibit Description                                         Page

<S>                <C>                                                                                     <C>

 3.1                     Second Certificate of Amendment to Amended and Restated Certificate of
                   Incorporation of MindSpring Enterprises, Inc. dated May 25, 1999 and filed
                          With the Secretary of the State of Delaware on May 26, 1999.


 27.                                           Financial Data Schedule
</TABLE>