<PAGE>   1

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

                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For The Fiscal Year Ended September 30, 1997
                         Commission File Number 0-22047
                                  GO2NET, INC.
             (Exact name of Registrant as specified in its charter)

                  DELAWARE                              91-1710182
       (State or other jurisdiction                   (IRS Employer
     of incorporation or organization)             Identification Number)
                                          
             999 THIRD AVENUE, SUITE 4700, SEATTLE, WASHINGTON 98104
          (Address of principal executive offices, including zip code)

                                 (206) 447-1595
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                           COMMON STOCK $.01 PAR VALUE

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

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

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

     The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 15, 1997 was $19,088,002 (based on the last
reported sale price on the Nasdaq SmallCap Market on that date).

     The number of shares outstanding of the registrant's Common Stock as of
December 15, 1997 was 4,506,217.

DOCUMENTS INCORPORATED BY REFERENCE

     Specifically identified information in the definitive Proxy Statement for
the 1998 Annual Meeting of Shareholders to be held on March 12, 1998, is
incorporated by reference into Part III herein.
<PAGE>   2
                                  GO2NET, INC.
                           ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                     PAGE
                                                                                                     ----
                                                      PART I

<S>           <C>                                                                                   <C>
Item 1.       Business.............................................................................    3

Item 2.       Properties...........................................................................    12


Item 3.       Legal Proceedings....................................................................    12

Item 4.       Submission of Matters to a Vote of Security Holders..................................    12

Item 4A.      Executive Officers of the Registrant.................................................    13


                                                      PART II

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters................    13

Item 6.       Selected Financial Data..............................................................    15
Item 7.       Management's Discussion and Analysis of Financial Condition and
              Results of Operation.................................................................    16

Item 8.       Financial Statements and Supplementary Data..........................................    28
Item 9.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure...............................................    40


                                                     PART III

Item 10.      Executive Officers of the Registrant.................................................    40

Item 11.      Executive Compensation...............................................................    40

Item 12.      Security Ownership of Certain Beneficial Owners and Management.......................    40

Item 13.      Certain Relationships and Related Transactions.......................................    40


                                                      PART IV

Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................    40

Signatures.........................................................................................    42
</TABLE>

This Report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including without limitation those discussed in
"Factors Affecting the Company's Business, Operating Results and Financial
Condition" section herein. Such forward-looking statements speak only as of the
date on which they are made, and the Company cautions readers not to place undue
reliance on such statements.


                                       2
<PAGE>   3
                                     PART I

ITEM 1.  BUSINESS

COMPANY OVERVIEW

         go2net, Inc. (the "Company") <URL: http://www.go2net.com/> is an
interactive technology company that operates a group of Web sites and develops
software. MetaCrawler <URL: http://www.metacrawler.com/> is a search/index guide
that combines various existing search/index guides into one guide (a "metasearch
engine"); PlaySite <URL: http://www.playsite.com/> is a Java-based multi-user
games network; and StockSite <URL: http://www.stocksite.com/> offers proprietary
articles, portfolio tracking tools, company research and news relating to
business and finance. The Company focuses on utilizing innovative technologies
to deliver its content and to enhance the attractiveness and utility of its
product offerings.

         Traffic on the Company's Internet sites has increased significantly
since the commercial launch of the Company's first Web site on November 7, 1996
to over thirty million page views and five million visits during the month of
September 1997.

         The Company's Internet sites seek to attract what the Company believes
is the typical Internet user of today (18 to 39 years old, middle- to
upper-middle class and college-educated) and the advertisers wishing to reach
this target market. Since the Company's inception, substantially all of the
Company's revenue have been derived from advertising sales.

         On January 31, 1997, the Company sublicensed from Netbot, Inc.
("Netbot") on an exclusive basis (with certain limited exceptions) MetaCrawler
<URL: http://www.metacrawler.com/>, a metasearch engine developed by the
University of Washington and Netbot, and associated intellectual property rights
(the "MetaCrawler Service"). The MetaCrawler Service is a free World Wide Web
search service which sends search queries to several Web search engines. The
Company integrated the MetaCrawler Service into the Company's product offerings
in March 1997.

         On July 22, 1997, the Company announced that it had formed a multi-user
gaming network through its July 15, 1997 acquisition of PlaySite <URL:
http://www.playsite.com>, a Java-based multi-user games site, and certain gaming
infrastructure technology from Internet Games Corporation. PlaySite is based on
a proprietary, 100% Java, multi-user communication system and game-building
toolkit. Through PlaySite, the Company is focused on developing latency-tolerant
multi-user board, card, trivia, party, adventure and simulation games, as well
as chat, messaging and bulletin boards. The Company also plans to develop
certain proprietary, original games based on the PlaySite technology.

INDUSTRY BACKGROUND

         Growth of the Internet and the World Wide Web

         The Internet is a global collection of thousands of computer networks
interconnected to enable commercial organizations, educational institutions,
government agencies and individuals to communicate electronically, access and
share information, and conduct business. Much of the growth to date in the use
of the Internet by businesses and individuals is due to the emergence of the
World Wide Web. The World Wide Web is a network medium that includes a wide
range of content and activities. Within the World Wide Web there can be found
content such as magazines, news and sports information, radio broadcasts, and
corporate, product, educational, research and political information, as well as
activities such as customer service, electronic commerce, hotel and airline
reservations, banking, games and discussion groups. Electronic documents or "Web
pages," which may contain textual, audio and video information, are published on
the World Wide Web on what is referred to as a "Web site" in a common format.
Users can view and move among these Web pages by using software called "Web
browsers" such as Netscape Navigator or Microsoft Internet Explorer. Users
specify which electronic documents they wish to view with their Web browser by
entering a document's unique electronic Web address, or Universal Resource
Locator ("URL").


                                       3
<PAGE>   4
         Jupiter Communications estimated that in 1995 there were approximately
15 million Internet users. International Data Corporation estimates that the
number of Internet users is projected to reach 199 million users in 1999, of
which 125 million users are estimated to be accessing the World Wide Web.
Net.Genesis estimates that there were approximately 90,000 Web sites in January
1996 compared to approximately 2,700 Web sites in June 1994. The Company
believes that the growth in the number of Internet users and Web sites has been
fueled principally by significant investments by leading technology and computer
software companies, public interest and the potential pervasive effect of the
Internet on virtually every industry. In particular, the existing and increasing
number of personal computers in the workplace and at home, improvements in the
performance and speed of personal computers and modems, the development of
easy-to-use graphical user interfaces, improvements in the network
infrastructure, the enhanced ease of access to the Internet by Internet service
providers, consumer-oriented Internet services and long-distance telephone
companies, the emergence of standards for Internet navigation and information
access and the declining costs of Internet service have all been contributing
factors to the current growth in the use of the Internet and the World Wide Web
by businesses and individuals.

         The Internet and Traditional Media

         The World Wide Web provides the opportunity for Internet technology
application and content providers to create products and services that are
timely, interactive, and offer information in a manner not typically produced by
traditional forms of media. While the print media can be comprehensive with
respect to its subject matter and the television broadcast media is well-suited
to conveying content with a high degree of audio and visual information, each
generally lacks interactivity, and the information provided thereby cannot be
personalized or customized. In addition, the print media lacks the ability to
provide real-time information and the television broadcast media typically
offers only a broad coverage of the subject matter. Web sites can offer the user
archives, related stories and other tools to enhance the attractiveness and
utility of the information received. The World Wide Web also makes it possible
to deliver personalized, real-time information to the user through software
applications that allow the user to customize and manipulate the information
accessed. The delivery of Internet content may be used not only to address a
user's preferences, but also to optimize, among other things, the utility
thereof based on the user's computer hardware, software and bandwidth. The
Company believes that many of the more prominent Web sites have been successful
in creating "virtual communities" by offering the user opportunities to, among
other things, congregate, trade information, make purchases and interact with
the content and/or programs. The Company believes that Web sites that have been
successful in building a "virtual community" among its users have been able to
significantly increase the number of users accessing their particular Web site.

         The Company believes that new technologies developed specifically for
use on the Internet, such as the "Java" programming language developed by Sun
MicroSystems, Inc., will help to fuel continued growth in the use of the
Internet. The Java programming language represents an evolution of languages
such as "C" and "C++." It combines the simplicity of "C" with object oriented
principles found in "C++" and adds, among other things, platform independence
and what the Company believes is an effective security model. In theory, a
computer program written in Java may be run on any operating system, eliminating
the expense and work involved in porting computer code between platforms. Java
also offers security features that enable the safe execution of downloaded
computer code, which has accelerated a shift in distribution models from
shrink-wrapped software to direct electronic delivery via the Internet. Two of
the most widely used Web browsers, Netscape Navigator and Microsoft Internet
Explorer, both employ the use of Java.

         Business Opportunities on the Internet

         The Company believes that the leading Internet technology application
and content providers will benefit from the increasing number of Internet users
since advertisers will more likely advertise on Web sites that demonstrate a
high volume of user traffic and provide advertising programs designed for
specific demographic groups. As a result, the Company believes that a
significant opportunity exists for companies providing unique, niche
technologies, products and services on the Internet. The Company believes that a
significant opportunity exists to exploit certain niches of the Internet user
community by providing search technologies, Java-based games and gaming
technologies, and business and finance content and technology tools, and
commerce opportunities. The Company believes that the Internet market for
advertising will continue to grow in the foreseeable future. According to
Jupiter Communications, the market for Internet-


                                       4
<PAGE>   5
based advertising and sponsorships amounted to approximately $55 million in
1995, and is forecast to grow to approximately $4 billion by the year 2000.

         The Company believes that an important factor in the recognition of the
World Wide Web as a legitimate advertising medium is the ability to direct
advertising to specific user groups, directly distribute targeted information to
users on an individualized basis and receive timely feedback from users. Current
technology allows Web sites to monitor the demographics of their users and
deliver specific information to the advertisers and advertising agencies. The
Company believes that continued improvements in the tools and technologies used
to measure user response to advertisements on the Internet and to track
purchasing decisions should increase the effectiveness and attractiveness of
Internet-based advertising. The emerging model for advertising rates is that
advertisers pay a premium for a targeted audience. The Internet can also provide
the user with direct access to the advertiser with "click-through"
advertisements, where an electronic transaction is capable of occurring
immediately if the advertiser has a Web site capable of conducting sales and
purchases via the Internet. Another perceived advantage of Internet-based
advertising is that such advertising can be evaluated and monitored daily, and
in the future should be capable of being monitored in real-time. If an
Internet-based advertisement is not delivering the anticipated results, an
advertiser can remove the advertisement within a short period of time and
replace it with an advertisement that may be more likely to deliver the desired
results.

         In light of increased growth in the number of Internet users, certain
Internet sites charge a subscription fee for users to access certain of their
products and/or services as an additional revenue source. These subscription
fees are charged to either supplement advertising revenues or as an entirely
separate revenue model. Additionally, the Company believes that the growth of
the Internet and its adaptation to commercial use presents a significant new
opportunity for merchants to reach a wider customer base. However, before
Internet commerce can experience significant growth, consumers, merchants and
financial institutions must be satisfied that the electronic manifestations of
existing payment methods are as safe, convenient and as secure as their current
counterparts. No assurance can be given that such safe, convenient and secure
Internet payments can be developed or, if developed, can be effectively used by,
or be cost efficient for, most Internet users.

STRATEGY

         The inability of the Company to achieve any portion of its strategic
goals may have a material adverse effect on its business, financial condition
and operating results. There can be no assurances that the Company will be able
to achieve any of such goals and, if not so achieved, that it will be able to
develop and implement alternative strategic goals. Key elements in the Company's
strategy include:

         Generate and Sustain a High Volume of Usage. The Company seeks to draw
a large number of users to the Company's Internet sites by generally providing
its products and services to users free of charge and making them as widely
accessible as possible. The Company is also focused on building its brands and
believes its brand building will be a significant contributor to usage growth in
the future.

         Create Innovative Advertising Solutions. The Company believes that the
traffic flow generated on its Web sites provides an attractive platform for
measurable, targeted, cost-effective and interactive advertising on the
Internet. The Company seeks to provide differentiated solutions to advertisers,
helping them exploit the capabilities of the Internet as an advertising medium.
The Company is actively and continually seeking to develop innovative ways for
advertisers to reach their target audiences through the Internet. The Company
designs and offers customized packages that include the ability to change
advertisements quickly and frequently, to target certain demographic groups or
user profiles, to link a specific search term to an advertisement, to sponsor
specific areas, to conduct advertising campaigns with rapid result delivery and
to track daily usage statistics.

         Enhance and Expand the Company's Product Offerings. The Company intends
to enhance its product offerings with additional content, features and
functionality to build and enhance its market position. The Company also plans
to incorporate into its product offerings new technologies developed internally
or licensed from other companies that it believes will further differentiate its
product offerings and provide users with a unique, value-added experience. The
Company plans to pursue integration of subscription and other commerce areas in
its existing and new Web sites.


                                       5
<PAGE>   6
         Provide Original, Compelling and Targeted Sites. The Company's Web
sites focus on what the Company believes are areas that are currently among the
most popular areas of interest on the Internet: search, games, and business and
finance. In addition, the Company believes that the building of a virtual
community for the products and services found on its Internet sites is an
important component in determining who chooses to access its sites.

         Establish Market Awareness and Brand Recognition. The Company believes
that establishing and maintaining the go2net brand is a critical element of its
strategy. In this regard, the Company has placed significant emphasis on
establishing brand identity for its Internet sites and product offerings. The
Company's brand and corporate identity seeks to reflect an Internet company that
provides a unique, well-balanced array of Internet sites and technology
applications. The Company seeks to build and reinforce its brand through
advertising on the Internet; in trade magazines and in other traditional forms
of media; editorial coverage; and a public relations strategy that includes
frequent press releases. The Company believes that by successfully building its
brands, there will be opportunities to expand into new offerings.

         Leverage Strategic Relationships. The Company seeks to leverage its
current resources and infrastructure by entering into strategic relationships
with third party developers of technologies and content. The Company believes
that these relationships will enhance the Company's product offerings while
leveraging the Company's development, sales and marketing resources. The Company
has established relationships with a number of leading information providers and
technology companies with respect to a significant portion of the information
included on the Company's Internet sites. These relationships enable the Company
to complement its proprietary offerings with information developed or compiled
by third parties.

PRODUCTS

         The Company offers various Internet sites, products and services.
Internet users access these sites, products and services directly through the
go2net home page or through the individual homepages of the Company's Internet
sites.

         MetaCrawler. Rated by InfoWorld magazine as the premier search service
on the World Wide Web, MetaCrawler <URL: http://www.metacrawler.com/> continues
to garner popularity and acclaim. In response to every user query, MetaCrawler
incorporates results from the top search engines on the Web. It collates
results, eliminates duplication, scores the results and provides the user with a
single, comprehensive list of sites. MetaCrawler offers a low-bandwidth version,
power-search options, and other customizable features. Additional value-added
features include the MetaCrawler Marketplace, an online shopping center; The
Ultimate Directory, a directory service; MiniCrawler, a small desktop version of
MetaCrawler; and the unique MetaSpy feature, which allows users to view other
users' queries-in-progress. In a December 1997 PC Magazine search engine review,
MetaCrawler received Editor's Choice and Readers' Picks awards.

         PlaySite. PlaySite <URL: http://www.playsite.com/> offers 100% Java,
latency-tolerant, multi-user games that incorporate chat, messaging, tournaments
and player ratings. Currently in development are card games and other multi-user
games to add to PlaySite, which has been recognized as one of the premier Java
gaming sites on the World Wide Web. PlaySite has won editorial awards, and its
technical advances have been recognized by the multi-user gaming industry and
various media outlets, including CNBC, The Web magazine, Yahoo! Internet Life
magazine, P.O.V. magazine, and PC Games magazine.

         StockSite. StockSite <URL: http://www.stocksite.com/> provides
investors with the tools to track their assets - and offers insights into the
financial markets. The Stock Picks area of StockSite focuses on investment
opportunities in small-cap and mid-cap companies. In addition to full research
reports and the Stock Picks virtual portfolio, StockSite features regular
commentary from industry professionals, such as The New York Observer's
Christopher Byron and William Fleckenstein, a nationally-recognized money
manager and frequent CNBC guest. StockSite also offers a customizable Java stock
ticker and research tools: quotes, interactive Java graphs, historical data,
portfolio creation, company news, company profiles, company-earnings estimates
and company filings. StockSite has been the recipient of editorial awards. The
Net magazine in October 1997 awarded StockSite the highest available marks in
all of its review categories.

         Other. The Company also offers go2vision <URL:
http://www.go2net.com/vision/>, which is a Netcaster/Castanet channel (push
technology), and The Useless WWW Pages Web site <URL:
http://www.go2net.com/internet/useless>.


                                       6
<PAGE>   7
STRATEGIC RELATIONSHIPS

         The Company intends to leverage its current development resources and
infrastructure by entering into strategic and licensing relationships with third
party developers of content and technologies. The Company has established
relationships with a number of leading information providers. The Company has
agreements with information providers including S&P Comstock, Dow Jones &
Company, Inc., New York Stock Exchange, Inc., The Nasdaq Stock Market, Inc.,
News Alert, SportsTicker, Edgar Online, Reuters, and Market Guide Inc. The
Company has also established a relationship with InterNAP Network Services,
L.L.C., a Seattle-based private NAP (network access point). The InterNAP
headquarters, where the Company's servers are located, maintains multiple DS-3
circuits with some of the largest Internet service providers. This relationship
helps to maximize the speed and accessibility of the Company's Web sites for
users.

         In January 1997, the Company licensed the MetaCrawler Service from
Netbot. See "- Metacrawler License Agreement."

         The Company also has ongoing advertising barter relationships with
various Internet companies and Web sites, which the Company believes help it
enhance its brand recognition and potentially expand its user base.

REVENUE SOURCES

         Advertisers -- As of December 15, 1997, the Company had relationships
with over 70 cash-paying advertisers, including Microsoft, Hewlett Packard,
AT&T, GTE, QVC, Merrill Lynch, and Charles Schwab. In addition, the Company had
barter arrangement with 4 other advertisers with respect to the trading of
advertisement impressions on each other's Internet site. The typical advertiser
being sought by the Company for its Internet sites is a large corporation or
organization that currently advertises nationally in print, radio, television or
electronic media, in addition to other types of corporations or organizations
that currently advertise in electronic media. The Company seeks to establish
advertising relationships with potential advertisers through its own advertising
sales department and to supplement these efforts from time to time through
national advertising agencies and independent advertising sales agencies. The
pricing strategy is generally based on the number of impressions delivered or
sponsorship of certain areas, with the goal of incentivizing advertisers to sign
long-term agreements. No assurance, however, can be given that such strategy
will result in significant advertising revenues to the Company.

         Subscriptions, Memberships, Licensing, Commerce, and Other
Transactions: The Company believes that there may be possibilities to segment
certain areas on the Company's Internet sites as subscription areas. The Company
is considering plans to offer subscription services in 1998, although there can
be no assurance that the Company will be able to initiate or successfully
operate any subscription areas. The Company also offers for sale products and
services from certain of its advertisers, for which it, in certain cases, gets a
percentage of any revenues generated. There can be no assurance that the Company
will be able to maintain or successfully operate electronic commerce, for itself
or its advertisers, through its Web sites. The Company also seeks to license
certain internally developed technologies in use on the companies Internet sites
to third parties. There can be no assurance that the Company will be able to
successfully license any of such technologies to third parties.

ADVERTISING SALES

         As of December 15, 1997, the Company's advertising sales staff and
advertising sales support staff consisted of twelve full-time employees located
at the Company's executive offices in Seattle, Washington. In addition, the
Company has relationships with two independent advertising sales agencies. The
Company expects that its Internet-based advertising revenues will be derived
from the sale of advertising and sponsorships by the Company's direct sales
department supplemented by independent advertising sales agencies. As of
December 15, 1997, the Company had relationships with over 70 cash-paying
advertisers. While the Company has developed and is implementing the advertising
sales strategy described in this Report, there can be no assurance that such
strategy will be successful in achieving its objectives.

         The Company believes that the sponsorship of Internet-based products
and services will play an increasingly important role in generating advertising
revenues. The World Wide Web is relatively new to 


                                       7
<PAGE>   8
sponsorships, but this concept has been around for almost 50 years in
traditional forms of media, originating back in the days of Kraft Television
Theater (1947) and the Texaco Star Theater (1948) and continuing today through
corporate sponsorship of various forms of entertainment, such as sporting events
and concerts. The Company believes that tasteful, authentic sponsorships will
lead the user to believe that the sponsor is not being forced upon them, but
rather is presenting a value-added product and/or service.

         The Company offers each of its advertisers the opportunity to access
the number of times their advertisements are viewed on a daily basis through a
private, dedicated URL located on the Company's Web servers. The Company
believes that this process makes it easier for the advertiser to monitor the
success of a particular advertisement on a daily basis, and gives the advertiser
more confidence in the accuracy of the number of advertisement impressions
delivered on the Company's Web site. In order to further serve the advertiser,
the Company has from time to time established a page on its Web sites where
users are asked to respond to a short survey in return for the opportunity to
win prizes. The Company believes that the demographic information derived from
such surveys may result in generating more interest in specific sites and
attracting advertiser interest. No assurance, however, can be given that
advertisers will find such surveys of use or value to them.

         Use of the Internet by consumers is at a very early stage of
development, and market acceptance of the Internet as a medium for information,
entertainment, commerce and advertising is subject to a high level of
uncertainty. The Company believes that its success depends upon its ability to
obtain significant revenues from its Internet operations, which will require the
development and acceptance of the Internet as an advertising medium. The Company
believes that most advertisers and advertising agencies have limited experience
with the Internet as an advertising medium and neither advertisers nor
advertising agencies have devoted a significant portion of their advertising
budgets to Internet-related advertising to date. In order for the Company to
generate advertising revenues, advertisers and advertising agencies must direct
a portion of their budgets to the Internet as a whole, and specifically to the
Company's Internet sites. There can be no assurance that advertisers or
advertising agencies will be persuaded, or able, to allocate or continue to
allocate portions of their budgets to Internet-based advertising, or if so
persuaded or able, that they will find Internet-based advertising to be more
effective than advertising in traditional media such as television, print or
radio, or in any event decide to advertise on the Company's Internet sites.
Moreover, there can be no assurance that the Internet advertising market will
develop as an attractive and sustainable medium, that the Company will achieve
market acceptance of its products and services or that the Company will be able
to execute its business strategy successfully. Acceptance of the Internet among
advertisers and advertising agencies will also depend on the level of use of the
Internet by consumers, which is highly uncertain, and on the acceptance of the
alternative new model of conducting business and exchanging information
presented by the Internet. Advertisers and advertising agencies that have
invested resources in traditional methods of advertising may be reluctant to
modify their media buying behavior or their systems and infrastructure to use
Internet-based advertising. Furthermore, no standards to measure the
effectiveness of Internet-based advertising have yet gained widespread
acceptance, and there can be no assurance that such standards will be adopted or
adopted broadly enough to support widespread acceptance of Internet-based
advertising. If Internet-based advertising is not widely accepted by advertisers
and advertising agencies, the Company's business, financial condition and
operating results will be materially adversely affected and the Company may
cease to be a commercially viable enterprise.


MARKETING

         The Company's marketing strategy is to enhance, promote and support a
perception that the Company's Internet sites and product offerings are both
original and compelling. The Company believes that it is necessary to provide
Internet users with products and services that allow them a unique, value-added
experience. To that end, the Company has focused on developing and offering
Internet sites and technologies in areas where it believes it is positioned to
offer unique, value-added products and services. This enhances the ability of
the Company to provide Internet sites that it believes to be both original and
compelling, as well as unique to the Internet medium.

         The Company currently is focusing on a marketing strategy to establish
and maintain the go2net brand that includes informing search/index guides and
information Web sites about the Company's Internet sites; periodic press
releases promoting the Company's Internet sites and new products, services and


                                       8
<PAGE>   9
technologies; important hires and other strategic relationships; and advertising
on Web sites and in trade magazines. In addition, the Company's public relations
strategy includes the development of relationships with various media to
encourage editorial and press coverage.

         The Company believes that having a combination of a strong brand
identity and unique product offerings is an approach that has been successful to
date for certain of the prominent Internet sites. In order to implement its
marketing plan and enhance its development efforts, the Company intends to
routinely gather information regarding the types of products and services that
Internet users seek. The Company intends to monitor users' needs and preferences
primarily by periodically conducting focus groups and encouraging users to
provide input in the form of electronic mail, or soliciting such opinions
through surveys completed in conjunction with contests conducted by the Company.

         Each of these elements of the Company's marketing plan will depend upon
the Company's ability to provide original and compelling products and services,
which cannot be assured. If Internet users do not perceive the Company's
Internet sites to be such, or if the Company introduces new products, services
or Web sites, or enters into new business relationships or strategies that are
not favorably received, the Company would likely be unsuccessful in promoting
and implementing its marketing plan. Furthermore, in order to attract and retain
users and to promote and implement its marketing plan, particularly in response
to competitive pressures, the Company may find it necessary to commit greater
financial and personnel resources to providing its Internet sites or creating or
maintaining its brand recognition. If the Company is unable to provide the
contemplated products and services or otherwise fail to establish and maintain
brand recognition, or if the Company incurs excessive expenses in an attempt to
improve its products and services or implement its marketing plan, the Company's
business, financial condition and operating results would be materially
adversely affected.

RESEARCH AND DEVELOPMENT

         A focus of the Company's research and development efforts is the
enhancement of its technology applications and content through the use of
Java-based software applications. The Company's programming staff devotes a
portion of its time and efforts to the development of Java and other software
applications, which are primarily used in connection with existing Company
Internet sites and offerings. No assurance can be given that the Company will be
able to develop enhancements to its product offerings or develop any new
Java-based software applications, or if so developed, that such enhancements or
applications will be commercially viable. Product development expenses for the
year ended September 30, 1997 and the period from inception through the
Company's year ended on September 30, 1996 were $548,706 and $137,159,
respectively.

COMPETITION

         The market for Internet products and services is highly competitive.
Furthermore, the Company expects the market for Internet advertising to become
intensely competitive as there are no substantial barriers to entry. The Company
believes the principal competitive factors in this market are name recognition,
performance, ease of use, variety of value-added products and services, features
and quality of support.

         The Company competes with other Internet sites for the time and
attention of consumers and for advertising and subscription revenues.
Competition among Internet sites is intense and is expected to increase
significantly in the future. The Company's Internet sites compete against a
variety of companies that provide similar offerings through one or more media,
such as print, radio, television and the Internet. To compete successfully, the
Company must develop and deliver popular, original, entertaining, informative
and compelling product offerings to attract Internet users and to support
advertising and, in the future, subscription fees. In the Company's areas of
focus of search, games, and business and finance, in addition to competing with
numerous newspapers, magazines, television programs and radio broadcasts that
cover the same material, the Company competes with various companies and
Internet sites, such as Starwave Corporation, Microsoft Corporation, c/net,
Inc., America OnLine, Inc., MGM Interactive, Inc., CompuServe, Inc., Prodigy
Services Co., Excite, Inc., Infoseek Corporation, Lycos, Inc., Netscape
Communications Corporation, Time Warner, Inc., PointCast Incorporated, SOFTBANK
Corporation, Yahoo! Inc., SportsLine USA, Inc. and Wired Ventures, Inc. Many, if
not all, of these competitors also offer a wider range of products and services
than does the Company, which products and services may be sufficiently
attractive to Internet users to attract users to their services and,
consequently, dissuade them 


                                       9
<PAGE>   10
from accessing the Company's Internet sites. If the Company is unable to
continue to attract a significant number of Internet users to its Internet
sites, the Company's business, financial condition and operating results will be
materially adversely affected and the Company may cease to be a commercially
viable enterprise.

         The market for Internet-based products and services is relatively new,
intensely competitive and rapidly evolving. There are minimal barriers to entry,
and current and new competitors can launch new Internet sites at relatively low
cost within relatively short time periods. In addition, the Company competes for
the time and attention of Internet users with thousands of non-profit Internet
sites operated by, among other persons, individuals, government and educational
institutions. Existing and potential competitors also include magazine and
newspaper publishers, cable television companies and start-up ventures attracted
to the Internet market. Accordingly, the Company expects competition to persist
and intensify and the number of competitors to increase significantly in the
future. Should the Company seek in the future to attempt to expand the scope of
its product offerings, it will compete with a greater number of Internet sites
and other companies. Because the operations and strategic plans of existing and
future competitors are undergoing rapid change, it is extremely difficult for
the Company to anticipate which companies are likely to offer competitive
products and services in the future. There can be no assurance that the
Company's Internet sites and product offerings will compete successfully.

         The Company believes that the competitive factors attracting Internet
users include the quality of presentation and the relevance, timeliness, depth
and breadth of information and services offered by the Company. With respect to
attracting advertisers and advertising agencies, the Company believes that the
competitive factors include, among others, the number of users accessing the
Company's Internet sites, the demographics of such user base, the Company's
ability to deliver focused and compelling advertising and interactivity through
its Internet sites, and the overall cost-effectiveness and value of advertising
offered by the Company. In addition, the success of the Company's business
strategy depends on the sale of future Internet advertising at premium prices,
based in part on the demographic characteristics of the Company's Internet
users. With respect to attracting subscription-based users in the future, the
Company believes that the competitive factors include, among others, the
quality, uniqueness and usefulness of the product or service provided, the price
charged for such product or service and the cost and accessibility of similar
products and services through the Internet or competing media. Given the intense
competition among Internet sites and other media, there can be no assurance that
the Company will be able to compete successfully with respect to any of these
factors.

         Many, if not all, of the Company's current and potential competitors
have significantly greater financial, editorial, technical and marketing
resources, longer operating histories, greater name recognition, and greater
experience than the Company; and also have established relationships with more
advertisers and advertising agencies. Many, if not all, of such competitors may
be able to undertake more extensive marketing campaigns, adopt more aggressive
advertising and subscription price policies and devote substantially more
resources to developing Internet-based products and services than the Company.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures faced by the
Company will not materially adversely affect the Company's business, financial
condition and operating results. In addition, in response to competitive
pressures, the Company may make certain pricing, business development and/or
marketing decisions, or enter into acquisitions or new ventures that could have
a material adverse effect on the Company's business, financial condition and
operating results.

EMPLOYEES

         As of September 30, 1997, the Company had a total of 23 employees all
of whom were based at the Company's executive offices in Seattle, Washington. Of
the total of 23 employees, 6 were in sales and marketing, 2 were in providing
and editing content for the Internet sites, 6 were in programming, 4 in design,
quality assurance, technical support, documentation and product development, and
5 were in administrative and finance functions. In addition, as of September 30,
1997, the Company had agreements with 7 independent contractors to provide
various services. None of the Company's employees are represented by a labor
union and the Company considers its employee relations to be good.

INTELLECTUAL PROPERTY


                                       10
<PAGE>   11
         The Company is dependent upon obtaining existing technology related to
its operations. To the extent new technological developments are unavailable to
the Company on terms acceptable to it or if at all, the Company may be unable to
continue to implement its business plan and its business, financial condition
and operating results would be materially adversely affected.

         The success of the Company is dependent upon its ability to protect and
leverage the value, if any, of its original Internet technologies, software,
content and its trademarks, trade names, service marks, domain names and other
proprietary rights it either currently has or may have in the future. The
Company has filed service marks for its logo and name, as well as for the names
of each of its Internet sites. In addition, given the uncertain application of
existing copyright and trademark laws to the Internet, there can be no assurance
that existing laws will provide adequate protection for the Company's
technologies, Internet sites or domain names. Policing unauthorized use of the
Company's technologies, content and other intellectual property rights entails
significant expenses and could otherwise be difficult or impossible to do given,
among other things, the global nature of the Internet.

METACRAWLER LICENSE AGREEMENT

         On January 31, 1997, The Company and Netbot entered into the
MetaCrawler License Agreement pursuant to which Netbot granted the Company an
exclusive (subject to certain limited exceptions), worldwide license to provide
the MetaCrawler Service. As part of the MetaCrawler License Agreement, the
Company has the exclusive right to operate, modify and reproduce the MetaCrawler
Service (including, without limitation, the exclusive right to use, modify and
reproduce the name "MetaCrawler" and the MetaCrawler URL in connection with the
operation of the MetaCrawler Service). Netbot licensed the MetaCrawler Service
and the other intellectual property rights associated therewith from the
University of Washington ("UW") on an exclusive basis. The license has been
granted to the Company by Netbot on an exclusive basis, but Netbot has reserved
the right to use, modify, reproduce and license the MetaCrawler search engine
for any purpose other than the provision of the MetaCrawler Service and the
license is subject to the rights of UW to use, modify and reproduce the
MetaCrawler search engine and derivatives of the MetaCrawler site to operate
Internet sites for internal purposes within the UW domain and to use, modify and
reproduce any of the licensed technologies for research, instructional and
academic purposes. The search technology underlying the MetaCrawler Service and
the MetaCrawler trademark is licensed to or owned by Netbot and sublicensed to
the Company pursuant to the MetaCrawler License Agreement. A substantial portion
of the traffic to the Company's Internet sites is currently derived from users
of the MetaCrawler Service. Although the MetaCrawler License Agreement may be
terminated by Netbot only upon a material default by the Company thereunder, the
termination of the MetaCrawler License Agreement could have a material adverse
effect on the Company's business, financial condition and operating results.
Moreover, the termination of the License Agreement between UW and Netbot
relating to Netbot's license of the MetaCrawler Service would result in the
inability of the Company to continue to provide the MetaCrawler Service under
the MetaCrawler License Agreement, which could have a material adverse effect on
the Company's business, financial condition and operating results. In addition,
any failure by the Company to continue the MetaCrawler Service for any reason
could have a material adverse effect on the Company's business, financial
condition and operating results.

         The MetaCrawler License Agreement provided for an initial license fee
of $100,000 to be paid by the Company to Netbot. The Company is also required to
pay Netbot up to $20,000 on a quarterly basis in 1997 if the average daily
queries made through the MetaCrawler Service exceed certain targets. As of
September 30, 1997, all such targets have been exceeded and all such payments
have been made. In the event certain specified search engines remain available
through the MetaCrawler Service after the first anniversary of the date of the
MetaCrawler License Agreement, the Company is required to pay Netbot an
additional fee of $50,000. In addition, commencing on January 1, 1999, the
Company is required to pay to Netbot an annual fee of $25,000. The Company has
agreed to pay Netbot annual royalties based on the Company's gross revenues
received from the MetaCrawler Service, which royalties will be reduced by the
$25,000 minimum annual payment.

PLAYSITE ACQUISITION

         On July 22, 1997, the Company announced that it had formed a multi-user
gaming network through its July 15, 1997 acquisition of PlaySite <URL:
http://www.playsite.com>, a Java-based multi-user games site, and certain gaming
infrastructure technology from Internet Games Corporation for $500,000 in cash
and 16,667 shares of the Company's common stock. PlaySite is based on a
proprietary, 100% Java, 


                                       11
<PAGE>   12
multi-user communication system and game-building toolkit. Through PlaySite, the
Company is focused on developing latency-tolerant multi-user board, card,
trivia, party, adventure and simulation games, as well as chat, messaging and
bulletin boards. The Company also plans to develop certain proprietary, original
games based on the PlaySite technology.

GOVERNMENT REGULATIONS

         As a publisher and a distributor of content over the Internet, the
Company faces potential liability for defamation, negligence, copyright, patent
or trademark infringement and other claims based on the nature and content of
the materials that it publishes or distributes. Such claims have been brought,
and sometimes successfully pressed, against Internet services. In addition, the
Company could be exposed to liability with respect to the content or
unauthorized duplication of material indexed in its search services. Although
the Company carries general liability insurance, the Company's insurance may not
cover potential claims of this type or may not be adequate to indemnify the
Company for all liability that may be imposed. Any imposition of liability that
is not covered by insurance or is in excess of insurance coverage could have a
material adverse effect on the Company's business, financial condition and
operating results.

         As a provider of Internet content, the Company is subject to the
provisions of existing and future United States federal legislation that can be
applied to the Company's undertakings. Although there are currently few laws and
regulations directly applicable to the Internet, it is possible that new laws
and regulations will be adopted covering issues such as, among other things,
privacy, copyrights, obscene or indecent communications and the pricing,
characteristics and quality of Internet-based products and services. The
adoption of restrictive laws and regulations could decrease the growth of the
use of the Internet or expose the Company to significant liabilities associated
with content available on or through the Company's Internet sites or otherwise
cause a material adverse effect on the Company's business, financial condition
and operating results. Application to the Internet of existing laws and
regulations governing issues such as, among other things, property ownership,
libel and personal privacy is also subject to substantial uncertainty.

         The adoption of such laws and regulations and the potential adoption of
new and more restrictive laws and regulations may decrease the growth of the
Internet, which in turn could decrease the attractiveness of the Company's
Internet sites and reduce the demand for advertising thereon. In addition, the
need to monitor and comply with existing and future laws and regulations will
increase the Company's cost of doing business. Moreover, the applicability to
the Internet of existing laws governing issues such as property ownership, libel
and personal privacy is uncertain.

ITEM 2.  PROPERTIES

         The Company's executive offices are located in downtown Seattle,
Washington in an office building in which the Company leases 13,481 square feet
under a sublease that expires in September 2003. The Company believes its office
space will be adequate for its needs for the present and the immediate future.

         The Company's operations are dependent in part upon its ability to
protect against physical damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The Company does not
have a disaster recovery plan or sufficient business interruption insurance to
compensate it for losses that may occur as a result of any of these events. The
occurrence of any of these events could result in interruptions, delays or
cessation in service to users of the Company's Internet sites, which could have
a material adverse effect on the Company's business, financial condition and
operating results.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not currently involved in any legal proceedings that it
believes could have, either individually or in the aggregate, a material adverse
effect on its business or financial condition.

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

         No matters were submitted to a vote of security holders during the last
quarter of the fiscal year ended September 30, 1997.


                                       12
<PAGE>   13
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

         Information required by Item 10 of Form 10-K with respect to executive
officers of the Company is set forth below. Executive officers of the Company
are elected by the Board of Directors on an annual basis and serve until their
successors have been duly elected and qualified. There are no family
relationships among any of the executive officers or directors of the Company.

         The executive officers of the Company are:

<TABLE>
<CAPTION>
         NAME                                                 AGE      POSITION
         ----------------------------------------------------------------------

<S>                                                           <C>      <C>
Russell C. Horowitz.......................................    31       President, Chief Executive Officer, 
                                                                       Chief Financial Officer, and 
                                                                       Chairman of the Board
John Keister..............................................    31       Chief Operating Officer, Director
Paul S. Phillips..........................................    25       Chief Technology Officer
</TABLE>

         RUSSELL C. HOROWITZ IS a founder of the Company and has served as its
President, Chief Executive Officer, Chief Financial Officer and a director since
its inception in February 1996. In March 1996, Mr. Horowitz founded Xanthus
Capital, L.P., a Seattle, Washington-based merchant bank that focuses primarily
on developing companies in emerging growth industries or special situations. Mr.
Horowitz serves as the Chief Executive Officer and a director of Xanthus
Management, L.L.C., the general partner of Xanthus Capital, L.P., and of DMR
Investments, L.L.C., the investment advisor to Xanthus Capital, L.P. In July
1992, Mr. Horowitz was a founder of Active Apparel Group, Inc., a New York, New
York-based apparel supplier. From 1992 until April 1994, Mr. Horowitz served as
its Chief Financial Officer; and from May 1994 until May 1997, Mr. Horowitz
served as its Director of Corporate Development and Investor Relations. Prior to
July 1992, Mr. Horowitz served as a financial advisor to start-up and developing
companies. Mr. Horowitz received a B.A. in Economics from Columbia College of
Columbia University in 1988.

         JOHN KEISTER is a founder of the Company and has served as the
Company's Chief Operating Officer since its inception in February 1996 and since
September 1997 as a director. From 1994 to February 1996, Mr. Keister served as
the President, Chief Operating Officer and a director of ViewCom Technology
International, Inc., a Seattle, Washington-based computer software developer.
From 1992 to 1994, Mr. Keister managed European marketing operations for Dorian
International, Inc., a White Plains, New York-based export management company.
Mr. Keister received a B.A. in International Affairs and Philosophy from
Occidental College in 1989.

         PAUL S. PHILLIPS has served as the Company's Vice President -
Technology since July 1996 and since July 1997 as Chief Technology Officer. Mr.
Phillips is a contributing author of the Internet Security Professional
Reference. In addition, Mr. Phillips has written for Internet Advisor magazine
and is a frequent contributor in numerous technical forums. From September 1990
to May 1996, Mr. Phillips was a student at the University of California at San
Diego. While at the University of California at San Diego, Mr. Phillips served
as lead Web developer and Internet security consultant at Primus Consulting from
July 1994 to August 1995 and as systems administrator of CERFNet and systems
administrator and Webmaster of InterNIC from October 1993 to October 1994. Mr.
Phillips received a B.S. in Computer Science from the University of California
at San Diego in 1996.

PART II

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

         The Common Stock of the Company has traded on the NASDAQ SmallCap
Market under the symbol "GNET" and The Boston Stock Exchange under the symbol
"GO" since the Company's initial public offering on April 23, 1997. Prior to
that time, there was no public market for the Company's Common Stock. The
following table sets forth the high and low last reported sales prices for the
Company's Common Stock for the period indicated as reported by the NASDAQ
SmallCap Market.


                                       13
<PAGE>   14
<TABLE>
<CAPTION>
              FISCAL QUARTER ENDED                                         HIGH         LOW
              -----------------------------------------------------------------------------

<S>                                                                        <C>          <C>
              June 30, 1997 (commencing April 23, 1997)                    11           5 1/4
              September 30, 1997                                           9 13/16      5 5/8
              December 31, 1997 (through December 15, 1997)                10 1/4       7 1/16
</TABLE>

         As of December 15, 1997, the Company had 4,506,217 shares of Common
Stock outstanding held by approximately 68 shareholders of record. This does not
reflect persons or entities who hold their stock in nominee or "street" name
through various brokerage firms.

         The Company has not paid dividends on its Common Stock. The Company
anticipates it will continue to reinvest earnings to finance future growth, and
therefore does not intend to pay dividends in the foreseeable future.


                                       14
<PAGE>   15
ITEM 6:           SELECTED FINANCIAL DATA

         The following table sets forth financial data and other operating
information of the Company. The selected financial data presented in the table
is derived from the financial statements of the Company, which have been audited
by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and Notes thereto
included elsewhere in this Report.

<TABLE>
<CAPTION>
------------------------------------------------------  --------------------------  -------------------------
                                                                                             PERIOD
                                                                                         FROM INCEPTION
                                                               YEAR ENDED             (FEBRUARY 12, 1996)
                                                           SEPTEMBER 30, 1997        TO SEPTEMBER 30, 1996
------------------------------------------------------  --------------------------  -------------------------
STATEMENT OF OPERATIONS DATA:                                                      
------------------------------------------------------  --------------------------  -------------------------
<S>                                                     <C>                         <C>      
Revenues                                                                 $254,389                  $       0
------------------------------------------------------  --------------------------  -------------------------
Cost of revenues                                                          180,253                          0
------------------------------------------------------  --------------------------  -------------------------
Operating expenses:                                                                
         Advertising and marketing                                         77,958                     10,150
         Product development                                              548,706                    137,159
         General and administrative                                     1,436,224                    283,832
                                                                      -----------                  ---------
                  Total operating expenses                              2,062,888                    431,141
                                                                      -----------                  ---------
------------------------------------------------------  --------------------------  -------------------------
Loss from operations                                                   (1,988,752)                  (431,141)
------------------------------------------------------  --------------------------  -------------------------
Interest income                                                           270,072                     13,383
                                                                      -----------                  ---------
------------------------------------------------------  --------------------------  -------------------------
Net loss                                                              $(1,718,480)                 $(417,757)
                                                                      ===========                  =========
------------------------------------------------------  --------------------------  -------------------------
Net loss per share                                                   $      (0.50)              $      (0.16)
------------------------------------------------------  --------------------------  -------------------------
Shares used in computing net loss per share (1)                         3,464,489                  2,548,680
------------------------------------------------------  --------------------------  -------------------------
                                                                                   
------------------------------------------------------  --------------------------  -------------------------
</TABLE>                                                                   


<TABLE>
<CAPTION>
------------------------------------------------------  --------------------------  -------------------------
                                                              SEPTEMBER 30,              SEPTEMBER 30,
                                                                  1997                        1996
                                                                  ----                        ----
------------------------------------------------------  --------------------------  -------------------------
BALANCE SHEET DATA:                                                                
------------------------------------------------------  --------------------------  -------------------------
<S>                                                      <C>                        <C>       
Cash and cash equivalents                                           $  10,891,801                 $  865,742
------------------------------------------------------  --------------------------  -------------------------
Working capital                                                        10,910,894                    828,860
------------------------------------------------------  --------------------------  -------------------------
Total assets                                                           12,619,714                  1,066,241
------------------------------------------------------  --------------------------  -------------------------
Total liabilities                                                         185,393                     45,098
------------------------------------------------------  --------------------------  -------------------------
Stockholders' equity                                                   12,434,321                  1,021,143
------------------------------------------------------  --------------------------  -------------------------
                                                                                   
------------------------------------------------------  --------------------------  -------------------------
</TABLE>                                                                    

(1)  Net loss per share is calculated using the weighted average number of
     shares of Common Stock outstanding during such period. See Note 1 to
     Financial Statements.


                                       15
<PAGE>   16
ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         THE MATTERS DISCUSSED IN THIS REPORT CONTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "FACTORS
AFFECTING THE COMPANY'S BUSINESS OPERATING RESULTS AND FINANCIAL CONDITION" AS
WELL AS THOSE DISCUSSED IN THIS SECTION AND ELSEWHERE IN THIS REPORT.

OVERVIEW

         The Company was incorporated on February 12, 1996 and is an interactive
technology company that operates a group of Web sites and develops software.
MetaCrawler <URL: http://www.metacrawler.com/> is a search/index guide that
combines various existing search/index guides into one guide (a "metasearch
engine"); PlaySite <URL: http://www.playsite.com/> is a Java-based multi-user
games network; and StockSite <URL: http://www.stocksite.com/> offers proprietary
articles, portfolio tracking tools, company research and news relating to
business and finance. The Company focuses on utilizing innovative technologies
to deliver its content and to enhance the attractiveness and utility of its
product offerings. For the fiscal year ended September 30, 1997, approximately
64% of the Company's revenues were generated from non-cash barter transactions.

         The Company has an extremely limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company
anticipates that advertising revenues from the Company's Internet sites will
constitute substantially all of the Company's revenues during the foreseeable
future. Because the Company anticipates that its operations will incur
significant operating losses for the foreseeable future, the Company believes
that its success will depend upon its ability to obtain revenues from
advertising on its Internet sites, which cannot be assured. The Company's
ability to generate revenues is subject to substantial uncertainty. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by start-up companies in general, and
specifically with respect to the new and rapidly evolving market for
Internet-based products and services. To address these risks, the Company must,
among other things, effectively establish, develop and maintain relationships
with advertising customers, advertising agencies and other third parties,
provide original and compelling products and services to Internet users, develop
and upgrade its technology, respond to competitive developments, attract new
qualified personnel and retain existing qualified personnel. There can be no
assurance that the Company will succeed in addressing such risks and the failure
to do so would have a material adverse effect on the Company's business,
financial condition and operating results. Additionally, the Company's lack of
an extensive operating history makes prediction of future operating results
difficult. Accordingly, there can be no assurance that the Company will be able
to generate significant revenues or that the Company will achieve, or maintain,
profitability or generate revenues from operations in the future. Since
inception, the Company has incurred significant losses and, as of September 30,
1997, had an accumulated deficit of $2,136,327. The Company currently intends to
increase substantially its operating expenses in order to, among other things,
expand and improve its Internet operations, fund increased advertising and
marketing efforts, expand and improve its Internet user support capabilities and
develop new Internet technologies, applications and other products and services.
The Company expects to continue to incur significant losses on a quarterly and
annual basis for the foreseeable future. To the extent such increases in
operating expenses are not offset by revenues, the Company will incur greater
losses than anticipated.

         The Company's quarterly operating results may fluctuate significantly
as a result of a variety of factors, many of which are outside of the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include the level of use of the Internet, demand for advertising,
seasonal trends in both Internet use and advertising placements, the addition or
loss of advertisers, advertising budgeting cycles of individual advertisers, the
level of use of the Company's Internet sites, the amount and timing of capital
expenditures and other costs relating to the development, operation and
expansion of the Company's Internet operations, the introduction of new sites
and services by the Company or its competitors, price competition or pricing
changes in the industry, technical difficulties or system failures, general
economic conditions and economic conditions specific to the Internet and
Internet media. In seeking to effectively execute its operating strategy, the
Company may elect from time to time to make certain advertising and marketing or
acquisition decisions that could have a material adverse effect on the Company's
business, financial condition and operating results. The Company believes that
period to period 


                                       16
<PAGE>   17
comparisons of its operating results are not meaningful and should not be relied
upon for an indication of future performance. Due to all of the foregoing
factors, it is likely that in some future quarters, the Company's operating
results may be below the expectations of public market analysts and
stockholders. In such event, the price of the Company's Common Stock would
likely be materially adversely affected.

RESULTS OF OPERATIONS

         REVENUES

         For the year ended September 30, 1997, the Company generated revenues
of $254,389, of which $90,999 represented cash revenues from advertising sales
and $163,390 represented barter transaction revenues. The Company did not launch
its initial Internet site until November 7, 1996 at which time it was still in
the process of evaluating the technical features of the site.

         COST OF REVENUES

         For the year ended September 30, 1997, the Company incurred $180,253 in
costs associated with barter transactions, commissions and royalties, of which
$163,390 represented barter transaction expenses. There can be no assurance that
the Company will be able to generate sufficient revenues, advertising or
otherwise, to cover its costs of revenues. The failure to generate sufficient
revenues in order to cover its costs of revenues will result in continued losses
and will have a material adverse effect on the Company's business, financial
condition and operating results.

         OPERATING EXPENSES

         Advertising and Marketing. Advertising and marketing expenses consist
primarily of public relations, travel and costs of marketing literature.
Advertising and marketing expenses incurred by the Company for the year ended
September 30, 1997 and the period from inception through the Company's year
ended September 30, 1996 were $77,958 and $10,150, respectively. The Company
intends to significantly increase its advertising and marketing expenses in
future periods.

         Product Development. Product development expenses consist of expenses
incurred by the Company in the development and creation of its Internet sites
and product offerings. Product development expenses include compensation and
related expenses, costs of computer hardware and software, and the cost of
acquiring, designing, and developing Internet technologies, products and
services. All of the costs incurred to date in connection with the development
of the Company's Internet sites have been expensed. Product development expenses
incurred by the Company for the year ended September 30, 1997 and the period
from inception through the Company's year ended September 30, 1996 were $548,706
and $137,159, respectively. The Company believes that significant investments in
enhancing its Internet sites and product offerings will be necessary to be
competitive. As a result, the Company may continue to incur, or increase the
level of, product development expenses.

         General and Administrative. General and administrative expenses consist
primarily of compensation not otherwise attributable to development expenses,
rent expense, fees for professional services and other general expenses. General
and administrative expenses incurred by the Company for the year ended September
30, 1997 and the period from inception through the Company's year ended
September 30, 1996 were $1,436,224 and $283,832, respectively. The Company
expects general and administrative expenses to significantly increase in future
periods as a result of, among other things, the additional costs of being a
public company.

         Interest Income. The increase in interest income is due to the funds
available for investment as a result of the Company's initial public offering.
Interest income for the year ended September 30, 1997 and the period of
inception through the Company's year ended September 30, 1996 was $270,272 and
$13,383, respectively.

         Income Taxes. The Company has not recorded an income tax benefit
because it has incurred net operating losses since its inception. As of
September 30, 1997, the Company had Federal net operating loss carry forwards of
approximately $2,130,000. The Federal net operating loss carry forwards will
expire beginning in 2011 if not utilized. Utilization of the net operating
losses and credits may be subject to a 


                                       17
<PAGE>   18
substantial annual limitation due to the ownership change limitations provided
in the Internal Revenue Code of 1986, as amended, and similar state provisions.
See Note 3 of Notes to Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

         At September 30, 1997, the Company's principal source of liquidity was
$10,891,801 in cash and cash equivalents derived primarily from the Company's
initial public offering in April and May 1997, in which it issued 1,840,000
shares of its Common Stock to the public at a price of $8.00 per share. The
Company received approximately $12.8 million in cash, net of underwriting
discounts, commissions and other offering costs. As of September 30, 1997, the
Company also had a $750,000 revolving line of credit with a commercial bank,
which on December 13, 1997 was amended to a $1,000,000 revolving line of credit
that expires on December 13, 1998. All borrowings under such line of credit
accrue interest at such bank's prime annual lending rate plus 1%. As of
September 30, 1997, no borrowings were outstanding under this line of credit.
The Company has primarily financed its operations through the sale of equity
securities.

         Capital expenditures were $448,318 and $197,202 for the year ended
September 30, 1997 and the period from inception through the Company's year
ended September 30, 1996, respectively. The Company has no material commitments
for capital expenditures other than approximately $100,000 relating to the
purchase of computer hardware and software. The Company anticipates a
substantial increase in its capital expenditures in 1998 consistent with its
anticipated growth.

         The Company currently believes that available funds, cash flows
expected to be generated from operations, if any, and the existing line of
credit will be sufficient to fund its working capital and capital expenditures
requirements for at least the next twelve months. Thereafter, the Company may
need to raise additional funds. The Company's ability to grow will depend in
part on the Company's ability to expand and improve its Internet operations,
expand its advertising and marketing efforts, expand and improve its Internet
user support capabilities and develop new Internet-based products and services.
In connection therewith, the Company may need to raise additional capital in the
foreseeable future from public or private equity or debt sources in order to
finance such possible growth. In addition, the Company may need to raise
additional funds in order to avail itself to unanticipated opportunities (such
as more rapid expansion, acquisitions of complementary businesses or the
development of new products or services), to react to unforeseen difficulties
(such as the loss of key personnel or the rejection by Internet users or
potential advertisers of the Company's Internet products and services) or to
otherwise respond to unanticipated competitive pressures. If additional funds
are raised through the issuance of equity securities, then the percentage
ownership of the Company's then existing stockholders will be reduced,
stockholders may experience additional and significant dilution and such equity
securities may have rights, preferences or privileges senior to those of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms acceptable to the Company or at all. If adequate funds are
not available or are not available on terms acceptable to the Company, the
Company may be unable to implement its business, sales or marketing plan,
respond to competitive forces or take advantage of perceived business
opportunities, which could have a material adverse effect on the Company's
business, financial condition and operating results.

FACTORS AFFECTING THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION

         Extremely Limited Operating History; Accumulated Deficit; Anticipated
Losses. The Company was incorporated in February 1996 and as of September 30,
1997 had generated only $90,999 in cash revenues from advertising sales. The
Company has an extremely limited operating history upon which an evaluation of
the Company and its prospects can be based. The Company anticipates that
advertising revenues from the Company's Internet sites will constitute
substantially all of the Company's revenues, if any, during the foreseeable
future. Since the Company anticipates that its operations will incur significant
operating losses for the foreseeable future, the Company believes that its
success will depend upon its ability to obtain revenues from advertising on its
Internet sites, which cannot be assured. The Company's ability to generate
revenues is subject to substantial uncertainty. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by start-up companies in general, and specifically with respect to
the new and rapidly evolving market for Internet-based products and services. To
address these risks, the Company must, among other things, effectively
establish, develop and maintain relationships with advertising customers,
advertising agencies and other third parties, provide original and compelling
products and services to Internet users, develop and upgrade its technology,


                                       18
<PAGE>   19
effectively respond to competitive developments, attract new qualified personnel
and retain existing qualified personnel. There can be no assurance that the
Company will succeed in addressing such risks and the failure to do so would
have a material adverse effect on the Company's business, financial condition
and operating results. Additionally, the Company's lack of an extensive
operating history makes prediction of future operating results difficult.
Accordingly, there can be no assurance that the Company will be able to generate
significant revenues or that the Company will achieve, or maintain,
profitability or generate revenues from operations in the future. Since
inception, the Company has incurred significant losses and, as of September 30,
1997, had an accumulated deficit of $2,136,327. The Company currently intends to
increase substantially its operating expenses in order to, among other things,
expand and improve its Internet operations, fund increased advertising and
marketing efforts, expand and improve its Internet user support capabilities and
develop new Internet technologies, products and services. The Company expects to
continue to incur significant losses on a quarterly and annual basis for the
foreseeable future.

         Unpredictability of Future Revenues; Potential Fluctuations in
Quarterly Operating Results. As a result of the Company's extremely limited
operating history and the emerging nature of the Internet, including
Internet-based advertising, subscription services and electronic commerce, the
Company is unable to forecast its expenses and revenues accurately. The Company
believes that due primarily to the relatively brief time the Internet has been
available to the general public, there has not yet been developed, implemented
and demonstrated a commercially viable business model from which to successfully
operate any form of Internet-based product and/or service business. The
Company's current and future estimated expense levels are based largely on its
estimates of future revenues and may increase because many of its significant
operating expenses are either fixed, such as rent for office space, or subject
to likely increases. Few, if any, of the Company's operating expenses can be
quickly or easily reduced, such as the laying off of personnel, in a manner
which would not cause a material adverse effect to the Company's business,
financial condition and operating results. In addition, the Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
expenditures; and a shortfall in actual revenues as compared to estimated
revenues would have an immediate material adverse effect on the Company's
business, financial condition and operating results.

         The Company's quarterly operating results may fluctuate significantly
as a result of a variety of factors, many of which are outside of the Company's
control. For example, the Company believes that advertising sales in traditional
media are generally lower in the first and third calendar quarters of each year
than in the second and fourth quarters and that advertising expenditures
fluctuate significantly with economic cycles. Depending on the extent to which
the Internet is accepted as an advertising medium, seasonality and cyclicality
in the level of advertising expenditures generally could become more pronounced
for Internet-based advertising. Seasonality and cyclicality in advertising
expenditures generally, or with respect to Internet-based advertising
specifically, could have a material adverse effect on the Company's business,
financial condition and operating results. Other factors that may adversely
affect the Company's quarterly operating results include the level of use of the
Internet, demand for advertising, seasonal trends in both Internet use and
advertising placements, the addition or loss of advertisers, advertising
budgeting cycles of individual advertisers, the level of use of the Company's
Internet sites, the amount and timing of capital expenditures and other costs
relating to the development, operation and expansion of the Company's Internet
operations, the introduction of new Internet sites, products and services by the
Company or its competitors, price competition or pricing changes in the
industry, technical difficulties or system failures, general economic conditions
and economic conditions specific to the Internet and Internet media. In seeking
to effectively execute its operating strategy, the Company may elect from time
to time to make certain advertising and marketing or acquisition decisions that
could have a material adverse effect on the Company's business, financial
condition and operating results. The Company believes that period to period
comparisons of its operating results are not meaningful and should not be relied
upon for an indication of future performance. Due to all of the foregoing
factors, it is likely that in some future quarters, the Company's operating
results may be below the expectations of public market analysts and
stockholders. In such event, the price of the Company's Common Stock would
likely be materially adversely affected.

         Dependence on Advertising Revenues. The Company expects to derive
substantially all of its revenues in the foreseeable future from the sale of
advertising on its Internet sites. As of September 30, 1997, the Company had
generated only $90,999 in cash revenues from advertising sales. Many of the
Company's relationships with advertisers are terminable within a short period of
time. Consequently, the Company's advertising customers may move their
advertising to competing Internet sites, or from the Internet to traditional
media, quickly and at relatively low costs, thereby increasing the Company's
exposure 


                                       19
<PAGE>   20
to competing pressures and fluctuations in revenues and operating results. In
selling Internet-based advertising, the Company will likely depend on
advertising agencies, which exercise substantial control over the placement of
advertising for their clients. The Company's success will depend on its ability
to convince advertisers and advertising agencies of the benefits of advertising
on the Company's Internet sites, and on its ability to retain, broaden and
diversify its future base of advertising customers. In order to generate
significant advertising revenues, the Company will depend on the development of
a larger base of users of the Company's Internet sites possessing demographic
characteristics attractive to advertisers. If the Company is unable to attract
and retain paying advertising customers or is forced to offer lower than
anticipated advertising rates in order to attract and/or retain advertising
customers, the Company's business, financial condition and operating results
will be materially adversely affected and the Company may cease to be a
commercially viable enterprise.

         Uncertain Acceptance of the Internet as an Advertising Medium; Lack of
Measurement Standards. Use of the Internet by consumers is at a very early stage
of development and market acceptance of the Internet as a medium for
information, entertainment, commerce and advertising is subject to a high level
of uncertainty. The Company believes that its success depends upon its ability
to obtain significant revenues from its Internet operations, which will require
the development and acceptance of the Internet as an advertising medium. The
Company believes that most advertisers and advertising agencies have limited
experience with the Internet as an advertising medium and neither advertisers
nor advertising agencies have devoted a significant portion of their advertising
budgets to Internet-related advertising to date. In order for the Company to
generate advertising revenues, advertisers and advertising agencies must direct
a portion of their budgets to the Internet as a whole, and specifically to the
Company's Internet sites. There can be no assurance that advertisers or
advertising agencies will be persuaded, or able, to allocate or continue to
allocate portions of their budgets to Internet-based advertising, or if so
persuaded or able, that they will find Internet-based advertising to be more
effective than advertising in traditional media such as television, print or
radio, or in any event decide to advertise on the Company's Internet sites.
Moreover, there can be no assurance that the Internet advertising market will
develop as an attractive and sustainable medium, that the Company will achieve
market acceptance of its products or that the Company will be able to execute
its business strategy successfully.

         Acceptance of the Internet among advertisers and advertising agencies
will also depend on the level of use of the Internet by consumers, which is
highly uncertain, and on the acceptance of the alternative new model of
conducting business and exchanging information presented by the Internet.
Advertisers and advertising agencies that have invested resources in traditional
methods of advertising may be reluctant to modify their media buying behavior or
their systems and infrastructure to use Internet-based advertising. Furthermore,
no standards to measure the effectiveness of Internet-based advertising have yet
gained widespread acceptance, and there can be no assurance that such standards
will be adopted or adopted broadly enough to support widespread acceptance of
Internet-based advertising. If Internet-based advertising is not widely accepted
by advertisers and advertising agencies, the Company's business, financial
condition and operating results will be materially adversely affected and the
Company may cease to be a commercially viable enterprise.

         Uncertain Acceptance of the Company's Internet Products and Services.
The Company's commercial viability depends in large part upon its ability to
develop and provide on the Internet original and compelling products and
services that will successfully attract and retain users with demographic
characteristics valuable to the various advertisers and advertising agencies the
Company is targeting and, in the future, to charge users a subscription fee for
access to certain portions of such products and services. There can be no
assurance that the Company's products and services will be attractive enough to
a sufficient number of Internet users to generate advertising revenues or to
allow the charging of a subscription fee for certain portions thereof. There
also can be no assurance that the Company will be able to anticipate, monitor
and successfully respond to rapidly changing consumer tastes and preferences so
as to attract a sufficient number of users to its Internet sites within the
demographics desirable to advertisers and advertising agencies or those users
who are otherwise willing to pay to access certain portions of the Company's
products and services. Internet users can freely navigate and instantly switch
among a large number of Internet sites, many of which offer competitive products
and services, making it difficult for the Company to distinguish its product
offerings and attract users. In addition, many other Internet sites offer very
specific, highly targeted products and services that may have greater appeal
than the products and services offered on the Company's Internet sites. In
addition, users of the Internet who do not use the most recent browser or
operating platform software will have greater difficulty in accessing and
navigating the Company's Internet sites than would users who use the most recent
versions of such software. Such 


                                       20
<PAGE>   21
difficulty could cause Internet users to cease using the Company's Internet
sites. If the Company is unable to develop original and compelling
Internet-based products and services in a manner that allows it to attract,
retain and expand a loyal user base desirable to advertisers and advertising
agencies or Internet users who are willing to pay to access certain portions of
such Internet-based products and services, then the Company will be unable to
generate sufficient advertising or subscription revenues, and its business,
financial condition and operating results will be materially adversely affected
and the Company may cease to be a commercially viable enterprise.

         Competition. The Company competes with other Internet sites for the
time and attention of consumers and for advertising and subscription revenues.
Competition among Internet sites is intense and is expected to increase
significantly in the future. The Company's Internet sites compete against a
variety of companies that provide similar offerings through one or more media,
such as print, radio, television and the Internet. To compete successfully, the
Company must develop and deliver popular, original, entertaining, informative
and compelling product offerings to attract Internet users and to support
advertising and, in the future, subscription fees. In the Company's areas of
focus of search, games, and business and finance, in addition to competing with
numerous newspapers, magazines, television programs and radio broadcasts that
cover the same material, the Company competes with various companies and
Internet sites, such as Starwave Corporation, Microsoft Corporation, c/net,
Inc., America OnLine, Inc., MGM Interactive, Inc., CompuServe, Inc., Prodigy
Services Co., Excite, Inc., Infoseek Corporation, Lycos, Inc., Netscape
Communications Corporation, Time Warner, Inc., PointCast Incorporated, SOFTBANK
Corporation, Yahoo! Inc., SportsLine USA, Inc. and Wired Ventures, Inc. Many, if
not all, of these competitors also offer a wider range of products and services
than does the Company, which products and services may be sufficiently
attractive to Internet users to attract users to their services and,
consequently, dissuade them from accessing the Company's Internet sites. If the
Company is unable to continue to attract a significant number of Internet users
to its Internet sites, the Company's business, financial condition and operating
results will be materially adversely affected and the Company may cease to be a
commercially viable enterprise.

         Low Barriers to Entry. The market for Internet-based products and
services is relatively new, intensely competitive and rapidly evolving. There
are minimal barriers to entry, and current and new competitors can launch new
Internet sites at a relatively low cost within relatively short time periods. In
addition, the Company competes for the time and attention of Internet users with
thousands of non-profit Internet sites operated by, among other persons,
individuals, government and educational institutions. Existing and potential
competitors also include magazine and newspaper publishers, cable television
companies and start-up ventures attracted to the Internet market. Accordingly,
the Company expects competition to persist and intensify and the number of
competitors to increase significantly in the future. Should the Company seek in
the future to attempt to expand the scope of its Internet sites and product
offerings, it will compete with a greater number of Internet sites and other
companies. Because the operations and strategic plans of existing and future
competitors are undergoing rapid change, it is extremely difficult for the
Company to anticipate which companies are likely to offer competitive products
and services in the future. There can be no assurance that the Company's
Internet sites will compete successfully.

         Competitive Factors. The Company believes that the competitive factors
attracting Internet users include, among others, the quality of presentation and
the relevance, timeliness, depth and breadth of information and services offered
by the Company. With respect to attracting advertisers and advertising agencies,
the Company believes that the competitive factors include, among others, the
number of users accessing the Company's Internet sites, the demographics of such
user base, the Company's ability to deliver focused and compelling advertising
and interactivity through its Internet sites and the overall cost-effectiveness
and value of advertising offered by the Company. In addition, the success of the
Company's business strategy depends on the sale of future Internet advertising
at premium prices, based in part on the demographic characteristics of the
Company's Internet users. With respect to attracting subscription-based users in
the future, the Company believes that the competitive factors include, among
others, the quality, uniqueness and usefulness of the products and services
provided, the price charged for such products and services and the cost and
accessibility of similar products and services through the Internet or competing
media. Given the intense competition among Internet sites and other media, there
can be no assurance that the Company will be able to compete successfully with
respect to any of these factors.

         Strength of Competitors. Many, if not all, of the Company's current and
potential competitors have significantly greater financial, editorial, technical
and marketing resources, longer operating histories,

                                       21
<PAGE>   22
greater name recognition, and greater experience than the Company; and also have
established relationships with more advertisers and advertising agencies. Many,
if not all, of such competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive advertising and subscription price
policies and devote substantially more resources to developing Internet-based
products and services than the Company. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures faced by the Company will not
materially adversely affect the Company's business, financial condition and
operating results. In addition, in response to competitive pressures, the
Company may make certain pricing, business development and/or marketing
decisions, or enter into acquisitions or new ventures that could have a material
adverse effect on the Company's business, financial condition and operating
results.

         Uncertain Acceptance and Maintenance of the go2net Brand. The Company
believes that establishing and maintaining the go2net brand is a critical aspect
of its efforts to attract an Internet audience and that the importance of brand
recognition will increase due to the anticipated increase in the number of
Internet sites and the relatively low barriers to entry to providing
Internet-based products and services. Promoting the go2net brand name will
depend on the Company's ability to develop and deliver original and compelling
Internet-based products and services, which it cannot assure. If Internet users
do not perceive the Company's Internet sites to be of sufficient interest and
usefulness, the Company will be unsuccessful in promoting and maintaining its
brand. To the extent the Company chooses in the future to seek to expand the
focus of its operations beyond providing its current Internet sites, the Company
risks diluting its brand, confusing users and advertisers, and decreasing the
attractiveness of its audience to advertisers. In order to attract and retain
Internet users and to promote and maintain the go2net brand in response to
competitive pressures, the Company may find it necessary to increase its budget
for developing its products and services or otherwise to increase substantially
its financial commitment to creating and maintaining a distinct brand loyalty
among users. If the Company is unable to provide Internet-based products and
services as described herein or otherwise fails to promote and maintain the
go2net brand, or the Company incurs significant expenses in an attempt to
improve its products and services or promote and maintain its brand, the
Company's business, financial condition and operating results will be materially
adversely affected and the Company may cease to be a commercially viable
enterprise.

         Expansion of 0perations and Managing Potential Growth. Since its
inception, the Company has grown rapidly and as of September 30, 1997 had 23
full-time employees and 7 independent contractors. This growth has placed, and
is expected to continue to place, a significant strain on the Company's
management, physical and capital resources. It is expected that the Company will
need to hire additional key personnel in order to fully implement its business
strategy. No assurance can be given as to whether, when, if ever, and under what
terms the Company will be able to attract such new personnel. In order to manage
such growth successfully, the Company will be required to, among other things,
implement and manage its operational and financial systems on a timely basis and
to train, manage and expand its growing employee base. Further, the Company's
management will be required to successfully maintain relationships with various
advertising customers, advertising agencies, other Internet sites and services,
Internet service providers and other third parties and to maintain control over
the strategic direction of the Company in a rapidly changing marketplace. There
can be no assurance that the Company's current personnel, systems, procedures
and quality and accounting controls will be adequate to support the Company's
future operations, that management will be able to identify, hire, train,
motivate or manage needed and qualified personnel, or that management will be
able to identify and exploit existing and potential opportunities. If the
Company is unable to effectively manage growth, the Company's business,
financial condition and operating results will be materially adversely affected.

         Need for Additional Capital to Finance Growth and Capital Requirements.
The Company expects to seek to enhance and expand its Internet sites in order to
improve its competitive position and meet the increasing demands for quality
Internet-based products and services and competitive advertising and
subscription pricing. The Company's ability to grow will depend in part on the
Company's ability to expand and improve its Internet operations, expand its
advertising and marketing efforts, expand and improve its Internet user support
capabilities and develop new Internet technologies, products and services. In
connection therewith, the Company may need to raise additional capital in the
foreseeable future from public or private equity or debt sources in order to
finance such possible growth. In addition, the Company may need to raise
additional funds in order to avail itself to unanticipated opportunities (such
as more rapid expansion, acquisitions of complementary businesses or the
development of new products or services), to react to unforeseen difficulties
(such as the loss of key personnel or the rejection by Internet users or
potential advertisers of the Company's Internet-based products and services) or
to otherwise respond to

                                       22
<PAGE>   23
unanticipated competitive pressures. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the Company's then
existing stockholders would be reduced, stockholders may experience additional
and significant dilution and such equity securities may have rights, preferences
or privileges senior to those of the holders of Common Stock. There can be no
assurance that additional financing will be available on terms acceptable to the
Company or at all. If adequate funds are not available or are not available on
terms acceptable to the Company, the Company may be unable to implement its
business, sales or marketing plan, respond to competitive forces or take
advantage of perceived business opportunities, which could have a material
adverse effect in the Company's business, financial condition and operating
results.

         Dependence on Key Personnel. The Company's performance is substantially
dependent on the continued services of Russell C. Horowitz, John Keister, Paul
S. Phillips and the other members of its management team, as well as on the
Company's ability to retain and motivate its officers and key employees. Each of
Messrs. Horowitz, Keister and Phillips has entered into employment agreements
with the Company. The Company maintains a $2,000,000 "key man" life insurance
policy on the lives of each of Messrs. Keister and Phillips and a $5,000,000
"key man" life insurance policy on the life of Mr. Horowitz. The Company's
future success also depends on its continuing ability to attract and retain
highly qualified technical and managerial personnel. The development of
technologies, products and services for the Company's Internet sites requires
the services of highly skilled employees and independent contractors. The number
of such personnel available is extremely limited and competition for such
personnel among Internet and other companies is intense. There can be no
assurance that the Company will be able to retain its existing employees and
independent contractors or that it will be able to attract, assimilate or retain
sufficiently qualified personnel in the future. The inability to attract and
retain the necessary technical, managerial, design, editorial, sales and
marketing personnel could have a material adverse effect on the Company's
business, financial condition and operating results.

         Limited Experience in Sales and Marketing of Advertising. None of the
Company's senior management team has any significant experience in selling
advertising on the Internet or any other medium, and few members of the
Company's senior management team have any significant experience in the Internet
industry. Achieving acceptance by potential advertisers and advertising agencies
of the Company's Internet sites as a viable marketing forum will require the
Company to develop and maintain relationships with key advertisers and
advertising agencies, and there can be no assurance that any such relationships
will be developed, on a timely basis or at all.

         Dependence on Third Parties for Internet Operations and Content
Development. The Company believes that the ability to advertise its Internet
sites on other Internet sites and the willingness of the owners and operators of
such sites to direct users to the Company's Internet sites through hypertext
links are critical to the success of the Company's Internet operations. Other
Internet sites, particularly search/index guides and other companies with
strategic ability to direct user traffic, significantly affect traffic to the
Company's Internet sites. The Company does not currently have any significant
arrangements with these types of companies from which it expects to generate
user visits to its Internet sites. There can be no assurance that the Company
will establish or maintain such arrangements in the future. In addition, the
Company relies on the cooperation of owners and operators of Internet sites and
search/index guides in connection with the operation of the MetaCrawler Service.
There can be no assurance that such cooperation will continue to be available on
terms acceptable to the Company or at all. The inability of the Company to
include third-party search/index guides in the MetaCrawler Service could result
in the decrease in use of the MetaCrawler Service, which would have a material,
adverse effect on the Company's business, financial condition and operating
results. The Company's ability to develop original and compelling Internet-based
products and services is also dependent on maintaining relationships with and
using products provided by third party vendors. Developing and maintaining
satisfactory relationships with third parties could become more difficult and
more expensive as competition increases among Internet sites. If the Company is
unable to develop and maintain satisfactory relationships with such third
parties on terms acceptable to the Company, or if the Company's competitors are
better able to leverage such relationships, the Company's business, financial
condition and operating results will be materially adversely affected. In these
efforts, the Company has relied, and will continue to rely substantially, on the
product and service development efforts of third parties. For example, the
Company relies on S&P Comstock, Dow Jones & Company. Inc., New York Stock
Exchange, Inc., The Nasdaq Stock Market, Inc., News Alert, SportsTicker, Edgar
Online, Reuters and Market Guide, Inc. to provide a significant portion of the
information included on the Company's Internet sites. There can be no assurance
the Company will maintain these relationships in the

                                       23
<PAGE>   24
future. Any failure of these third parties to provide this information to the
Company could have a material adverse effect on the Company's business,
financial condition and operating results.

         Dependence on Continued Growth in the Use of the Internet. Rapid growth
in the use of and interest in the Internet is a recent phenomenon, and there can
be no assurance that acceptance and use of the Internet will continue to develop
or that a sufficient base of users will emerge to support the Company's
business. Revenues from the Company's Internet operations will depend largely on
the widespread acceptance and use of the Internet as a source of information and
entertainment and as a vehicle for commerce in goods and services. The Internet
may not be accepted as a viable commercial medium for a number of reasons,
including potentially inadequate development of the necessary infrastructure,
lack of timely development of enabling technologies or lack of commercial
support for Internet-based advertising. To the extent that the Internet
continues to experience an increase in users, an increase in frequency of use or
an increase in the bandwidth requirements of users, there can be no assurance
that the Internet infrastructure will be able to support the demands placed upon
it. In addition, the Internet could lose its viability as a commercial medium
due to delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity, or due to increased
government regulation. Changes in or insufficient availability of
telecommunications services to support the Internet also could result in slower
response times and could adversely affect use of the Internet generally and of
the Company's Internet sites in particular. If use of the Internet does not
continue to grow or grows more slowly than expected, or if the Internet
infrastructure does not effectively support growth that may occur, the Company's
business, financial condition and operating results would be materially
adversely affected.


         Dependence on the MetaCrawler License. The Company and Netbot entered
into a License Agreement (the "MetaCrawler License Agreement") pursuant to which
Netbot has granted the Company an exclusive (subject to certain limited
exceptions), worldwide license to provide the MetaCrawler Service. As part of
the MetaCrawler License Agreement, the Company has the exclusive right to
operate, modify and reproduce the MetaCrawler Service (including, without
limitation, the exclusive right to use, modify and reproduce the name
"MetaCrawler" and the MetaCrawler URL in connection with the operation of the
MetaCrawler Service). Netbot has licensed the MetaCrawler Service and the other
intellectual property rights associated therewith from UW on an exclusive basis.
The license has been granted to the Company by Netbot on an exclusive basis, but
Netbot has reserved the right to use, modify, reproduce and license the
MetaCrawler search engine for any purpose other than the provision of the
MetaCrawler Service and the license is subject to the rights of UW to use,
modify and reproduce the MetaCrawler search engine and derivatives of the
MetaCrawler site to operate Internet sites for internal purposes within the UW
domain and to use, modify and reproduce any of the licensed technologies for
research, instructional and academic purposes. The search technology underlying
the MetaCrawler Service and the MetaCrawler trademark is licensed to or owned by
Netbot and sublicensed to the Company pursuant to the MetaCrawler License
Agreement. A substantial portion of the traffic to the Company's Internet sites
is currently derived from users of the MetaCrawler Service. Although the
MetaCrawler License Agreement may be terminated by Netbot only upon a material
default by the Company thereunder, the termination of the MetaCrawler License
Agreement could have a material adverse effect on the Company's business,
financial condition and operating results. Moreover, the termination of the
License Agreement between UW and Netbot relating to Netbot's license of the
MetaCrawler Service would result in the inability of the Company to continue to
provide the MetaCrawler Service under the MetaCrawler License Agreement, which
could have a material adverse effect on the Company's business, financial
condition and operating results. In addition, any failure by the Company to
continue to provide the MetaCrawler Service for any reason could have a material
adverse effect on the Company's business, financial condition and operating
results.

         Risks of New Business Areas. The long-term success of the Company's
business strategy will depend to a significant extent on the Company's ability
to expand operations beyond solely relying on Internet-based advertising
revenues into areas such as subscription-based products and services and
electronic commerce, in addition to successfully developing new Internet sites
and enhancing existing ones. There can be no assurance that the Company will be
able to expand into such areas, develop and launch any new Internet sites or
enhance existing ones. In addition, expansion into new business areas and new
Internet sites may bring the Company into direct competition with new
competitors. Any expansion of product offerings or operations, or new Internet
sites developed and launched by the Company that are not favorably received by
Internet users could damage the Company's reputation or the go2net brand.
Expansion into new business areas or the development and launching of new
Internet sites will also require significant additional expenses and programming
and other resources and will strain the Company's management, financial and
operational resources. Furthermore, any expansion of business areas and the

                                       24
<PAGE>   25
developing and launching of new Internet sites, as well as the enhancement of
the Company's existing Internet sites, will necessarily rely on untested
business models. To date, the Company has generated limited revenues from
Internet-based advertising, and there can be no assurance that the Company will
be able to generate revenues from these sources in the future. The Company's
failure to expand its business operations or develop and launch new Internet
sites in a cost effective and timely manner could have a material adverse effect
on the Company's business, financial condition and operating results.

         From time to time, the Company may entertain new business opportunities
and ventures in a broad range of areas. Although the Company has made no
specific arrangements with respect to any such opportunities, it may in the
future elect to pursue one or more such opportunities. Typically, such
opportunities require extended negotiations, the outcome of which cannot be
predicted. If the Company were to enter into such a venture, the Company could
be required to invest a substantial amount of capital, which could have a
material adverse effect on the Company's financial condition and its ability to
implement its existing business strategy. Such an investment could also result
in large and prolonged operating losses for the Company. Further, such
negotiations or ventures could place additional, substantial burdens on the
Company's management personnel and its financial and operational systems. There
can be no assurance that such a venture would ever achieve profitability, and a
failure by the Company to recover the substantial investment required to launch
and operate such a venture would have a material adverse effect on the Company's
business, financial condition and operating results.

         Risks of Technological Change. The market for Internet-based products
and services is characterized by rapid technological developments, frequent new
product introductions and evolving industry standards. The emerging character of
these products and services and their rapid evolution will require that the
Company continually improve the performance, features and reliability of its
Internet-based products and services, particularly in response to competitive
offerings. There can be no assurance that the Company will be successful in
responding quickly, cost effectively and sufficiently to these developments. In
addition, the widespread adoption of new Internet technologies or standards
could require substantial expenditures by the Company to modify or adapt its
Internet sites and services and could fundamentally affect the character,
viability and frequency of Internet-based advertising, either of which could
have a material adverse effect on the Company's business, financial condition
and operating results. In addition, new Internet-based products, services or
enhancements offered by the Company may contain design flaws or other defects
that could require costly modifications or result in a loss of consumer
confidence, either of which could have a material adverse effect on the
Company's business, financial condition and operating results

         Capacity Constraints and System Disruptions. The satisfactory
performance, reliability and availability of the Company's Internet sites and
its computer network infrastructure are critical to attracting Internet users
and maintaining relationships with advertising customers. The Company's
Internet-based advertising revenues will be directly related to the number of
advertisement impressions delivered by the Company. System interruptions that
result in the unavailability of the Company's Internet sites or slower response
times for users would reduce the number of advertisements delivered and reduce
the attractiveness of the Company's Internet sites to users and advertisers. The
Company may experience periodic systems interruptions from time to time in the
future. Additionally, any substantial increase in traffic on the Company's
Internet sites may require the Company to expand and adapt its computer network
infrastructure. The Company's inability to add additional computer software,
hardware and bandwidth to accommodate increased use of its Internet sites may
cause unanticipated system disruptions and result in slower response times.
There can be no assurance that the Company will be able to expand its computer
network infrastructure on a timely basis to meet increased use. Any system
interruptions or slower response times resulting from the foregoing factors
could have a material adverse effect on the Company's business, financial
condition and operating results. The Company is dependent on third parties for
uninterrupted Internet access. In addition, the Company is dependent on various
third parties for substantially all of its news and information. Loss of such
services from any one or more of such third parties may have a material adverse
effect on the Company's business, financial condition and operating results. No
assurance can be given as to whether, or on what terms, the Company would be
able to obtain such services from other third parties in the event of the loss
of any of such services.

         The Company's Internet operations are vulnerable to interruption by
fire, earthquake, power loss, telecommunications failure and other events beyond
the Company's control. There can be no assurance that interruptions in service
will not materially adversely affect the Company's operations in the future.
While the Company carries business interruption insurance to compensate the
Company for losses that may occur,

                                       25
<PAGE>   26
there can be no assurance that such insurance will be sufficient to provide for
all losses or damages incurred by the Company.

         Liability for Internet Content; Government Regulations. As a publisher
and a distributor of content over the Internet, the Company faces potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that it publishes or distributes. In addition, the Company could be exposed to
liability with respect to the content or unauthorized duplication of material
indexed in its search services. Although the Company carries liability
insurance, the Company's insurance may not cover potential claims of this type
or may not be adequate to indemnify the Company for all liability that may be
imposed. Any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on the
Company's business, financial condition and operating results.

         Although there are currently few laws and regulations directly
applicable to the Internet, it is possible that new laws and regulations will be
adopted covering issues such as, among other things, access, obscene or indecent
communications and the pricing, characteristics and quality of Internet products
and services. As a provider of Internet-based products and services, the Company
is subject to the provisions of existing and future federal and local
legislation that could be applied to the Company's operation. Such legislation
could also dampen the growth of the Internet generally and decrease the
acceptance of the Internet as an advertising medium, and could, thereby, have a
material adverse effect on the Company's business, financial condition and
operating results.

         Liability for Information Retrieved From the Internet. Materials may be
printed from or downloaded into users' computers from the Internet-based
services provided by the Company or from the Internet access or information
providers with which the Company has a relationship. Given that materials may be
subsequently distributed to third parties, without the Company's knowledge or
consent, there is a potential that claims will be made against the Company for
defamation, negligence, copyright or trademark infringement or other theories
based on the nature and content of such materials. Such claims have been
brought, and successfully pressed, against Internet-based services in the past.
Although the Company carries liability insurance, the Company's insurance may
not cover potential claims of this type, or may not be adequate to indemnify the
Company for all liability that may be imposed. Any imposition of liability that
is not covered by insurance or is in excess of insurance coverage would have a
material adverse effect on the Company's business, financial condition and
operating results.

         Security Risks. The Company has instituted certain security measures
designed to protect its Internet sites and other operations from unauthorized
use and access. Such measures cannot guarantee complete security, however, and a
party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the Company's
Internet operations. The Company may be required to expend significant capital
and resources to protect against the threat of such security breaches or to
alleviate problems caused by such breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, particularly as a means of conducting commercial
transactions. To the extent that activities of the Company or any third party
contractors involve the storage and transmission of proprietary information,
such as computer software or credit card numbers, security breaches could expose
the Company to a risk of loss or litigation and possible liability. There can be
no assurance that contractual provisions attempting to limit the Company's
liability in such areas will be successful or enforceable, or that parties will
accept such contractual provisions as part of the Company's agreements.

         Dependence on Licensed Technology; Protection of Intellectual Property.
The Company is dependent upon obtaining existing technology related to its
operations. To the extent new technological developments are unavailable to the
Company on terms acceptable to it or if at all, the Company may be unable to
continue to execute its business plan and its business, financial condition and
operating results would be materially adversely affected.

         The success of the Company is dependent upon its ability to protect and
leverage the value, if any, of its original Internet technologies, software,
content and its trademarks, trade names, service marks, domain names and other
proprietary rights it either currently has or may have in the future. The
Company has filed service marks for its logo and name, as well as for the names
of each of its sites. In addition, given the uncertain application of existing
copyright and trademark laws to the Internet, there can be no assurance that
existing laws will provide adequate protection for the Company's technologies,
sites or domain names.

                                       26
<PAGE>   27
Policing unauthorized use of the Company's technologies, content and other
intellectual property rights entails significant expenses and could otherwise be
difficult or impossible to do given, among other things, the global nature of
the Internet.

         From time to time, the Company may be subject to legal proceedings and
claims in the ordinary course of business, including claims of alleged
infringement of the trademarks and other intellectual property of third parties
by the Company or its licensees. Such claims, even if not meritorious, could
result in the expenditure of significant financial and managerial resources. The
Company is not currently aware of any legal proceedings or claims that the
Company believes will have, individually or in the aggregate, a material adverse
effect on the Company's business, financial condition and operating results.

         Risks Associated with Potential Acquisitions. The Company may in the
future pursue acquisitions of companies, technologies or other assets. Future
acquisitions may result in the potentially dilutive issuance of equity
securities, the incurrence of debt, the write-off of in-process research and
development or software acquisition and development costs, and the amortization
of expenses related to goodwill and other intangible assets, any of which could
have a material adverse effect on the Company's business, financial condition,
results of operations and cash flow. Future acquisitions would involve numerous
additional risks, including difficulties in the assimilation of the operations,
services, products and personnel of the acquired company, the diversion of
management's attention from other business concerns along with the risks
involved in entering markets in which the Company has little or no experience.
As of the date of this Report, the Company does not have any commitments,
agreements or understandings with regard to any material acquisition.

         Susceptibility to General Economic Conditions. The Company's business,
financial condition and operating results will be subject to fluctuations based
upon general economic conditions. If there were to be a general economic
downturn or a recession, however slight, then the Company expects that business
entities, including the Company's advertisers and potential advertisers, could
substantially and immediately reduce their advertising and marketing budgets. In
addition, the Company's ability to charge subscription fees for access to
certain portions of its Internet sites or to engage in commerce via the Internet
would be adversely affected, thereby resulting in a material adverse effect on
the Company's business, financial condition and operating results.

                                       27
<PAGE>   28
ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
PART I.       FINANCIAL INFORMATION                                                            PAGE
<S>          <C>                                                                               <C>
Item 1        Consolidated Financial Statements:
              Independent Auditors' Report..............................................       29
              Balance Sheets September 30, 1997
                  and September 30, 1996................................................       30
              Statements of Operations Year ended September 30, 1997
                  and the period from inception
                  (February 12, 1996) to September 30, 1996.............................       31
              Statements of Stockholders' Equity........................................       32
              Statements of Cash Flows Year ended September 30, 1997
                   and the period from inception (February 12, 1996)
                   to September 30, 1996................................................       33
              Notes to Consolidated Financial Statements................................       34
</TABLE>

PART II.      FINANCIAL STATEMENTS SCHEDULE

         All schedules have been omitted since they are either not applicable,
not required or the information is included elsewhere herein.

                                       28
<PAGE>   29
                Report of Ernst & Young LLP, Independent Auditors


Board of Directors and Stockholders
go2net, Inc.

We have audited the accompanying balance sheets of go2net, Inc. as of September
30, 1997 and 1996, and the related statements of operations and cash flows for
the year ended September 30, 1997 and for the period from inception (February
12, 1996) through September 30, 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 go2net, Inc. at September 30,
1997 and 1996, and the results of its operations and its cash flows for the year
ended September 30, 1997 and for the period from inception (February 12, 1996)
through September 30, 1996, in conformity with generally accepted accounting
principles.


                                                      ERNST & YOUNG LLP


Seattle, Washington
October 23, 1997

                                       29
<PAGE>   30
                                  GO2NET, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              September 30,        September 30,
                                                                   1997                 1996
                                                                   ----                 ----
ASSETS
<S>                                                            <C>                  <C>
Current assets:
  Cash and cash equivalents ...........................        $ 10,891,801         $   865,742
  Receivables .........................................              59,462                  --
  Prepaid expenses and other assets ...................             145,114               8,216
                                                               ------------         -----------
          Total current assets ........................          11,096,377             873,958

Property and equipment, net ...........................             509,004             179,328
Intangibles ...........................................             688,107                  --
Deposits ..............................................             307,365                  --
Other assets ..........................................              18,861              12,955
                                                               ------------         -----------
          Total assets ................................        $ 12,619,714         $ 1,066,241
                                                               ============         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses ..............        $    134,890         $    45,098
   Short term debt ....................................              34,580                  --
   Deferred revenue ...................................              15,923                  --
                                                               ------------         -----------
          Total current liabilities ...................             185,393              45,098

Stockholders' equity:
  9% Cumulative Redeemable Convertible Preferred Stock,
     $1.00 par value, authorized 1,000,000 shares; no
     shares at September 30, 1997 and 927,500 shares at
     September 30, 1996  outstanding ..................                  --           1,505,000
  Common stock, $0.01 par value, authorized 9,000,000
     shares; 4,505,217 shares at September 30, 1997 and
     1,619,100 shares at September 30, 1996 outstanding          14,570,558              13,900
  Less 9% Cumulative Redeemable Convertible Preferred
     Stock ............................................                  --             (80,000)
     Subscriptions receivable
  Accumulated deficit .................................          (2,136,237)           (417,757)
                                                               ------------         -----------

          Total stockholders' equity ..................          12,434,321           1,021,143
                                                               ------------         -----------

          Total liabilities and stockholders' equity ..        $ 12,619,714         $ 1,066,241
                                                               ============         ===========
</TABLE>

                             See accompanying notes.

                                       30
<PAGE>   31
                                  GO2NET, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                           Period from Inception
                                                 Year Ended                 (February 12, 1996)
                                             September 30, 1997         through September 30, 1996
                                             ------------------         --------------------------
<S>                                          <C>                        <C>
Revenue ..........................              $   254,389                     $        --
Cost of revenue ..................                  180,253                              --
                                                -----------                     -----------
          Gross profit ...........                   74,136                              --
                                                                       
                                                                       
Operating expenses:                                                    
  Advertising and marketing ......              $    77,958                     $    10,150
  Product development ............                  548,706                         137,159
  General and administrative .....                1,436,224                         283,832
                                                -----------                     -----------
          Total operating expenses                2,062,888                         431,141
                                                -----------                     -----------
                                                                       
                                                                       
Loss from operations .............               (1,988,752)                       (431,141)
                                                                       
Interest income, net .............                  270,272                          13,383
                                                -----------                     -----------
                                                                       
Net loss .........................              $(1,718,480)                    $  (417,758)
                                                ===========                     ===========
                                                                       
Net loss per share ...............              $     (0.50)                    $     (0.16)
                                                                       
Shares used in computing                                               
  net loss per share .............                3,464,489                       2,548,680
</TABLE>
                                                                       
                             See accompanying notes.

                                       31
<PAGE>   32
                                  GO2NET, INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

      PERIOD FROM INCEPTION (FEBRUARY 12, 1996) THROUGH SEPTEMBER 30, 1996
                        AND YEAR ENDED SEPTEMBER 30, 1997



<TABLE>
<CAPTION>
                                           CUMULATIVE REDEEMABLE                                             SUBSCRIPTION 
                                           CONVERTIBLE PREFERRED                COMMON STOCK                     NOTES    
                                            SHARES       AMOUNT              SHARES        AMOUNT             RECEIVABLE  
                                            ------       ------              ------        ------             ----------  
<S>                                     <C>           <C>                 <C>            <C>                <C>
Cash received for common                                                                                                   
stock sold to founders ............              -              -          1,390,000      $    13,900                 -    
                                                                                                                           
Issuance of common stock                                                                                                   
at no cost ........................              -              -            229,100                -                 -    
                                                                                                                           
Sale of preferred stock ...........        927,500    $ 1,505,000                  -                -          $(80,000)   
                                                                                                                           
Net loss for period from                                                                                                   
  Inception (February 12,                                                                                                  
  1996) through                                                                                                             
  September 30, 1996 ..............              -              -                  -                -                 -    
                                          ---------    -----------         ---------      -----------          --------
Balance at September 30, 1996 .....        927,500      1,505,000          1,619,100           13,900           (80,000)   
Payment of note receivable ........              -              -                  -                -            80,000 
                                                                                                                           
Issuance of common stock                                                                                                   
at no cost ........................              -              -             35,500                -                 -    
                                                                                                                           
Conversion of preferred stock .....       (927,500)    (1,505,000)           927,500        1,505,000                 -    
Sale of common stock ..............              -              -             75,000          150,000                 -    
                                                                                                                           
Repurchase of common                                                                                                       
stock_ ............................              -              -            (13,550)            (556)                -    
                                                                                                                           
Issuance of common stock                                                                                                   
for services rendered .............              -              -              5,000           28,000                 -    
                                                                                                                           
Issuance of common                                                                                                         
stock, net of related expenses                                                                                             
of $1,930,788 .....................              -              -          1,840,000       12,789,212                 -    
                                                                                                                           
Common stock issued in                                                                                                     
connection with acquisition                                                                                                
of license ........................              -              -             16,667           85,002                 -    
                                                                                                                           
                                                                                                                           
Net Loss for the year                                                                                                      
ended September 30,                                                                                                        
1997 ..............................              -              -                  -                -                 -    
                                          ---------    -----------         ---------      -----------          --------
                                                                                                                           
Balance at September 30,                                                                                                   
1997 ..............................              -              -          4,505,217      $14,570,558                 -    
                                          =========    ===========         =========      ===========          ========
</TABLE>




<TABLE>
<CAPTION>
                                                                    TOTAL
                                            ACCUMULATED          STOCKHOLDERS'
                                              DEFICIT               EQUITY
                                              -------               ------
<S>                                       <C>                  <C>
Cash received for common                                      
stock sold to founders ............                -            $    13,900
                                                              
Issuance of common stock                                      
at no cost ........................                -          
                                                              
Sale of preferred stock ...........                -              1,425,000
                                                              
Net loss for period from                                      
  Inception (February 12,                                     
  1996) through                      
  September 30, 1996 ..............        $(417,757)              (417,757)
                                           ---------              ---------
Balance at September 30, 1996 .....         (417,757)             1,021,143
                                                              
Payment of note receivable ........                -                 80,000
                                                              
Issuance of common stock                                      
at no cost ........................                -                      -
                                                              
Conversion of preferred stock .....                -                      -
                                                              
Sale of common stock ..............                -                150,000
                                                              
Repurchase of common                                          
stock ............................                 -                   (556)
                                                              
Issuance of common stock                                      
for services rendered .............                -                 28,000
                                                              
Issuance of common                                            
stock, net of related expenses                                
of $1,930,788 .....................                -             12,789,212
                                                              
Common stock issued in                                        
connection with acquisition                                   
of license ........................                -                 85,002
                                                              
                                                              
Net Loss for the year                                         
ended September 30,                                           
1997 ..............................       (1,718,480)            (1,718,480)
                                         ------------           ------------
Balance at September 30,                                      
1997 ..............................       (2,136,237)           $12,434,321
                                         ============           ===========
</TABLE>

                             See accompanying notes.

                                       32
<PAGE>   33
                                  GO2NET, INC.

                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                    PERIOD FROM INCEPTION
                                                                                     (FEBRUARY 12, 1996)
                                                               YEAR ENDED                  THROUGH
                                                           SEPTEMBER 30, 1997         SEPTEMBER 30, 1996
                                                           ------------------         ------------------
<S>                                                        <C>                      <C>
Operating activities:
  Net loss ......................................              $ (1,718,480)              $  (417,757)

Adjustments to reconcile net loss to net cash
used in operating activities:
      Depreciation and amortization .............                   171,042                    19,278
      Stock compensation ........................                    28,000                        --
      Loss on sale of equipment .................                     5,080                        --
                                                               ------------               -----------
   Changes in assets and liabilities:
      Prepaid expenses and other assets .........                  (136,898)                   (8,216)
      Receivables ...............................                   (59,462)                       --
      Other assets ..............................                   (10,781)                  (14,359)
      Deposits ..................................                  (307,365)                       --
      Deferred revenue ..........................                    15,923                        --
      Accounts payable and accrued expenses .....                    89,792                    45,098
                                                               ------------               -----------

Net cash used in operating activities ...........                (1,923,149)                 (375,956)

Investing activities:
      Acquisition of property and equipment .....                  (448,318)                 (197,202)
      Proceeds from sale of property and                              
      equipment .................................                     5,494                        --
      Acquisition of Intangibles ................                  (661,204)                       --
                                                               ------------               -----------

Net cash used in investing activities ...........                (1,104,028)                 (197,202)

Financing activities:
      Proceeds from issuance of common stock, net                12,939,212                    13,900
      Repurchase of common stock ................                      (556)                       --
      Borrowing on line of credit ...............                   500,000                        --
      Payment on line of credit .................                  (500,000)                       --
      Short term borrowing ......................                    76,354                        --
      Payment on short term borrowing ...........                   (41,774)                       --
      Proceeds from issuance of preferred
      stock .....................................                        --                 1,425,000
      Proceeds from note receivable .............                    80,000                        --
                                                               ------------               -----------
Net cash provided by financing activities .......                13,053,236                 1,438,900
                                                               ------------               -----------

Net increase in cash and cash equivalents .......                10,026,059                   865,742

Net cash and cash equivalents at beginning of
  period ........................................                   865,742                        --
                                                               ------------               -----------

Cash and cash equivalents at end of period ......              $ 10,891,801               $   865,742
                                                               ============               ===========
Supplemental cashflow disclosure:  Cash paid
for interest: ...................................              $     10,957               $        --
</TABLE>

                             See accompanying notes.

                                       33
<PAGE>   34
                                  go2net, Inc.
                          Notes to Financial Statements


1.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

go2net, Inc. (the "Company") was incorporated in the State of Delaware on
February 12, 1996 (operations began in March 1996). The Company is an
interactive technology company that operates a group of Web sites. MetaCrawler
<URL: http://www.metacrawler.com/> is a search/index guide that combines various
existing search/index guides into one guide (a "metasearch engine"); PlaySite
<URL: http://www.playsite.com/> is a Java-based multi-user games network;
StockSite <URL: http://www.stocksite.com/> offers proprietary articles,
portfolio tracking tools, company research and news relating to business and
finance; and go2vision <URL: http://www.go2net.com/vision/> is a
Netcaster/Castanet channel (push technology). The Company focuses on utilizing
innovative technologies to deliver its content and to enhance the attractiveness
and utility of its product offerings.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets.

INTANGIBLE ASSETS

Intangible assets represent license fees associated with technology sublicenses
and acquisitions and are recorded at cost. Amortization of intangibles is
recorded using the straight-line method over the useful lives of 5 years. The
recoverability of carrying values of intangible assets is evaluated on a
recurring basis. For the period ended September 30, 1997, there were no
adjustments to the carrying values of intangible assets resulting from these
evaluations.

CONCENTRATION OF CREDIT RISK

Financial instruments potentially subjecting the Company to concentration of
credit risk consist primarily of cash equivalents with one financial
institution. Management believes the financial risks associated with such
deposits are minimal.

USE OF ESTIMATES

The Company's management has made a number of estimates and assumptions relating
to the reporting of assets, liabilities, and expenses to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

REVENUE RECOGNITION

The Company derives its revenue from the sale of advertisements on short-term
contracts and barter transactions. Advertising revenues are recognized ratably
over the period in which the advertisements are displayed. Deferred revenues
result from billings in excess of recognized revenue relating to contracts.
Barter transactions are recorded at the lower of the estimated fair value of
advertisements received or the estimated fair value of the advertisements given.
Barter revenue and the related advertising is recorded based on impressions
delivered and received with the difference recorded as an advance or prepaid. As
of September 30, 1997 and 1996, respectively, the Company did not have any
advances or prepaids related to

                                       34
<PAGE>   35
                                  go2net, Inc.
                    Notes to Financial Statements (continued)


barter agreements. For the year ended September 30, 1997, the Company recognized
revenues of $163,390 from barter transactions.

ADVERTISING AND MARKETING EXPENSE

The Company expenses costs associated with advertising and marketing as they are
incurred.

NET LOSS PER SHARE

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

STOCK-BASED COMPENSATION

The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair value of the shares at the date of grant.
The Company has elected the disclosure only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation", and accordingly accounts for stock options grants in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly,
the Company recognizes no compensation expense for its stock option grants.


NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share", which becomes effective for the Company's 1997 financial
statements beginning in the first quarter of the fiscal year ending September
30, 1998. SFAS No. 128 will require the reporting of "basic" earnings per share,
which will exclude the impact of common stock equivalents. Additionally, SFAS
No. 128 changes the methodology for fully diluted earnings per share. The
adoption of this new accounting standard is not expected to have a material
effect on the reported net loss per share of the Company.

RECLASSIFICATIONS

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

2.  BALANCE SHEET COMPONENTS

Cash and Cash Equivalents

The carrying value of cash and cash equivalents consisted of:

<TABLE>
<CAPTION>
                                             September 30,       September 30,
                                                  1997              1996
                                                  ----              ----
<S>                                          <C>                <C>
Cash ....................................     $    85,935        $    25,354
Money market and time deposit balances...      10,805,866            840,388
Cash and cash equivalents ...............     $10,891,801        $   865,742
                                              ===========        ===========
</TABLE>

The carrying value of the Company's cash equivalents approximate their fair
values based on quoted market prices.

                                       35
<PAGE>   36
                                  go2net, Inc.
                    Notes to Financial Statements (continued)


Property and Equipment

A summary of property and equipment follows:

<TABLE>
<CAPTION>
                                                    September 30,     September 30,
                                                        1997               1996
                                                        ----               ----
<S>                                                 <C>               <C>
Computer equipment ...........................        $ 578,837         $ 160,756
Office equipment .............................           22,041            27,425
Leasehold improvements .......................           27,540             7,221
Other ........................................               --             1,800
                                                      ---------         ---------
                                                        628,418           197,202
Less accumulated depreciation and amortization         (119,414)          (17,874)
                                                      ---------         ---------
                                                      $ 509,004         $ 179,328
                                                      =========         =========
</TABLE>

Intangibles

Capitalized license fees were $746,206 and $0 at September 30, 1997 and 1996,
respectively. Amortization of intangibles amounted to $58,099 and $0 for 1997
and 1996. Accumulated amortization at September 30, 1997 and 1996 was $58,099
and $0, respectively.

Other Assets

Trademarks and other intangibles are included with "Other Assets" and are being
amortized over a useful life of three years. Trademarks and other intangibles
were $25,140 and $12,601 as of September 30, 1997 and 1996, respectively.
Amortization of trademarks and other intangibles amounted to $4,875 and $1,404
for 1997 and 1996. Accumulated amortization at September 30, 1997 and 1996 was
$6,280 and $1,404, respectively.

3.  INCOME TAXES

As of September 30, 1997 and September 30, 1996, the Company had approximately
$2,130,000 and $394,000, respectively, of net operating loss carryforwards for
federal income tax purposes, which expire beginning in 2011. Utilization of the
Company's net operating loss carry forwards may be subject to annual limitations
if there is deemed to be a change in control (Section 382).

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets are presented below:

<TABLE>
<CAPTION>
                                                         September 30,     September 30,
                                                              1997             1996
                                                              ----             ----
<S>                                                      <C>               <C>
Depreciation and amortization........................       $ (1,342)       $  (6,304)
Net operating losses.................................        724,312          133,953
Accruals, reserves and other.........................              -           12,540
                                                             722,970          140,189
Less valuation allowance.............................       (722,970)        (140,189)
                                                            --------        ---------
                                                            $     --        $      --
                                                            ========        =========
</TABLE>                                                               

4.  STOCKHOLDERS' EQUITY

9% Cumulative Convertible Redeemable Preferred Stock

In November 1996, the holders of all outstanding shares of Preferred Stock
converted into 927,500 shares of common stock.

                                       36
<PAGE>   37
                                  go2net, Inc.
                    Notes to Financial Statements (continued)


Common Stock

From Inception (February 12, 1996) through September 30, 1996, the Company sold
1,390,000 shares to its founders at par value and during the year ended
September 30, 1997, sold 75,000 shares of common stock for $2.00 per share to a
member of its Board of Directors. The Company also issued 35,500 and 229,100
shares to employees and independent contractors in 1997 and 1996, respectively.
The Company has the right, at any time after termination of such employees' and
independent contractors' employment or service, to repurchase certain common
shares at the price per share paid by the employee or independent contractor.
The Company's right to repurchase lapses with respect to the shares held by the
employees and independent contractors over varying periods of time but generally
within three years of the purchase or issuance date. There were 108,875 shares
of common stock subject to repurchase by the Company at September 30, 1997.

In 1997, the Company issued 5,000 shares to an employee with a fair market value
of $5.60 per share. Compensation expense of $28,000 was recorded during the year
ended September 30, 1997 associated with this issuance.

In April 1997, the Company completed its initial public offering and issued
1,600,000 shares of its common stock to the public at a price of $8.00 per
share. In May 1997, pursuant to the exercise of an over-allotment option granted
to the underwriters of the Company's initial public offering, the Company issued
an additional 240,000 shares of its common stock at a price of $8.00 per share.
The Company received approximately $12.8 million of cash, net of underwriting
discounts, commissions and other offering costs.

On July 15, 1997, the Company acquired PlaySite, a Java-based multi-user games
site, and certain gaming infrastructure technology from Internet Games
Corporation for $500,000 in cash and 16,667 shares of the Company's common
stock, with a value of $85,002.

5.  LEASES

The Company has a noncancelable lease for its facilities. Rental expense from
this and a previous lease that expired in July 1997 amounted to approximately
$141,346 for the year ended September 30, 1997 and $34,600 for the period from
inception (February 12, 1996) through September 30, 1996.

Future minimum payments under noncancelable operating leases with an initial
term of one year or more were as follows at September 30, 1997:


<TABLE>
<CAPTION>
<S>                                                        <C>       
1998.................................................      $  275,714
1999.................................................         283,101
2000.................................................         283,101
2001.................................................         283,101
2002.................................................         283,101
Thereafter                                                    259,509
                                                           ----------
Total Minimum Lease Payments.........................      $1,667,627
                                                           ==========
</TABLE>

6.  STOCK OPTION PLAN

In 1996, the Board of Directors adopted a Stock Option Plan under which an
aggregate of 750,000 shares of common stock were reserved for grants to
employees and members of the Board of Directors and independent contractors.
Options granted under this plan may be designated as incentive or nonqualified
at the discretion of the Plan Administrator.

                                       37
<PAGE>   38
                                  go2net, Inc.
                    Notes to Financial Statements (continued)


The Compensation Committee of the Board of Directors determines the option price
for stock options granted under the Stock Option Plan. Incentive stock options
may be granted at not less than 100% of the fair market value per share at the
date of grant as determined by the Board of Directors or committee thereof,
except for incentive options granted to a person owning greater than 10% of the
total combined voting power of all classes of the Company's stock, for which the
exercise price of the options must be not less than 110% of the fair market
value. Stock options exercised, granted and canceled during periods ended
September 30, 1997 and 1996, are as follows:


<TABLE>
<CAPTION>
                                                          SHARES          WEIGHTED
                                                           UNDER           AVERAGE
                                                        OUTSTANDING       EXERCISE
                                                          OPTIONS           PRICE
                                                          -------           -----
<S>                                                     <C>              <C>
Options Granted......................................      79,500           $8.00
Options Exercised....................................           -               -
Options Cancelled....................................           -               -
                                                          -------          
Balance at September 30,1996........................       79,500           $8.00
Options Granted......................................     568,500           $7.97
Options Exercised....................................           -               -
Options Cancelled....................................     (53,334)          $8.00
                                                          -------
 Balance at September 30,1997........................     594,666           $7.97
                                                          =======            
</TABLE>


Options considered exercisable as of September 30, 1997 and 1996 were 409,834
and 10,000 at weighted average exercise prices of $8.00 per share. The weighted
average remaining contractual life of the outstanding options at September 30,
1997 and 1996 was 5.756 years and 5.133 years, respectively. At September 30,
1997 and 1996, options for 155,334 and 670,500, respectively, remain available
for grant.

Pro forma information regarding net loss and loss per share required by
Statement 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions on the
option grant date: risk-free interest rates of 4.92% to 6.39%, expected
volatility of .548, expected option life of 1 to 5 years, and a dividend yield
of 0.0%.

Under 123, if the Company had elected to recognize the compensation cost based
upon the fair value of the options granted at the grant date, net loss would
have been increased as follows (the estimated fair value of the options is
amortized to expense over the options' vesting period.)

<TABLE>
<CAPTION>
                                                        September 30,     September 30,
                                                            1997               1996
                                                            ----               ----
<S>                                                    <C>                 <C>
Net loss:
     As reported.........................               $ (1,718,480)       $(417,758)
     Pro forma...........................               $ (2,103,405)       $(445,202)
Net loss per share:
     As reported.........................                   $(.50)           $(.16)
     Pro forma...........................                   $(.61)           $(.17)
</TABLE>


The Statement 123 pro forma disclosures above are not necessarily indicative of
future pro forma disclosures because of the manner in which Statement 123
calculations are phased in over time.

7.  REVOLVING CREDIT AGREEMENT

On November 20, 1996, the Company entered into a revolving credit agreement with
a bank that provides for the Company to borrow up to $750,000 at the bank's
prime lending rate (8.5% per annum as of September 30, 1997) plus 1% and all
amounts outstanding under the agreement are due by November 15, 1997. No amounts
were outstanding under the line of credit at September 30, 1997.

                                       38
<PAGE>   39
                                  go2net, Inc.
                    Notes to Financial Statements (continued)


8.  SUBSEQUENT EVENTS

Subsequent to September 30, 1997, the Board of Directors approved an amendment
to the Company's 1996 Stock Option Plan to increase the number of shares
available for the grant of options thereunder from 750,000 to 1,500,000, which
is subject to shareholder approval, and the Company granted options to acquire
an additional 218,000 shares of the Company's common stock. Those options
generally vest over periods ranging from one to four years. The weighted average
exercise price for all such option grants was $7.90 per share.

                                       39
<PAGE>   40
ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

         None.

PART III

         In accordance with General Instruction G(3) to Form 10-K, except as
indicated in the following sentence, the information called for by Items 10, 11,
12 and 13 is incorporated by reference from the registrant's definitive proxy
statement pursuant to Regulation 14A for the Annual Meeting of Shareholders to
be held on March 12, 1998. As permitted by General Instruction G(3) to Form 10-K
and Instruction 3 to Item 401(b) of Regulation S-K, the information on executive
officers called for by Item 10 is included in Part I of this Annual Report on
Form 10-K.

PART IV

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

         (a)      Financial Statements and Schedules

         The Financial Statements and Schedules filed as part of this Annual
Report on Form 10-K are listed in index under Item 8.

         (b)      Reports on Form 8-K

         No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1997


         (c)      List of Exhibits

                                       40
<PAGE>   41
<TABLE>
<CAPTION>
Exhibit
   No.                                      Title
   ---                                      -----
<S>      <C>
3.1*     Restated Certificate of Incorporation of the Company.

3.2*     Amended and Restated Bylaws of the Company.

4.1*     Specimen stock certificate representing the shares of Common Stock.

10.1*    Form of Preferred Stock Subscription Agreement.

10.2*    Employment Agreement, dated March 1, 1996, between the Company and
         Russell C. Horowitz.

10.3*    Employment Agreement, dated March 1, 1996, between the Company and John
         Keister.

10.4*    Promissory Note, dated November 20, 1996, in the aggregate principal
         amount of $500,000 made by the Company and payable to US Bank of
         Washington.

10.5*    Commercial Guaranty of Russell C. Horowitz, dated November 20, 1996,
         guaranteeing all amounts due under the $500,000 Line of Credit between
         the Company and US Bank of Washington.

10.6     Sublease Agreement, dated March 18, 1997, between the Company and Wells
         Fargo Bank, N.A.

10.8*    go2net, Inc. 1996 Stock Option Plan.

10.9*    License Agreement dated as of January 31, 1997 between Netbot, Inc. and
         the Company.

10.10*   Subscription Agreement dated as of August 7, 1996 between Sports Ticker
         Enterprises, L.P. and the Company.

10.11*   S&P Comstock Information Distribution License Agreement dated as of
         August 16, 1996 between S&P Comstock, Inc. and the Company.

10.12*   Distributor Agreement dated as of September 6, 1996 between Comtex
         Scientific Corporation and the Company.

11.1     Computation of Net Loss Per Share.

27       Financial Data Schedule

</TABLE>

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

*        Incorporated by reference from the Company's Registration Statement on
         Form S-1 (Registration No. 333-19051).

                                       41
<PAGE>   42
                                   SIGNATURES


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


                             go2net, Inc.


                              By: /s/  Russell C. Horowitz
                                 ----------------------------------------------
                                  Name: Russell C. Horowitz
                                  Title:  President and Chief Executive Officer

Date:  December 23, 1997


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


<TABLE>
<CAPTION>
Signature                                   Title                                   Date
---------                                   -----                                   ----
<S>                                        <C>                                     <C>
/s/  Russell C. Horowitz                    President, Chief Executive              December 23, 1997
-----------------------------               Officer, Chief Financial
Russell C. Horowitz                         Officer and Director
                                            (principal executive,
                                            financial and accounting
                                            officer)



/s/  John Keister                           Chief Operating Officer                 December 23, 1997
-----------------------------               and Director
John Keister                                



/s/  Dennis Cline                           Director                                December 23, 1997
-----------------------------
Dennis Cline



/s/ Michael J. Riccio Jr.                   Director                                December 23, 1997
-----------------------------
Michael J. Riccio, Jr.



/s/  Martin L. Schoffstall                  Director                                December 23, 1997
-----------------------------
Martin L. Schoffstall
</TABLE>

                                       42