<PAGE>   1
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>

                                                                                       Period from
                                                                                     August 30, 1993
                                                                                       (inception)
(In thousands, except per share data)                Years Ended December 31,        to December 31,
----------------------------------------------------------------------------------------------------
                                                 1996           1995           1994          1993
<S>                                           <C>              <C>             <C>            <C>
SUMMARY STATEMENTS OF OPERATIONS DATA
Total revenues                                $ 15,095         $ 1,032         $   --         $  --
Cost of revenues                                 3,194             614             --            --
                                              -----------------------------------------------------
Gross profit                                    11,901             418             --            --
Operating expenses:
  Research and development                       4,550           1,175          1,063             8
  Sales and marketing                           20,455           1,488             97            --
  General and administrative                     4,177           1,148            360            19
                                              -----------------------------------------------------
    Total operating expenses                    29,182           3,811          1,520            27
                                              -----------------------------------------------------
Operating loss                                 (17,281)         (3,393)        (1,520)          (27)
Interest income, net                             1,343              97             10            --
                                              -----------------------------------------------------
Net loss                                      $(15,938)        $(3,296)       $(1,510)        $ (27)
                                              =====================================================
Net loss per share (Pro forma in 1995)        $  (0.73)        $ (0.13)
                                              ========================
Shares used in computing net loss per share
  (Pro forma in 1995)                           21,737          25,863
                                              ========================
</TABLE>



<TABLE>
<CAPTION>
                                                              December 31,
                                                 --------------------------------------------
(In thousands)                                     1996          1995        1994       1993
---------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>       <C>
SUMMARY BALANCE SHEETS DATA
Cash, cash equivalents and short-term
  investments                                    $ 46,653      $ 1,626       $ 568     $  177
Working capital (deficit)                          41,997           93         458        (99)
Total assets                                       58,332        5,123         859        318
Long-term obligations                               1,892          838         210         --
Total shareholders' equity                         48,985        2,142         520         27
                                                 ============================================
</TABLE>


2 INFOSEEK CORPORATION

<PAGE>   2


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

This Discussion and Analysis contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1993, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results and the
timing of certain events could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth in "Risk
Factors That May Affect Future Results" and other factors discussed elsewhere in
this Report.

The following table sets forth items from Infoseek's Statements of Operations
(in thousands):

<TABLE>
<CAPTION>
                                        Years Ended December 31
                              -------------------------------------
                                1996           1995            1994
                              -------------------------------------
<S>                           <C>            <C>            <C>
Revenues
  Advertising                 $ 14,951       $  849         $    --
  Subscription                     144          183              --
                              -------------------------------------
Total revenues                  15,095        1,032              --
Cost of revenues                 3,194          614              --
                              -------------------------------------
Gross profit                    11,901          418              --
Operating expenses
  Research and development       4,550        1,175           1,063
  Sales and marketing           20,455        1,488              97
  General and administrative     4,177        1,148             360
                              -------------------------------------
Total operating expenses        29,182        3,811           1,520
                              -------------------------------------
Operating loss                 (17,281)      (3,393)         (1,520)
Interest income, net             1,343           97              10
                              -------------------------------------
Net loss                      $(15,938)     $(3,296)        $(1,510)
                              =====================================
</TABLE>


RESULTS OF OPERATIONS

From inception through the first quarter of 1995, the Company's operations were
limited and consisted primarily of start-up activities. Accordingly, the Company
believes that year-to-year comparisons of 1994 to 1995 are not meaningful and
therefore has not included such comparisons in the following discussion.

Total Revenues -- For the years ended December 31, 1996 and 1995, total revenues
were $15,095,000 and $1,032,000, respectively.


During 1996 and 1995, the Company derived its revenues substantially from the
sale of advertisements on its Web pages. Advertising revenues in 1996 and 1995
were $14,951,000 and $849,000, respectively, representing 99% and 82% of total
revenues in such periods. The growth in revenues is attributable to the
increased use of the Internet for information publication, distribution and
commerce coupled with the development and acceptance of the Internet as an
advertising medium. The Company expects to continue to derive substantially all
of its revenues for the foreseeable future from selling advertising space on its
Web sites. Advertising revenues are derived principally from short-term
advertising contracts in which the Company guarantees a minimum number of
impressions (displays of an advertisement to the user) for a fixed fee.
Advertising revenues are recognized ratably over the term of the contract during
which services are provided and are stated net of customer discounts.

In March 1996, the Company and NYNEX Information Technologies Company ("NYNEX")
entered into a one-year agreement, which provides for the Company's display of
the BigYellow logo within Ultraseek. According to the terms of the agreement,
NYNEX agreed to pay to the Company up to an aggregate of $4,600,000, in monthly
payments, which amount will be decreased proportionately if the number of
impressions of the BigYellow logo is below a specified number. NYNEX could
extend the term of the agreement for addi-


                                                        INFOSEEK CORPORATION  3
<PAGE>   3
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

tional one-year periods, with the fee to be determined based upon Infoseek's
then current advertising rate structure. In addition, NYNEX had the right to
cancel or renegotiate the agreement based upon certain relative traffic volumes
on the BigYellow and Infoseek Guide sites. In February of 1997, the Company has
signed an amendment with NYNEX extending the term of the original agreement
through June 1998 in exchange for an additional $1,400,000 for a total of
$6,000,000, in monthly payments, subject to substantially the same terms and
conditions as the original agreement, except for elimination of certain
exclusivity and reimbursement provisions. The Company recognized revenue of
$1,882,000 in connection with this amended agreement during the year ended
December 31, 1996. There can be no assurance that the NYNEX arrangement will
prove to be mutually beneficial or that it will be continued after the extended
term. See Note 11 and 12 of Notes to Financial Statements.

Also included in advertising revenues is the exchange by the Company of
advertising space on the Company's Web sites for reciprocal advertising space in
other media publications or other Web sites or receipt of applicable goods and
services. Revenues from these exchange transactions are recorded as advertising
revenues at the estimated fair value of the goods and services received and are
recognized when both the Company's advertisements and reciprocal advertisements
are run or applicable goods or services are received. Although such revenues
have been insignificant to date, the Company believes these exchange
transactions are of value, particularly in the marketing of the Infoseek brand,
and expects to continue to engage in these transactions in the future.

The balance of total revenues during these periods was derived from subscription
fees for a premium service offered to business and professional users. Revenues
from this service are recognized over the period the service is provided and
have been insignificant to date. During the third quarter of 1996, the Company
discontinued this service.

The Company's current business model to generate revenues through the sale of
advertising on the Internet may be unsustainable. There can be no assurance that
current advertisers will continue to purchase advertising space and services
from the Company or that the Company will be able to successfully attract
additional advertisers.

Cost of Revenues -- For the years ended December 31, 1996 and 1995, cost of
revenues were $3,194,000 and $614,000, respectively. Cost of revenues consist
primarily of expenses associated with the enhancement, maintenance and support
of the Company's Web sites, including telecommunications costs and equipment
depreciation. Cost of revenues also includes, for all periods presented,
expenses associated with the licensing of certain third-party technologies,
consisting primarily of amortization of the fee for the search engine technology
licensed from Applied Computing Systems Institute of Massachusetts, Inc.
("ACSIOM"), as well as ongoing royalties based on usage of the product. The
initial license fee was amortized at a rate of $37,000 per quarter, commencing
with the first quarter of 1995 and ending in the second quarter of 1996. Royalty
fees to ACSIOM were paid commencing in the first quarter of 1995 and will
continue as long as the Company utilizes the technology. With the introduction
of Ultraseek royalty fees to ACSIOM will be insignificant in future periods.
Cost of revenues increased in 1996 and 1995 as the Company added additional
equipment and personnel to support its Web sites and as royalties due upon usage
of the product increased as revenues increased. The Company expects its cost of
revenues will continue to increase in absolute dollars and possibly as a
percentage of revenues as it upgrades equipment and maintenance and support
personnel, adds content partners to meet the growing demands for Web services
and as sales through the recently introduced Infoseek Network, which is expected
to generate advertising revenues that typically would carry lower margins than
those associated with advertising sold on the Company's own Web site, grow.

Operating Expenses -- The Company's operating expenses have increased in each
quarter during 1996 and 1995 as the Company has transitioned from the product
development stage to the marketing of its services and products and expansion of
its business. The Company expects operating expenses to continue to increase in
dollar amount in the future as the Company continues to expand its business.


INFOSEEK CORPORATION 4
<PAGE>   4
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The Company recorded aggregate deferred compensation of $5,226,000 in connection
with certain stock options granted during 1996 and 1995. For the years ended
December 31, 1996 and 1995, the Company amortized $1,346,000 and $44,000,
respectively, related to stock options. The amortization of such deferred
compensation is being charged to operations over the vesting periods of the
options, which are typically four years. As a result, the amortization of this
deferred compensation will continue to have an adverse effect on the Company's
results of operations. See Note 7 of Notes to Financial Statements.

Research and Development -- For the years ended December 31, 1996 and 1995,
research and development expenses were $4,550,000 and $1,175,000, respectively.
Research and development expenses consist principally of personnel costs,
consulting and equipment depreciation. Costs related to research, design and
development of products and services have been charged to research and
development expense as incurred. See Note 1 of Notes to Financial Statements.

The increase in research and development expenses for 1996 over 1995 were
primarily the result of continued product enhancements of the Infoseek Guide
product and the development of the Company's next generation search engine,
Ultraseek, which was released in November 1996. The Company believes
that a significant level of product development expenses is required to remain
competitive. Accordingly, the Company anticipates that it will continue to
devote substantial resources to product development and that these costs are
expected to continue to increase in dollar amount in future periods.

Sales and Marketing -- For the years ended December 31, 1996 and 1995, sales and
marketing expenses were $20,455,000 and $1,488,000, respectively. Sales and
marketing expenses consist primarily of compensation of sales and marketing
personnel, advertising and promotional expenses.

Sales and marketing expenses for the year ended December 31, 1996 included
payments made to Netscape Communications Corporation ("Netscape") pursuant to an
arrangement for the listing of the Company's product on the Netscape Web page.
This agreement with Netscape provides for payments of up to an aggregate of
$5,000,000 over the course of the one year term of the agreement. During the
year ended December 31, 1996, the Company recognized $3,750,000 of the
$5,000,000 payment to Netscape as expense. The remaining $1,250,000 will be
expensed in the first quarter of 1997. In March 1997, Infoseek renewed its
agreement with Netscape under terms which extend the current contract through
April 1997 and thereafter provides for Infoseek to be one of five premier
providers displayed on Netscape's Web page for the period of May 1, 1997
through April 30, 1998. Infoseek's agreement with Netscape provides for
payments of up to an aggregate of $12,500,000 to Netscape over the term of the
agreement. See Notes 5 and 12 of Notes to Financial Statements.

In addition, the increase in sales and marketing expenses for the year ended
1996 over 1995 was also the result of hiring additional sales and marketing
personnel and an increase in promotional and advertising activity. The Company
expects to increase promotional and advertising expenses and anticipates hiring
additional sales representatives in 1997 and future periods. As a result, these
costs are expected to continue to increase.

General and Administrative -- For the years ended December 31, 1996 and 1995,
general and administrative expenses were $4,177,000 and $1,148,000,
respectively. General and administrative expenses consist primarily of
compensation of administrative and executive personnel facility costs and fees
for professional services.

The increase in general and administrative expenses for the year ended 1996 over
1995 was the result of hiring additional administrative and executive staff and
adding infrastructure to manage the expansion of the business. The Company
anticipates that its general and administrative expenses will continue to
increase in dollar amount as the Company continues to expand its administrative
and executive staff, relocates its corporate headquarters to larger facilities
in the first half of 1997, adds infrastructure and incurs additional costs
related to being a public company, such as expenses related to directors' and
officers' insurance, investor relations programs and increased professional
fees.


                                                          INFOSEEK CORPORATION 5
<PAGE>   5
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Income Taxes -- Due to the Company's loss position, there was no provision for
income taxes for any of the periods presented. At December 31, 1996, the Company
had federal and state net operating loss carry forwards of approximately $20.2
million and $7.1 million, respectively. The federal net operating loss carry
forwards will expire beginning in 2009 through 2011, if not utilized, and the
state net operating loss carry forwards will expire in the years 1999 through
2001. Certain future changes in the share ownership of the Company, as defined
in the Tax Reform Act of 1986 and similar state provisions, may restrict the
utilization of carry forwards. A valuation allowance has been recorded for the
entire deferred tax asset as a result of uncertainties regarding the realization
of the asset due to the lack of earnings history of the Company. See Note 9 of
Notes to Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

From inception through May 1996, the Company financed its operations and met its
capital expenditure requirements primarily through the issuance of equity,
convertible debt securities and equipment term loans. In June 1996, the Company
completed its initial public offering and received proceeds from the offering of
$43,485,000 net of underwriting discounts, commissions and other offering costs.
Concurrent with the closing of the initial public offering, all outstanding
shares of its redeemable convertible preferred and convertible preferred stock
were automatically converted into shares of common stock.

For 1996 and 1995, operating activities used cash of $10,083,000 and $1,468,000,
respectively. The net cash used during these periods was primarily due to net
losses and increases in accounts receivable and other current assets, partially
offset by increases in accounts payable and accrued liabilities. For the 1996
and 1995, investing activities used net cash of $49,827,000 and $3,326,000,
respectively, primarily associated with the purchase of net short-term
investments as well as the purchase of property and equipment. Financing
activities generated cash of $62,567,000 and $5,355,000 in 1996 and 1995,
respectively, primarily from preferred stock sales, the initial public offering
in June 1996 and equipment loans.

The Company has commitments for its facilities under operating lease agreements
(see Notes 5 and 12 of Notes to Financial Statements) and expects to continue to
incur significant capital expenditures to support expansion of the Company's
business. Furthermore, from time to time the Company expects to evaluate the
acquisition of products, businesses and technologies that complement the
Company's business. The Company does not, however, currently have any
understandings, commitments or agreements with respect to any such
acquisitions.

The Company had $46,653,000 in cash, cash equivalents and short-term investments
at December 31, 1996. In March 1997, the Company entered into a four year,
$5,000,000 equipment term loan facility. The Company believes that its existing
funds will satisfy the Company's anticipated working capital and other cash
requirements through at least the next 12 months. The estimate of the period for
which the Company expects its available funds to be sufficient to meet its
capital requirements is a forward-looking statement that involves risks and
uncertainties. There can be no assurance that the Company will be able to meet
its working capital and other cash requirements for this period as a result of a
number of factors including but not limited to those described below under the
caption "Risk Factors That May Affect Future Results -- Future Capital Needs;
Uncertainty of Additional Financing." Thereafter, the Company may need to raise
additional funds. The Company may need to raise additional funds sooner,
however, in order to fund more rapid expansion, to develop new or enhance
existing services or products, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of the shareholders of the Company will be reduced,
shareholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company's ability to
fund expansion, take advantage of acquisition opportunities, develop or enhance
services or products or respond to competitive pressures would be significantly
limited. Such limitation could have a material adverse effect on the Company's
business, results of operations and financial condition.


6 INFOSEEK CORPORATION
<PAGE>   6

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


RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

In addition to the other information contained in this Report, the following
risk factors should be considered.

Limited Operating History; Anticipation of Continued Losses -- The Company has
a limited operating history, which makes it difficult to manage future
operations or predict future operating results. The Company was formed in
August 1993 and did not commence generating revenues until January 1995. The
Company has incurred significant net losses since inception and expects to
continue to incur significant losses on a quarterly and annual basis for the
foreseeable future. As of December 31, 1996, the Company had an accumulated
deficit of $20,771,000. The Company and its prospects must be considered in
light of the risks, costs and difficulties frequently encountered by companies
in their early stage of development, particularly companies in the new and
rapidly evolving Internet market. The Company has achieved only limited
revenues to date, and its ability to generate significant revenues is subject
to substantial uncertainty. There can be no assurance that the Company will be
able to address any of these challenges or will be able to sustain revenue
growth or achieve profitability. Moreover, in 1996 the Company significantly
increased its operating expenses to substantially increase its sales and
marketing operation, develop new distribution channels, broaden its customer
support capabilities and fund greater levels of research and development.
Further increases in operating expenses are planned in 1997. To the extent that
any such expenses are not subsequently and timely followed by increased
revenues, the Company's business, results of operations and financial condition
would be materially adversely affected.

Potential Fluctuations in Future Results -- As a result of the Company's limited
operating history as well as the very recent emergence of the Internet market
addressed by the Company, the Company has neither internal nor industry-based
historical financial data for any significant period of time upon which to base
planned operating expenses. The Company expects that its results of operations
may also fluctuate significantly in the future as a result of a variety of
factors, including: the continued rate of growth, usage and acceptance of the
Internet; the rate of acceptance of the Internet as an advertising medium;
demand for the Company's products and services; the advertising budgeting cycles
of individual advertisers; the introduction and acceptance of new or enhanced
products or services by the Company or by its competitors; the Company's ability
to anticipate and effectively adapt to a developing market and to rapidly
changing technologies; the Company's ability to attract, retain and motivate
qualified personnel; initiation, renewal or expiration of significant contracts
with NYNEX, Netscape or others; pricing changes by the Company or its
competitors; specific economic conditions in the Internet market; general
economic conditions and other factors. In addition, the Infoseek Network, which
was recently introduced by the Company, is expected to generate advertising
revenues that would typically carry lower gross profit margins than those
associated with advertising sold on the Company's own Web site. As a result the
Company expects that its gross margins may decline somewhat to the extent that
Network sales become material in amount. Substantially all of the Company's
revenues have been generated from the sale of advertising, and the Company
expects revenue for the foreseeable future to continue to be derived
substantially from advertising sales. Moreover, most of the Company's contracts
with advertising customers have terms of three months or less, with options to
cancel at any time. Accordingly, future sales and operating results are
difficult to forecast. The Company's expense levels are based in part on its
expectations as to future revenues and to a significant extent are relatively
fixed, at least in the short term. The Company may not be able to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall in relation to the Company's expectations
would have an immediate adverse impact on the Company's business, results of
operations and financial condition. In addition, the Company may elect from time
to time to make certain pricing, service or marketing decisions or acquisitions
that could have a short-term material adverse effect on the Company's business,
results of operations and financial condition and may not generate the long-term
benefits intended. Due to all of the foregoing factors, it is likely that in
some future period, the Company's operating results may be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially adversely affected.

The Company's revenues are also dependent on it's relationship with NYNEX. In
March 1996, the Company and NYNEX entered into a one year agreement, which
provides for the Company's display of the BigYellow logo within Ultraseek.
According to the terms of the agreement, NYNEX agreed to pay to the Company up
to an aggregate of $4,600,000, in monthly payments, which amount will be
decreased proportionately if the number of impressions of the BigYellow logo is
below a specified number. NYNEX could extend the term of the agreement for
additional one year periods, with the fee to be determined based upon
Infoseek's then current advertising rate structure. In addition, NYNEX had the
right to cancel or renegotiate the agreement based upon certain relative
traffic volumes on the BigYellow and Infoseek Guide sites. In February 1997,
the Company and Nynex amended this agreement to extend its term to June 1998 in
exchange for a total of $6,000,000, in monthly payments ($2,500,000 of which
was previously paid under the terms of the original agreement) subject to
substantially the same terms and conditions as the original agreement, except
for elimination of certain exclusivity and reimbursement provisions. There can
be no assurance that the NYNEX arrangement will prove to be mutually beneficial
or that it will be continued after its amended term.



                                                         INFOSEEK CORPORATION 7
<PAGE>   7
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Developing Market; Unproven Acceptance of Internet Advertising and of the
Company's Products and Services -- The market for the Company's products and
services has only recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants with products and
services for use on the Internet. The Company's future success is highly
dependent upon the increased use of the Internet for information publication,
distribution and commerce. In particular, because the Company expects to derive
substantially all of its revenues in the foreseeable future from sales of
Internet advertising, the future success of the Company is highly dependent on
the development of the Internet as an advertising medium. If the market fails
to develop, develops more slowly than expected or becomes saturated with
competitors, or if the Company's products and services do not achieve or
sustain acceptance by the Internet users or advertisers, the Company's
business, results of operations and financial condition will be materially
adversely affected.

Reliance on Advertising Revenues -- The Company has derived substantially all of
its revenues to date from the sale of advertisements and expects such dependence
of advertising revenue to continue. The Company's current business model to
generate revenues through the sale of advertising on the Internet is unproven.
The Internet as an advertising medium has not been available for a sufficient
period of time to gauge its effectiveness as compared with traditional
advertising media. In addition, most of the Company's current advertising
customers have limited or no experience using the Internet as an advertising
medium, have not devoted a significant portion of their advertising expenditures
to such advertising and may not find such advertising to be effective for
promoting their products and services relative to advertising in traditional
media. In addition, the Company's advertising revenues to date have been derived
from a limited number of advertising customers. There can be no assurance that
current advertisers will continue to purchase advertising space and services
from the Company or that sufficient impressions will be achieved or available,
or that the Company will be able to successfully attract additional advertisers.
Furthermore, with the rapid growth of available inventory on the internet and
the intense competition among sellers of advertising space it is difficult to
project future levels of advertising revenues and pricing models that will be
adopted by the industry or individual companies. Accordingly, there can be no
assurance that the Company will be successful in generating significant future
advertising revenues and failure to do so will have a material adverse effect on
the Company's business, results of operations and financial condition.



8 INFOSEEK CORPORATION
<PAGE>   8
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Change in Strategic Relationships -- From March 1995 through March 1996, the
Company's service was listed as the sole premier navigational service on the
Netscape Web page accessible via the "Net Search" button. In March 1996,
Infoseek entered into a new agreement with Netscape, which provides that
Infoseek will be listed as a non-exclusive premier provider of navigational
services on Netscape's Web page for the period April 10, 1996 to March 31,
1997. Currently, Netscape's Web page displays four additional premier
providers. There can be no assurance that the Company will be able to maintain
or increase its current level of traffic and any failure to do so could
materially and adversely impact advertising revenues. In addition, the Company
cannot anticipate the impact on Infoseek traffic of any changes Netscape may
make to this service, to its Web page or its other services, or the effect on
advertising revenues that may be generated from such traffic. Infoseek's
agreement with Netscape provides for payments of up to an aggregate of
$5,000,000 to Netscape over the term of the agreement. Furthermore, if traffic
is decreased significantly as a result of these or other changes in the
Netscape relationship and the Company is unable to develop alternative viable
distribution channels, advertising revenues would be adversely affected, while
the remaining $1,250,000 Netscape obligation would not be reduced, the result
being that the Company's business, results of operations and financial
condition would be materially and adversely affected. In March 1997, Infoseek
renewed its agreement with Netscape under terms which extend the current
contract through April 1997 and thereafter provide for Infoseek to be one of
five premier providers displayed on Netscape's Web page for the period of May 1,
1997 through April 30, 1998. Infoseek's agreement with Netscape provides for
payments of up to an aggregate of $12,500,000 to Netscape over the term of the
agreement.

The Company's revenues are also dependent on it's relationship with NYNEX. In
March 1996, the Company and NYNEX entered into a one year agreement, which
provides for the Company's display of the BigYellow logo within Ultraseek.
According to the terms of the agreement, NYNEX agreed to pay to the Company up
to an aggregate of $4,600,000, in monthly payments, which amount will be
decreased proportionately if the number of impressions of the BigYellow logo is
below a specified number. NYNEX could extend the term of the agreement for
additional one year periods, with the fee to be determined based upon
Infoseek's then current advertising rate structure. In addition, NYNEX had the
right to cancel or renegotiate the agreement based upon certain relative
traffic volumes on the BigYellow and Infoseek Guide sites. In February 1997,
the Company and Nynex amended this agreement to extend its term to June 1998 in
exchange for a total of $6,000,000, in monthly payments ($2,500,000 of which
was previously paid under the terms of the original agreement) subject to
substantially the same terms and conditions as the original agreement, except
for elimination of certain exclusivity and reimbursement provisions. There can
be no assurance that the NYNEX arrangement will prove to be mutually beneficial
or that it will be continued after its amended term.

Technological Changes and New Products and Services -- The market for Internet
products and services is characterized by rapid technological change, changing
customer needs, frequent new product introductions and evolving industry
standards. These market characteristics are exacerbated by the emerging nature
of this market and the fact that many companies are expected to introduce new
Internet products and services in the near future. The Company's future success
will depend on its ability to continually and on a timely basis introduce new
products, services and technologies and to continue to improve the performance,
features and reliability of the Company's products and services in response to
both evolving demands of the marketplace and competitive product offerings.

There can be no assurance that any new or proposed product or service will
attain market acceptance. Failure of the Company to successfully design,
develop, test, market and introduce new and enhanced technologies and services,
in particular, Ultraseek or any enhancements of the Company's current search
technology, or the failure of the Company's recently introduced products and
services to achieve market acceptance could have a material adverse effect upon
the Company's business, operating results and financial condition. While the
Company's Ultramatch technology is currently in beta testing and is expected to
be commercially released in 1997, this technology, which is being developed by
Aptex Software, is complex and subject to risks inherent in the development and
deployment process. There can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction or marketing of new or enhanced technologies, products and
services, or that the Company's new or recently introduced products and services
will adequately meet the requirements of the marketplace and achieve significant
market acceptance. Due to certain market characteristics, including
technological change, changing customer needs, frequent new product and service
introductions and evolving industry standards, timeliness of introduction of
these new products and services is critical. Delays in the introduction of new
products and services may result in customer dissatisfaction and may delay or
cause a loss of advertising revenue. There can be no assurance that the Company
will be successful in developing new products or services or improving existing
products and services that respond to technological changes or evolving industry
standards, that the Company will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of new or
improved products and services, or that its new products and services will
adequately meet the requirements of the marketplace and achieve market
acceptance. In addition, new or enhanced products and services introduced by the
Company may contain undetected errors that require significant design
modifications. This could result in a loss of customer confidence and user
support, thus adversely affecting the use of the Company's products and
services, which in turn would have a material adverse effect upon the Company's
business, results of operations or financial condition. If the Company is unable
to develop and introduce new or


                                                        INFOSEEK CORPORATION  9
<PAGE>   9
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


improved products or services in a timely manner in response to changing market
conditions or customer requirements, the Company's business, operating results
and financial condition will be materially adversely affected.

Intense Competition -- The market for Internet products and services is highly
competitive, with no substantial barriers to entry, and the Company expects that
competition will continue to intensify. In addition, the market for the
Company's products and services has only recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants with
competing products and services. The Company does not believe this market will
support the increasing number of competitors and their products and services.
Although the Company believes that the diverse segments of the Internet market
may provide opportunities for more than one supplier of products and services
similar to those of the Company, it is possible that a single supplier may
dominate one or more market segments. Accordingly, any failure of the Company
to provide product and service offerings that achieve success in the short-term
could result in an insurmountable loss in market and brand acceptance, and
could, therefore, have a material adverse and long-term effect upon the
Company's business, results of operations and financial condition.

Capacity Constraints and System Failure -- A key element of the Company's
strategy is to generate a high volume of traffic to its products and services.
Accordingly, the performance of the Company's products and services is critical
to the Company's reputation, its ability to attract advertisers to the Company's
Web sites and market acceptance of these products and services. Any system
failure that causes interruptions or that increases response time of the
Company's products and services would result in less traffic to the Company's
Web sites and, if sustained or repeated, would reduce the attractiveness of the
Company's products and services to advertisers and customers. In addition, an
increase in the volume of searches conducted through the Company's products and
services could strain the capacity of the software, hardware or
telecommunications lines deployed by the Company, which could lead to slower
response time or system failures. The Company renewed its contract with Netscape
pursuant to which the Company hopes to increase its presence as a Netscape
premier provider. If the Company receives a greater share of Netscape traffic it
is possible that the capacity of the Company's hardware or software could be
exceeded and service interruptions or failures could occur. As the number of Web
pages and users increase, there can be no assurance that the Company products,
services and systems will be able to scale appropriately. The Company is also
dependent upon Web browser companies and Internet and online service providers
for access to its products and services, and users have experienced and may in
the future experience difficulties due to system or software failures or
incompatibilities not within the Company's control. The Company is also
dependent on hardware suppliers for prompt delivery, installation and service of
servers and other equipment and services used to provide its products and
services. The Company has been working to establish a duplicate Infoseek Service
site to be complete and functioning in 1997. The Company's current estimate of
the timing of the completion of this duplicate service site is a forward-looking
statement that involves risk and uncertainties. The actual timing of such
completion and the capacity of the service provided could differ materially from
that noted in this forward-looking statement as a result of certain factors,
including hardware or software difficulties and the amount of traffic on
Infoseek Service. As a result, there can be no assurance that a duplicate
service site will be operational within the time frame stated above, or at all.
In addition, any duplicate service site will create additional operational and
management complexities, including the need for continual updating and
maintenance of directory listings, possibly among geographically dispersed
network servers. Any disruption in the Internet access and service provided by
the Company or its service providers could have a material adverse effect upon
the Company's business, results of operations and financial condition.


10 INFOSEEK CORPORATION


<PAGE>   10
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

The process of managing advertising within large, high traffic Web sites such as
the Company's is an increasingly important and complex task. The Company relies
on internal advertising inventory management and analysis systems to provide
enhanced internal reporting and customer feedback on advertising. To the extent
that any extended failure of the Company's advertising management system results
in incorrect advertising insertions, the Company may be exposed to "make good"
obligations with its advertising customers, which, by displacing advertising
inventory, could have a material adverse effect on the Company's business,
results of operations and financial condition.

In addition, the Company's operation depends upon its ability to maintain and
protect its computer systems located in Santa Clara, California. This system is
vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The Company does not
currently have a disaster recovery plan in effect. Despite the implementation of
network security measures by the Company, its servers are also vulnerable to
computer viruses, break-ins and similar disruptive problems. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays in or cessation of service to users of the Company's products and
services. The occurrence of any of these risks could have a material adverse
effect on the Company's business, results of operations and financial condition.

Risks Associated with International Expansion--As part of its business strategy,
the Company is seeking opportunities to expand its products and services into
international markets. The Company believes that such expansion is important to
the Company's ability to continue to grow and to market its products and
services. In marketing its products and services internationally, however, the
Company will face new competitors. In addition, the ability of the Company to
enter the international markets will be dependent upon the Company's ability to
create localized versions of its products and services. There can be no
assurance that the Company will be successful in creating localized versions of
its products and services or marketing of distributing its products abroad or
that, if the Company is successful, its international revenues will be adequate
to offset the expense of establishing and maintaining international
operations. To date, the Company has limited experience in marketing and
distributing its products internationally. In addition to the uncertainty as to
the Company's ability to establish an international presence, there are certain
difficulties and risks inherent in doing business on an international level,
such as compliance with regulatory requirements and changes in these
requirements, export restrictions, export controls relating to technology,
tariffs and other trade barriers, protection of intellectual property rights,
difficulties in staffing and managing international operations, longer payment
cycles, problems in collecting accounts receivable, political instability,
fluctuations in currency exchange rates and potentially adverse tax
consequences. There can be no assurance that one or more of such factors will
not have a material effect on any international operations established by the
Company and, consequently, on the Company's business, operating results and
financial condition.

Future Capital Needs; Uncertainty of Additional Financing--The Company currently
anticipates that its cash, cash equivalents and short term investment balances,
together with cash flows generated from advertising revenues, will be sufficient
to meet its anticipated needs for working capital, capital expenditures and
business expansion for at least the next 12 months. Thereafter, the Company may
need to raise additional funds. The Company may need to raise additional funds
sooner in order to fund more rapid expansion, to develop new or enhanced
services or products, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of the shareholders of the Company will be reduced,
shareholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company may not be
able to fund its expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures. Such inability could have a material adverse effect on the Company's
business, results of operations and financial condition.


                                                         INFOSEEK CORPORATION 11


<PAGE>   11

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                                ---------------------------------
(In thousands, except per share amounts)                            1996        1995         1994
-------------------------------------------------------------------------------------------------
<S>                                                             <C>        <C>         <C>
Revenues:
 Advertising                                                    $  14,951    $  849      $     --
 Subscription                                                         144       183            --
                                                                ---------------------------------
Total revenues                                                     15,095     1,032            --
Cost of revenues                                                    3,194       614            --
                                                                ---------------------------------
Gross profit                                                       11,901       418            --
Operating expenses:
 Research and development                                           4,550     1,175         1,063
 Sales and marketing                                               20,455     1,488            97
 General and administrative                                         4,177     1,148           360
                                                                ---------------------------------
Total operating expenses                                           29,182     3,811         1,520
                                                                ---------------------------------
Operating loss                                                    (17,281)   (3,393)       (1,520)
Interest income (expense):
 Interest income                                                    1,771       115            15
 Interest expense                                                    (428)      (18)           (5)
                                                                ---------------------------------
                                                                    1,343        97            10
Net loss                                                         $(15,938)  $(3,296)      $(1,510)
                                                                =================================
Net loss per share (Pro forma in 1995)                            $ (0.73)  $ (0.13)
                                                                =======================
Shares used in computing net loss per share (Pro forma in 1995)    21,737    25,863
                                                                =======================
</TABLE>


See accompanying notes.


12 INFOSEEK CORPORATION
<PAGE>   12


BALANCE SHEETS

<TABLE>
<CAPTION>                                              Years Ended December 31,
                                                       -------------------------
(In thousands)                                         1996                 1995
--------------------------------------------------------------------------------
<S>                                                     <C>               <C>
Assets
Current assets:
 Cash and cash equivalents                              $ 3,786           $1,129
 Short-term investments                                  42,867              497
 Accounts receivable, less allowance for doubtful
  accounts of $350 in 1996 and $42 in 1995                2,428              499
 Other current assets                                       371              111
                                                        ------------------------
   Total current assets                                  49,452            2,236
Property and equipment:
 Computer and office equipment                            9,651            3,103
 Furniture and fixtures                                     307               85
 Leasehold improvements                                     108               22
                                                        ------------------------
                                                         10,066            3,210
 Less accumulated depreciation and amortization           2,479              398
                                                        ------------------------
 Net property and equipment                               7,587            2,812
Purchased technology, net of accumulated amortization        --               75
Deposits and other assets                                 1,293               --
                                                        ------------------------
   Total assets                                         $58,332           $5,123
                                                        ========================

Liabilities and Shareholders' Equity
Current liabilities:
 Accounts payable                                       $ 3,269           $1,223
 Accrued payroll and related expenses                     1,362               70
 Accrued royalties                                          311               36
 Other accrued liabilities                                  759              576
 Deferred revenue                                           760               --
 Short-term obligations                                     994              238
                                                        ------------------------
    Total current liabilities                             7,455            2,143
Long-term obligations                                     1,757              688
Maintenance fees due third parties                          135              150
Commitments
Shareholders' equity:
  Preferred stock, no par value:
  Authorized shares -- 5,000
  No shares issued and outstanding                           --               --
Convertible preferred stock, no par
 value:
    Authorized shares --  none in 1996, 27,890 in 1995
    Issued and outstanding shares -- none in 1996,
     15,580 in 1995                                          --            6,695
 Common stock, no par value:
  Authorized shares -- 60,000
  Issued and outstanding shares - 25,691 in 1996,
    4,000 in 1995                                        73,754            2,410
 Accumulated deficit                                    (20,771)          (4,833)
 Deferred compensation                                   (3,546)          (2,080)
 Notes receivable from shareholders                        (452)             (50)
                                                        ------------------------
    Total shareholders' equity                           48,985            2,142
                                                        ------------------------
    Total liabilities and shareholders' equity          $58,332           $5,123
                                                        ========================
</TABLE>


See accompanying notes.

                                                         INFOSEEK CORPORATION 13

<PAGE>   13

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                   Convertible
                                                                  Preferred Stock             Common Stock
(In thousands)                                               ----------------------     ----------------------      Accumulated
                                                                Shares      Amount         Shares      Amount         Deficit
                                                             -----------  ---------     -----------   --------      -----------
<S>                                                          <C>         <C>            <C>           <C>            <C>
BALANCE AT DECEMBER 31, 1993                                    --       $     --            --       $     --       $    (27)
 Issuance of common stock to founders                           --             --         3,780             38             --
 Issuance of Series A convertible preferred
  stock for cash and conversion of note
  payable, net of issuance costs                             6,826            900            --             --             --
 Issuance of Series B convertible preferred
  stock for cash, net of issuance cost                       2,595          1,120            --             --             --
 Exercise of common stock options                               --             --             3             --             --
 Net loss                                                       --             --            --             --         (1,510)
                                                            ------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994                                 9,421          2,020         3,783             38         (1,537)
 Issuance of Series A preferred stock for
  purchased technology                                         559            224            --             --             --
 Repurchase of common stock from founder                        --             --          (155)            (2)            --
 Issuance of Series C convertible preferred
  stock for cash, net of issuance costs                      5,600          4,430            --             --             --
 Issuance of warrants for shares of Series C
  convertible preferred stock                                   --             21            --             --             --
 Issuance of common stock to employee
  for note receivable                                           --             --           372             50             --
 Unearned compensation related to stock options                 --             --            --          2,124             --
 Amortization of unearned compensation
  related to stock options                                      --             --            --             --             --
 Fair value assigned to services provided by Netscape           --             --            --            200             --
 Net loss                                                       --             --            --             --         (3,296)
                                                            ------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995                                15,580          6,695         4,000          2,410         (4,833)
 Cancellation of Series A preferred stock
  issued for purchased technology                             (280)            --            --             --             --
 Unearned compensation related to stock options                 --             --            --          3,102             --
 Amortization of unearned compensation
  related to stock options                                      --             --            --             --             --
 Issuance of Series E convertible preferred
  stock for cash, net of issuance costs                      2,267         17,619            --             --             --
 Repurchases of common stock                                    --             --          (325)            (3)            --
 Issuance of common stock to officer                            --             --           375            300             --
 Issuance of common stock to officers
  for notes receivable                                          --             --           412            610             --
 Cancellation of note receivable and repurchase
  of shares                                                     --             --          (365)          (470)            --
 Payment on shareholders' notes receivable                      --                           --
 Conversion of preferred stock into common
  stock upon the initial public offering                   (17,567)       (24,314)       17,567         24,314             --
 Issuance of common stock in connection
  with initial public offering, net of
  issuance costs                                                --             --         3,973         43,485             --
 Exercise of common stock options                               --             --            54              6             --
 Net loss                                                       --             --            --             --        (15,938)
                                                            ------------------------------------------------------------------
Balance at December 31, 1996                                    --       $     --        25,691       $ 73,754       $(20,771)
                                                           ==================================================================
</TABLE>




<TABLE>
<CAPTION>
                                                                             Notes         Total
                                                                           Receivable   Shareholders'
                                                                Deferred      From         Equity
                                                              Compensation Shareholders   (Deficit)
                                                              ------------ ------------ -------------


<S>                                                           <C>           <C>         <C>
BALANCE AT DECEMBER 31, 1993                                  $    --       $  --       $    (27)
 Issuance of common stock to founders                              --          --             38
 Issuance of Series A convertible preferred
  stock for cash and conversion of note
  payable, net of issuance costs                                   --          --            900
 Issuance of Series B convertible preferred
  stock for cash, net of issuance cost                             --          --          1,120
 Exercise of common stock options                                  --          --             --
 Net loss                                                          --          --         (1,510)
                                                              ---------------------------------------
BALANCE AT DECEMBER 31, 1994                                       --          --            521
 Issuance of Series A preferred stock for
  purchased technology                                             --          --            224
 Repurchase of common stock from founder                           --          --             (2)
 Issuance of Series C convertible preferred
  stock for cash, net of issuance costs                            --          --          4,430
 Issuance of warrants for shares of Series C
  convertible preferred stock                                      --          --             21
 Issuance of common stock to employee
  for note receivable                                              --         (50)            --
 Unearned compensation related to stock options                (2,124)         --             --
 Amortization of unearned compensation
  related to stock options                                         44          --             44
 Fair value assigned to services provided by Netscape              --          --            200
 Net loss                                                          --          --         (3,296)
                                                              ---------------------------------------
BALANCE AT DECEMBER 31, 1995                                   (2,080)        (50)         2,142
 Cancellation of Series A preferred stock
  issued for purchased technology                                  --          --             --
 Unearned compensation related to stock options                (3,102)         --             --
 Amortization of unearned compensation
  related to stock options                                      1,346          --          1,346
 Issuance of Series E convertible preferred
  stock for cash, net of issuance costs                            --          --         17,619
 Repurchases of common stock                                       --          --             (3)
 Issuance of common stock to officer                               --          --            300
 Issuance of common stock to officers
  for notes receivable                                             --        (610)            --
 Cancellation of note receivable and repurchase
  of shares                                                       290         180             --
 Payment on shareholders' notes receivable                         --          28             28
 Conversion of preferred stock into common
  stock upon the initial public offering                           --          --             --
 Issuance of common stock in connection
  with initial public offering, net of
  issuance costs                                                   --          --         43,485
 Exercise of common stock options                                  --          --              6
 Net loss                                                          --          --        (15,938)
                                                              ----------------------------------
BALANCE AT DECEMBER 31, 1996                                  $(3,546)      $(452)      $ 48,985
                                                              ==================================
</TABLE>


See accompanying notes



14 INFOSEEK CORPORATION
<PAGE>   14


STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                  -----------------------------------------------
(In thousands)                                                                    1996                1995                1994
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>               <C>                  <C>
Operating activities
Net loss                                                                         $(15,938)         $(3,296)             $(1,510)
Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation and amortization                                              2,157              438                  109
         Amortization of unearned compensation related to stock options             1,347               44                   --
         Amortization of warrants issued in connection with term loan                  --               21                   --
         Fair value assigned to services provided by Netscape                          --              200                   --
Changes in operating assets and liabilities
         Accounts receivable                                                       (1,929)            (499)                  --
         Other current assets                                                        (260)             (92)                  51
         Accounts payable                                                           2,047            1,211                  (57)
         Accrued payroll and related expenses                                       1,291               67                    4
         Accrued royalties                                                            275               36                   --
         Other accrued liabilities                                                    182              462                  114
         Deferred revenue                                                             760               --                   --
         Maintenance fees due third parties                                           (15)             (60)                 210
                                                                                 ----------------------------------------------
Net cash used in operating activities                                             (10,083)          (1,468)              (1,079)
Investing activities
Purchase of available-for-sale investments                                        (92,966)          (2,483)                  --
Proceeds from sales of available-for-sale investments                              50,596            1,986                   --
Issuance of note receivable                                                          (600)              --                   --
Purchase of property and equipment                                                 (6,857)          (2,829)                (310)
                                                                                 ----------------------------------------------
Net cash used in investing activities                                             (49,827)          (3,326)                (310)
Financing activities
Term loan                                                                           2,573              967                   --
Repayments of term loan                                                              (748)             (40)                  --
Issuance of note payable                                                               --               --                  380
Payment of deposit on term loan                                                      (693)              --                   --
Repayment of note payable                                                              --               --                  (57)
Proceeds from sale of convertible preferred stock, net of issuance costs           17,619            4,430                1,420
Proceeds from sale of common stock, net of issuance costs                          43,785               --                   37
Proceeds from the exercise of stock options                                             6
Proceeds from repayment of notes receivable from shareholders                          28               --                   --
Repurchase of common stock                                                             (3)              (2)                  --
                                                                                 ----------------------------------------------
Net cash provided by financing activities                                          62,567            5,355                1,780
                                                                                 ----------------------------------------------
Net increase in cash and cash equivalents                                           2,657              561                  391
Cash and cash equivalents at beginning of period                                    1,129              568                  177
                                                                                 ----------------------------------------------
Cash and cash equivalents at end of period                                       $  3,786          $ 1,129              $   568
                                                                                 ==============================================
</TABLE>

Supplemental schedule of noncash investing and financing activities
Unearned compensation related to stock options amounted to $3,102 and $2,124 for
the years ended December 31, 1996 and 1995, respectively. Cash paid for interest
expense amounted to $428 and $18 in 1996 and 1995, respectively.

See accompanying notes.

                                                        INFOSEEK CORPORATION  15
<PAGE>   15



NOTES TO FINANCIAL STATEMENTS

1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization  Infoseek (the "Company") develops and provides branded,
comprehensive Web-based navigational services that help users access and
personalize the vast resources of the Internet. The Infoseek Service is a free
service targeted at individual business and consumer users. The Company believes
that the Infoseek Service goes beyond the functionality offered by other search
engines and directory services, by aggregating and packaging the resources of
the Internet to serve the unique and personal interests of each user and create
a rich Internet experience. Infoseek's search engine is able to deliver high
accuracy due to its sophisticated technology that is able to respond to "natural
language" queries.

Cash, Cash Equivalents and Short-Term Investments  Cash and Cash Equivalents --
The Company considers all highly liquid debt instruments which are purchased
with a maturity of three months or less to be cash equivalents.

Short-Term Investments -- The Company accounts for investments in accordance
with Financial Accounting Standards Board, Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Management determines the
appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. The Company's
short-term investments, which consist primarily of commercial paper and
government agency notes with maturities of one year or less, are classified as
available-for-sale, and as such, are carried at fair value with the unrealized
gains and losses, net of tax, reported in a separate component of shareholders'
equity. The amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization, as well as any interest on the securities, is included in interest
income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in interest
income (expense). The cost of securities sold is based on the specific
identification method. The Company had no investments in equity securities at
December 31, 1996 and 1995.

Property and Equipment  Property and equipment are carried at cost less
accumulated depreciation. The Company depreciates property and equipment using
the straight-line method over the estimated useful lives of three to five years.
Leasehold improvements are amortized using the straight-line method over the
shorter of the life of the related asset or the term of the lease.

Research and Development  Research and development expenditures are generally
charged to operations as incurred. Financial Accounting Standards Board,
Statement No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," requires the capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
In the Company's case, capitalization would begin upon completion of a working
model as the Company does not prepare detail program designs as part of the
development process. As of December 31, 1996 and 1995, such capitalizable costs
were insignificant.

Stock-Based Compensation  The Company has elected to follow Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting of Stock Issued to
Employees" and related interpretations, in accounting for its employee stock
options because, as discussed below, the alternative fair value accounting
provided for under Financial Accounting Standards Board, Statement No. 123 (SFAS
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, with the exception of certain options granted during 1996 and 1995 as
discussed in Note 7, because 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 expense is recognized.

Long-Lived Assets  In 1995, the Financial Accounting Standards Board released
the Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS 121 requires
recognition of impairment of long-lived assets in the event the net book value
of such assets exceeds the future undiscounted cash flows attributable to such
assets. SFAS 121 has not had a material impact on the financial statements of
the Company.



16 INFOSEEK CORPORATION
<PAGE>   16
NOTES TO FINANCIAL STATEMENTS


Revenue Recognition  The Company's advertising revenues are derived principally
from short-term advertising contracts in which the Company guarantees a minimum
number of impressions for a fixed fee. Advertising revenues are recognized
ratably over the term of the contract provided that the monthly minimum
impressions are met, the Company does not have any remaining significant
obligations, and collection of the resulting receivable is probable. To the
extent the minimum guaranteed impressions are not met, the Company defers
recognition of the revenue until guaranteed impressions levels are met.

In March 1996 the Company entered into an agreement with NYNEX (a related party,
see Note 11), which was subsequently amended, whereby the Company displays
NYNEX's Big Yellow logo within Ultraseek. The agreement is for a total of
$6,000,000 in monthly payments and runs through May 1998. The Company is
recognizing revenue in connection with this agreement on a straight line basis
over the term of the agreement.

Also included in advertising revenues is the exchange by the Company of
advertising space on the Company's Web sites for reciprocal advertising space in
other media publications or other Web sites or receipt of applicable goods and
services. Revenues from these exchange transactions are recorded as advertising
revenue at the estimated fair value of the goods and services received and are
recognized when both the Company's advertisements and the reciprocal
advertisements are run, or goods or services are received. Advertising revenues
recognized under these trading activities were insignificant during all periods
presented.

The Company has also derived revenues during 1996 and 1995 from fees related to
a premium subscription service offered to business and professional users.
Revenues from this service are recognized over the period the services are
provided. During the third quarter of 1996, the Company discontinued this
service.

Advertising Costs  Advertising costs are recorded as an expense as incurred.
Advertising costs amounted to $4,498,000 for the year ended December 31, 1996.
There were no advertising costs for the years ended December 31, 1995 and 1994.
The Company does not incur any significant direct response advertising costs.

Concentration of Credit Risk  Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments, and trade receivables. The Company places
its cash equivalents and short-term investments with high-quality financial
institutions. Through December 31, 1996 the Company invested its excess cash in
commercial paper. The Company operates in one business segment and sells
advertising to various companies across several industries. The Company
generally does not require collateral. The Company maintains allowances for
credit losses, and such losses have been within management's expectations. For
the year ended December 31, 1996, one customer (a related party, see Note 11)
accounted for 13% of revenues. For the year ended December 31, 1995, another
customer accounted for 13% of revenues.

Net Loss Per Share  The 1996 net loss per share is computed using the weighted
average number of shares of common stock outstanding. Pursuant to the Securities
and Exchange Commission Staff Accounting Bulletins, convertible preferred stock,
redeemable convertible preferred stock, common stock and common equivalent
shares (options and warrants) issued by the Company at prices below the assumed
public offering price during the twelve-month period prior to the offering have
been included in the calculation through March 31, 1996 as if they were
outstanding for all periods presented regardless of whether they are
antidilutive (using the treasury


                                                         INFOSEEK CORPORATION 17
<PAGE>   17
NOTES TO FINANCIAL STATEMENTS


stock method at the public offering price). Net loss per share calculated on
this basis for the years ended December 31, 1995 and 1994 was ($0.20) and
($0.10) based upon 16,163,000 and 15,791,000 shares, respectively. Net loss for
the year ended December 31, 1994 has not been presented in the accompanying
statements of operations pursuant to Securities and Exchange Commission
guidelines.

Pro forma and supplemental net loss per share   Pro forma net loss per share for
the year ended December 31, 1995 has been computed as described above and
also gives effect, even if antidilutive, to common equivalent shares from
preferred stock that automatically converted upon the closing of the Company's
initial public offering (using the as-if-converted method). Supplemental net
loss per share would have been $0.63 for the year ended December 31, 1996,
assuming the convertible preferred stock was converted at the beginning of the
second quarter.

Use of Estimates in the Preparation of Financial Statements   The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenue and expenses during the reporting period. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.

2. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange.


<TABLE>
<CAPTION>
                                                          At December 31, 1996
Cash equivalents and                      -------------------------------------------------
short-term investments (In thousands)                    Gross          Gross
                                           Amortized   Unrealized     Unrealized    Estimated
                                             Cost         Gains        Losses      Fair Value
                                           --------------------------------------------------

<S>                                         <C>           <C>          <C>          <C>
Commercial paper                            $27,588       $  --        $  --        $ 27,588
Government agency notes                      15,279          --           --          15,279
Money market fund                             1,947          --           --           1,947
                                           --------------------------------------------------
Total                                       $44,814       $  --        $  --        $ 44,814
                                           ==================================================
</TABLE>



Cash equivalents and short-term investments at December 31, 1995 consisted
primarily of money market funds and treasury bills. At December 31, 1995, the
fair market value of cash equivalents and short-term investments approximated
cost. Realized gains and losses were insignificant during all periods presented.


3.  PURCHASED TECHNOLOGY

The Company exchanged 559,000 shares of its Series A convertible preferred stock
to license certain technology from ACSIOM under an amended July 1994 Software
Development and Licensing Master Agreement ("ACSIOM Agreement"). In March 1996,
280,000 shares of the previously issued Series A convertible preferred stock
were cancelled under terms contained in the ACSIOM Agreement. The value assigned
to the Series A convertible preferred stock of $224,000 was amortized over 18
months ending June 30, 1996. Amortization expense for the year ended December
31, 1996 and 1995 was $75,000 and $149,000, respectively.


18 INFOSEEK CORPORATION


<PAGE>   18
NOTES TO FINANCIAL STATEMENTS


4. OBLIGATIONS

In 1995 and 1996, the Company entered into term loan agreements with a lending
institution under which the Company borrowed approximately $3,540,000 to finance
the purchase of equipment. Borrowings made under the agreement are due over 37
months, bear interest which ranges from 15.80% to 16.39%, and are secured by
certain assets of the Company. In connection with the 1996 loan agreement, the
Company paid a cash deposit of $693,000 to the lending institution.

Maturities under these agreements as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                                 December 31,
(In thousands)                                                       1996
----------------------------------------------------------------------------
<S>                                                                   <C>
1997                                                                  $  994
1998                                                                   1,270
1999                                                                     487
                                                                     -------
                                                                      $2,751
                                                                     =======
</TABLE>



5.  COMMITMENTS

The Company leases its facilities under operating lease agreements which expire
at various dates through 2004. Total rent expense for the years ended December
31, 1996, 1995 and 1994 was $379,000, $86,000 and $50,000, respectively. Minimum
future rental commitments under these leases as of December 31, 1996 are as
follows:

<TABLE>
<CAPTION>
                                                                  December 31,
(In thousands)                                                        1996
---------------------------------------------------------------------------
<S>                                                                  <C>
1997                                                                 $  543
1998                                                                    469
1999                                                                    260
2000                                                                    196
2001                                                                    143
Thereafter                                                               74
                                                                     ------
                                                                     $1,685
                                                                     ======
</TABLE>


Historically, a large portion of the Company's traffic was derived through the
Web page of Netscape Communications Corporation ("Netscape"). In March 1996,
Infoseek entered into an agreement with Netscape, which provides that Infoseek
will be listed as a Premier Provider on Netscape's Web page for the period from
April 10, 1996 to March 31, 1997. This agreement with Netscape provides for
payments of up to an aggregate of $5,000,000 to Netscape over the course of the
term of the agreement. The payments to Netscape are being recognized ratably
over the term of the agreement. At December 31, 1996, the Company has a
$1,250,000 commitment remaining in connection with this agreement. In March
1997, Infoseek renewed its agreement with Netscape under terms which extend the
current contract through April 1997 and thereafter provide for Infoseek to be
one of five premier providers displayed on Netscape's Web page for the period of
May 1, 1997 through April 30, 1998. Infoseek's agreement with Netscape provides
for payments of up to an aggregate of $12,500,000 to Netscape over the term of
the agreement. See Note 12.


                                                        INFOSEEK CORPORATION  19

<PAGE>   19
NOTES TO FINANCIAL STATEMENTS


6.  SHAREHOLDERS' EQUITY

Convertible Preferred Stock  Through May of 1996 the Company issued Series A
through E convertible preferred stock. A portion of the Series E convertible
preferred stock was redeemable at the request of the holder. On June 11, 1996
the Company completed its initial public offering and at that time all
outstanding shares of convertible preferred stock were converted into common
stock on a one-for-one basis.

Preferred Stock  On May 15, 1996, the Board of Directors authorized 5,000,000
shares of undesignated preferred stock. In connection with this action, the
Board has the authority to issue in one or more series and to fix the rights,
preferences, privileges, and restrictions thereof, without further vote or
action by the shareholders. No such shares have been issued to date.

Common Stock  On May 15, 1996, the Company's Shareholders approved a 3-for-4
reverse stock split of the Company's preferred and common stock. All outstanding
preferred, common and common equivalent shares in the accompanying financial
statements have been retroactively adjusted to give effect to this reverse stock
split. At the same time, the Board of Directors approved the increase of
authorized common stock to 60,000,000 shares.

Founders' Common Stock  The Company has the right, at any time within sixty
days after termination of a founder's employment or service, to repurchase
certain common shares at the price per share paid by the founder. The Company's
right to repurchase lapses with respect to 25% of the total number of shares
held by the founder, commencing twelve months after purchase, and in monthly
increments of 2.08% of the total number of shares thereafter. There were
1,101,000 and 1,629,000 common shares subject to repurchase by the Company at
December 31, 1996 and 1995, respectively.

Shareholders' Notes Receivable  During 1996 and 1995, the Company entered into
agreements with certain officers and an employee to sell 412,000 and 372,000
shares, respectively, of the Company's common stock in exchange for full
recourse promissory notes. The shares are subject to repurchase by the Company,
and such repurchase options lapse in monthly increments of 2.08% of the total
number of shares purchased. At December 31, 1996 and 1995, there were 504,000
and 372,000 common shares, respectively, subject to repurchase by the Company.

Warrants  During 1995, in connection with an equipment financing transaction,
the Company issued warrants to purchase 100,000 shares of Series C convertible
preferred stock at an exercise price of $0.80 per share. These warrants are
exercisable at any time through October 2000. As of December 31, 1996, no
warrants had been exercised. The Company has recorded an insignificant amount of
additional interest expense using the minimum value method to determine the
value of the warrant.

Common Stock Reserved For Future Issuance  Shares of common stock reserved for
future issuance are as follows:


<TABLE>
<CAPTION>
                                                                  December 31,
(In thousands)                                                        1996
--------------------------------------------------------------------------
<S>                                                                   <C>
Convertible preferred stock                                           5,000
Warrants                                                                100
Stock option plan                                                       655
                                                                      -----
                                                                      5,755
                                                                      =====
</TABLE>


20  INFOSEEK CORPORATION


<PAGE>   20
NOTES TO FINANCIAL STATEMENTS


7.  STOCK OPTION/STOCK ISSUANCE PLAN

The Company's Stock Option Plan (the "Predecessor Plan") provides for the grant
of incentive stock options and non statutory stock options to employees and
consultants of the Company at prices ranging from 85% to 110% (depending on the
type of grant) of the fair market value of the common stock on the date of grant
as determined by the Board of Directors.

        In April 1996, the Board of Directors adopted the 1996 Stock
Option/Stock Issuance Plan (the "1996 Plan") which was approved by the
Company's shareholders on May 15, 1996. The 1996 Plan is intended to serve as
the successor equity incentive stock issuance program to the Predecessor Plan.
Under the 1996 Plan, 5,625,000 shares of common stock have been authorized for
issuance. In February 1997, the Board of Directors, subject to shareholders'
approval, approved an increase of 1,600,000 shares to the 1996 Plan. This share
reserve consists of (i) the shares which remained available for issuance under
the Predecessor Plan, including the shares subject to outstanding options
thereunder and the shares otherwise available for future grant, plus (ii) an
additional increase. The 1996 Plan is divided into three separate components:
the Discretionary Option Grant Program under which eligible individuals may be
granted options to purchase shares of common stock at an exercise price of not
less than 85% of their fair market value on the grant date, the Stock Issuance
Program under which eligible individuals may be issued shares of common stock
directly through the purchase of such shares at a price of not less than 85% of
their fair market value at the time of issuance or as a bonus tied to the
performance of services and the Automatic Option Grant Program under which
option grants will automatically be made at periodic intervals to eligible non
employee Board members to purchase shares of common stock at an exercise price
equal to 100% of their fair market value on the grant date.

The vesting and exercise provisions of the option grants are determined by the
Board of Directors. Options generally vest and become exercisable as to 25% of
the shares one year from the date of grant and the balance in monthly increments
over the subsequent three years of service. Options expire no later than seven
years from the date of grant. Options for the purchase of 845,000 and 155,000
shares were exercisable as of December 31, 1996 and 1995, respectively.

The Company has elected to follow APB 25 and related Interpretation in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123, "Accounting for
Stock-Based Compensation," requires use of option valuation models that were not
developed for use in valuing stock options. Under APB 25, because the exercise
price of the Company's stock option equals the market price of the underlying
stock on the date of grant, no compensation expense, other than deferred
compensation, see discussion below, is recognized.

During 1996 and 1995, the Company recorded aggregate deferred compensation of
$5,226,000 representing the difference between the grant price and the deemed
fair value of the Company's common stock granted during those periods. The
amortization of deferred compensation is being charged to operations and is
being amortized over the vesting period of the options, which is typically four
years. For 1996 and 1995, the amortized expenses were $1,346,000 and $44,000,
respectively.

Pro forma information regarding net loss and loss per share is required by SFAS
123, which also requires that the information be determined as if the Company
has accounted for its employee stock options granted subsequent to December 31,
1994 under the fair value method of this statement. The fair value for options
granted subsequent to the Company's initial public offering in June 1996 were
estimated at the date of grant using a Black-Scholes multiple option pricing
model with the following weighted average assumptions: risk-free interest rate
ranging from 5.18% to 6.58% in 1996 and 5.34% to 7.03% in 1995; a dividend yield
of 0.0%; a volatility factor of the expected market price of the Company's
common stock of .80; and a weighted-average expected life of the option of five
years for officers and four years for non officers. The fair value for options
granted prior to the Company's initial public offering in June 1996 were
estimated at the date of grant using the minimum value method and have a
volatility factor of zero.

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 models require the input of highly subjective
assumptions including the


                                                        INFOSEEK CORPORATION 21
<PAGE>   21

NOTES TO FINANCIAL STATEMENTS

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 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.

Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS 123, the Company's net loss and loss
per share would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
(In thousands, except per share data)                    1996       1995
-------------------------------------------------------------------------
<S>                                                    <C>         <C>
Pro forma net loss                                     $17,328     $3,442
Pro forma loss per share                               $  0.80     $ 0.13
</TABLE>

Because SFAS 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effect will not be fully reflected until 1999.

A summary of the Company's stock option activity and related information for the
years ended December 31 is as follows:

<TABLE>
<CAPTION>
                                                      1996                               1995                           1994
                                          -------------------------------------     ------------------------      ----------------
                                                     Weighted-Average               Weighted-Average              Weighted-Average
(In thousands, except per share data)     Options     Exercise Price     Options     Exercise Price   Options      Exercise Price
----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>           <C>             <C>            <C>           <C>
Outstanding - beginning of year            3,074           $0.13           165           $0.07           --           $    --
  Granted                                  2,851           $3.98         3,438           $0.13          186           $   0.06
  Exercised                                  (54)          $0.11            --              --           --                --
  Canceled                                  (957)          $1.51          (529)          $0.11          (20)          $   0.03
Outstanding - end of year                  4,914           $2.10         3,074           $0.13          165           $   0.07
Exercisable at end of year                   845           $0.35           155           $0.13
Weighted-average fair value of
  options granted during the year                          $3.79                         $0.40
                                                           -----------------------------------------------------------------------
</TABLE>

Outstanding and Exercisable By Price Range as of December 31, 1996:
(In thousands, except per share data)

<TABLE>
<CAPTION>
                                 Options Outstanding                                          Options Exercisable
-----------------------------------------------------------------------   --------------------------------------------------------
                                                        Weighted Average
                                                          Remaining                            Number
                              Number Outstanding         Contractual      Weighted Average     Exercisable as of   Weighted Average
Range of Exercise Prices   as of December 31, 1996           Life          Exercise Price      December 31, 1996    Exercise Price
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                    <C>                <C>                    <C>               <C>
   $0.000  -  1.000                   3,051                  5.9                $ 0.19                 757               $0.14
   $1.001  -  3.000                     528                  6.1                $ 1.33                  62               $1.33
   $3.001  -  5.000                     529                  6.2                $ 4.00                  26               $4.00
   $ 5.00  - 10.000                     754                  6.6                $ 8.45                  --                  --
   $10.001 - 15.000                      52                  6.8                $10.13                  --                  --
                                      ---------------------------------------------------------------------------------------------
                                      4,914                  6.0                $ 2.10                 845               $0.35
                                      ---------------------------------------------------------------------------------------------
</TABLE>

22 INFOSEEK CORPORATION
<PAGE>   22
NOTES TO FINANCIAL STATEMENTS

8. EMPLOYEE STOCK PURCHASE PLAN

In April 1996, the Board of Directors adopted the 1996 Employee Stock Purchase
Plan (the "Purchase Plan"), which is designed to allow eligible employees of the
Company to purchase shares of common stock at semiannual intervals through their
periodic payroll deductions. The Company's shareholders approved the Purchase
Plan on May 15, 1996. An aggregate of 187,500 shares of common stock has been
reserved for the Purchase Plan. The Purchase Plan will be implemented in a
series of successive offering periods, each with a maximum duration of 24
months. Eligible employees can have up to 10% (up to a maximum of 1,000 shares
per year) of their base salary deducted that is to be used to purchase shares of
the common stock on specific dates determined by the Board of Directors. The
price of common stock purchased under the Purchase Plan will be equal to 85% of
the lower of the fair market value of the common stock on the commencement date
of each offering period or the specified purchase date. The Company does not
recognize compensation cost related to employee purchase rights under the Plan.
To comply with the pro forma reporting requirements of SFAS 123, compensation
cost is estimated for the fair value of the employees' purchase right using the
Black-Scholes model with the following assumptions (incorporated in the pro
forma information provided in Note 7) for those rights granted in 1996: a risk
free interest rate of 5.0%; dividend yield of 0.0%; expected volatility factor
of .80; an expected life of two years.

INCOME TAXES

Due to the Company's loss position, there was no provision for income taxes for
any period presented.

As of December 31, 1996, the Company has federal and state net operating loss
carry forwards of approximately $20,200,000 and $7,100,000, respectively. The
federal net operating loss carry forwards will expire in the years 2009 through
2011, and the state net operating loss carry forwards will expire in the years
1999 through 2001. The Company has federal and state research and
experimentation credits of approximately $100,000 each, that will expire in the
years 2009 through 2011. Utilization of the net operating losses and credits may
be subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986 and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credits before utilization.

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

<TABLE>
<CAPTION>
                                                         December 31,
                                                --------------------------
(In thousands)                                      1996             1995
--------------------------------------------------------------------------
<S>                                              <C>               <C>
Deferred tax assets:
 Net operating losses                            $ 7,500           $ 1,382
 Research credit carry forwards                      200                42
 Accrued royalties                                    60                83
 Other individually immaterial items                 340               184
                                                 -------           -------
Total deferred tax assets                          8,100             1,691
 Valuation allowance                              (8,100)           (1,691)
                                                 -------           -------
Total net deferred tax assets                    $    --           $    --
                                                 =======           =======
</TABLE>

The change in the valuation allowance was a net increase of approximately
$1,030,000 for the year ended December 31, 1995.

                                                       INFOSEEK CORPORATION  23
<PAGE>   23
NOTES TO FINANCIAL STATEMENTS

10. EMPLOYEE BENEFIT PLAN

In January 1996, the Company adopted a plan to provide retirement and incidental
benefits for its eligible employees, known as the Infoseek Corporation 401(k)
Plan. As allowed under Section 401(k) of the Internal Revenue Code, the plan
provides tax-deferred salary deductions for eligible employees. Participants in
the Plan may make salary deferrals of up to 20% of their annual salary, limited
by the maximum dollar amount allowed by the Internal Revenue Code. The Company,
at its discretion, may elect to make contributions to the Plan on behalf of its
eligible participants. The Company has made no such contributions to date.

11. RELATED PARTY TRANSACTIONS

NYNEX, with a representative on the Company's Board of Directors and ownership
of a substantial amount of the outstanding common stock of the Company is
considered a related party. In March 1996, the Company and NYNEX entered into a
one-year agreement, which provides for the Company's display of the BigYellow
logo, within Ultraseek. According to the terms of the agreement, NYNEX agreed to
pay to the Company up to an aggregate of $4,600,000, in monthly payments. The
Company recognized revenue of $1,882,000 in connection with this agreement
during the year ended December 31, 1996. Amounts receivable from and payable to
such related party were immaterial at December 31, 1996 and 1995. See Note 12.

12. SUBSEQUENT EVENTS

In February of 1997, the Company signed a lease agreement for a 48,000 square
feet facility. In connection with this agreement the Company must take an
additional 13,500 square feet after the first six months and has an option to
add additional space up to a total of 93,000 square feet at this facility. This
facility will be the corporate headquarters and will allow the Company to
consolidate all current corporate facilities into one location. Minimum future
rental commitments under this lease are $768,000 in 1997 and $1,152,000 per year
through 2002.

In February of 1997, the Company has signed an amendment with NYNEX extending
the term of the original agreement through June 1998 in exchange for an
additional $1,400,000 for a total of up to $6,000,000, in monthly payments,
subject to substantially the same terms and conditions as the original
agreement, except for elimination of certain exclusivity and reimbursement
provisions.

In March 1997, the Company and Hoover's, Inc. ("Hoover's") entered into a
strategic agreement which integrates Hoover's Company Information Service and
the Infoseek Service. As part of this relationship, the Company made an equity
investment of $750,000 in Hoover's and received warrants for an equal amount of
Hoover's common stock. The Company has also agreed to make available to Hoover's
a revolving credit loan of up to $250,000. Beginning in March 1997 the Company
will be the exclusive advertising provider to Hoover's advertising- and
subscriber-supported Web sites, including Hoover's Online, IPO Central and
Cyberstocks and is required to pay certain monthly minimums to Hoover's during
the term of the contract. In addition, Infoseek will represent advertising sales
on the Hoover's Business Resource site provided through America Online.

In March 1997 Infoseek and Cable News Network ("CNN") formed a partnership to
feature the Infoseek Service exclusively on CNN's three Web sites -- CNN
Interactive, CNNfn Interactive and AllPolitics -- giving users the ability to
search instantly within CNN's sites or the entire Web for additional information
related to a news story. Under the terms of the agreement, which requires
certain minimum payments over the one year term, an Infoseek button will be
prominently featured on all pages of each of CNN's sites. In addition, most CNN
news stories will include an option to instantly search the Internet, using the
Infoseek Service, for information

24 INFOSEEK CORPORATION
<PAGE>   24
NOTES TO FINANCIAL STATEMENTS

related to the article's subject. As part of the agreement, CNN will also use
Infoseek's search technology within the CNN sites to allow users to search CNN
Interactive, CNNfn Interactive and AllPolitics, and future CNN and Turner
Entertainment Web sites will also feature Infoseek's search and navigation
services.

In March 1997, Infoseek renewed its agreement with Netscape under terms which
extend the current contract through April 1997 and thereafter provides for
Infoseek to be one of five premier providers displayed on Netscape's Web page
for the period of May 1, 1997 through April 30, 1998. Infoseek's agreement with
Netscape provides for payments of up to an aggregate of $12,500,000 to Netscape
over the term of the agreement.

In March 1997, the Company entered into a four year, $5,000,000 equipment term
facility. The loan will bear interest at the bank's prime rate plus 0.25%. Under
the terms of the agreement, the Company grants a first priority security
interest in all assets of the company and must maintain certain financial
covenants including maintaining minimum tangible net worth and others based on
monthly cash equivalence balances. Interest only payments will be made during
the first 12 months and borrowings and interest will be repaid on a
straight-line basis over 36 months beginning in month 13 of the facility.

13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)                                              Three months ended
                                 ------------------------------------------------------------------
                                 March 31, 1996     June 30, 1996   Sept. 30, 1996    Dec. 31, 1996
---------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>              <C>              <C>
Total revenues                       $ 1,731          $ 3,286          $ 4,007          $ 6,071
Cost of revenues                         690              729              827              948
                                     --------------------------------------------------------------
Gross profit                           1,041            2,557            3,180            5,123
Operating expenses:
 Research and development                934              950            1,218            1,448
 Sales and marketing                   2,757            5,566            5,219            6,913
 General and administrative              860              919            1,091            1,307
                                     --------------------------------------------------------------
Total operating expenses             $ 4,551          $ 7,435          $ 7,528          $ 9,668
Operating loss                        (3,510)          (4,878)          (4,348)          (4,545)
Net interest income                      (58)             155              652              594
                                     --------------------------------------------------------------
Net loss                             $(3,568)         $(4,723)         $(3,696)         $(3,951)
                                     ==============================================================
</TABLE>


<TABLE>
<CAPTION>
                                                          Three months ended
                                 ------------------------------------------------------------------
                                 March 31, 1995     June 30, 1995   Sept. 30, 1995    Dec. 31, 1995
---------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>              <C>              <C>
Total revenues                       $     5          $    54          $   278          $   695
Cost of revenues                          79              112              179              244
                                     --------------------------------------------------------------
Gross profit                         $   (74)         $   (58)         $    99          $   451
Operating expenses:
 Research and development                177              195              238              565
 Sales and marketing                      77              244              387              780
 General and administrative               98              155              186              709
                                     --------------------------------------------------------------
Total operating expenses             $   352          $   594          $   811          $ 2,054
                                     --------------------------------------------------------------
Operating loss                          (426)            (652)            (712)          (1,603)
Net interest income                        4               31               45               17
                                     --------------------------------------------------------------
Net loss                             $  (422)         $  (621)         $  (667)         $(1,586)
                                     ==============================================================

</TABLE>






                                                       INFOSEEK CORPORATION 25
<PAGE>   25
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Infoseek Corporation

We have audited the accompanying balance sheets of Infoseek Corporation as of
December 31, 1996 and 1995, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Infoseek Corporation at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.

San Jose, California                                       ERNST & YOUNG LLP
January 28, 1997, except for Note 12 as to which
the date is March 31, 1997

26 INFOSEEK CORPORATION
<PAGE>   26
CORPORATE DATA

STOCK SYMBOL

SEEK

STOCK MARKET

The Company's stock trades on the NASDAQ

STOCK TRADING

The following table sets forth the high and low sales prices since the Company's
initial public offering on June 11, 1996 for each quarter shown, as well as the
closing sales prices on the last trading day of each such quarter. In addition,
the table shows the average daily trading volume for each quarter listed.

<TABLE>
<CAPTION>
                                                                   Shares
1996                                     High     Low     Close    in thousands
-------------------------------------------------------------------------------
<S>                                      <C>      <C>     <C>      <C>
2nd Quarter Ended June 30                16.50    8.88    10       84
3rd Quarter Ended Sept. 30               10.00    5.25     9.13    72
4th Quarter Ended Dec. 31                11.50    7.38     7.75    56
===============================================================================
</TABLE>

                                                         INFOSEEK CORPORATION 27