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

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FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to Commission File No. 0-25131

INFOSPACE.COM, INC.
(Exact name of Registrant as specified in its charter)

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Delaware 91-1718107
(State or other jurisdiction (I.R.S. Employer)
incorporation or organization) Identification Number)
15375 N.E. 90th Street
Redmond, Washington 98052
(Address of principal executive
offices) (Zip Code)

Registrant's telephone number, including area code: (425) 602-0600

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Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.0001 per share

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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of Common Stock on February 29, 2000,
as reported by Nasdaq, was approximately $12.8 billion. Shares of voting stock
held by each officer and director and by each person who owns 5% or more of the
outstanding voting stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of February 29, 2000, 108,288,253 shares of the registrant's Common Stock
were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the definitive
proxy statement for the Annual Meeting of Stockholders tentatively scheduled
for May 22, 2000, (the "Proxy Statement").

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TABLE OF CONTENTS

Part I
Item 1. Business................................................................................ 3
Factors Affecting Our Operating Results, Business Prospects and Market Price of Stock.. 16
Item 2. Properties.............................................................................. 28
Item 3. Legal Proceedings....................................................................... 29
Item 4. Submission of Matters to a Vote of Security Holders..................................... 30

Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................... 31
Item 6. Selected Consolidated Financial Data.................................................... 33
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 34
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.............................. 46
Item 8. Financial Statements and Supplementary Data............................................. 48
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.... 75

Part III
Item 10. Executive Officers and Directors of the Registrant...................................... 75
Item 11. Executive Compensation.................................................................. 75
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 75
Item 13. Certain Relationships and Related Transactions.......................................... 75

Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................... 76
Signatures ....................................................................................... 78

ITEM 1. BUSINESS

Overview

InfoSpace is a global Internet information infrastructure services company.
InfoSpace provides enabling technologies to Web sites, merchants and wireless
devices. Our affiliates utilize and distribute these services via PCs and a
network of wireless and other non-PC devices including PCs, cellular phones,
pagers, screen telephones, television set-top boxes, online kiosks, and
personal digital assistants. We have relationships with AT&T Wireless, GTE,
USWEST, Intel, Ericsson, Nokia, NeoPoint, Sprint, Mitsui and Acer America.
InfoSpace's affiliate network also consists of more 2,500 Web sites that
include AOL, Microsoft, Disney/InfoSeek's GO Network, NBC's Snap, Lycos, Go2Net
Inc., DoubleClick, Dow Jones (The Wall Street Journal Interactive Edition) and
ABC LocalNet, among others.

Our Infrastructure Services

We have developed a scalable, flexible technology platform that enables us to
deliver a broad, integrated suite of services to Web sites, merchants and
wireless carriers. All of our consumer, merchant and wireless services utilize
the same core technology platform within the same operational infrastructure.
Our consumer services are designed for the end user and are distributed through
wireless devices and Web sites. These services include four main components:
(1) unified communication services, including device-independent email and
instant messaging; (2) information services, such as integrated directory,
news, and lifestyle information; (3) community services, including the "sticky"
services such as online address books and calendars; and (4) the ability to
offer collaboration services, including real-time document sharing. We target
merchant services to local merchants (including service-based merchants such as
restaurants and dry cleaners) and distribute these services through our
relationships with the regional bell operating companies (RBOCs), merchant
banks and other financial institutions and other local media networks,
including newspapers and television and radio stations. These services include
commerce services such as online storebuilding and technology that promotes
merchant services. We target wireless services to mobile users, whether on a
cellular phone, personal digital assistant (or PDA), pager or other non-PC
device, and distribute these services through our relationships with wireless
carriers and device manufacturers. These services include the ability to
conduct secure commerce using single-click buying, integrated information
services such as real-time stock quotes and traffic reports, and services that
manage users' lives, including online address books and calendars.

We design our infrastructure services to be highly flexible and customizable,
enabling affiliates to select from among our broad range of consumer, merchant
and wireless services. One of our principal strengths is our internally
developed technology, which enables us to easily and rapidly add new affiliates
and distribution partners by employing a distributed, scalable architecture
adapted specifically to our Internet-based infrastructure services. We help our
affiliates and distribution partners build and maintain their brands by
delivering our consumer, merchant and wireless services with the look and feel
and navigation features specific to each affiliate's delivery platform and
format, including the growing number of emerging wireless devices.

We have built an extensive distribution network through our direct sales
force and through reseller channels. Our reseller channels are based on
distribution agreements with online advertising networks, such as DoubleClick
and Flycast, who offer both our consumer and merchant services to their network
of thousands of Web sites, reseller agreements with RBOCs, including BellSouth,
SBC, Bell Atlantic and USWEST, merchant banks and other local media networks
who provide our services to local merchants. We also work with wireless
carriers such as AT&T Wireless, Airtouch, USWest and GTE, device manufacturers
such as Nokia, Ericsson and Neopoint, and software developers such as AvantGo,
who offer our wireless portal services to mobile users.

Consumer Services

Information Services

We provide information of broad appeal to users of wireless devices and PCs,
including maps, directories, financial data, traffic reports, sports, news and
entertainment. In most cases, we receive regular data feeds from our content
providers and store the content on our Web servers in order to maintain its
reliability and increase its accessibility. In other cases, our proprietary
technology allows Web users to transparently access content that is stored
directly on the content provider's system. In either case, our technology
enables us to integrate heterogeneous content from multiple sources and make it
appear as if it comes from one source, which is then delivered to our
affiliates. Our technology pulls the information dynamically into a Web page or
device output display that maintains the look and feel and navigation features
of each affiliate's Web site or wireless device.

We have acquired rights to third-party content pursuant to more than 85
license agreements, typically having terms of one to five years. The license
agreements require the content provider to update content on a regular basis,
the frequency of which varies depending on the type of content. In certain
arrangements, the content provider pays us a carriage fee for syndication of
its content to our network of affiliates. In other instances, we share with the
content provider advertising revenues attributable to end-user access of the
provider's content. For certain of our content, including our core directory
and map content, we pay a one-time or periodic fee or fee per content query to
the content provider. We typically enter into nonexclusive arrangements with
our content providers. However, in certain instances we have entered into
exclusive relationships, which may limit our ability to enter into additional
content agreements.

For our directory services, we integrate our yellow pages and white pages
information with each other and utilize yellow pages category headings in
combination with a natural word search feature to provide a user-friendly
interface and navigation vehicle within our directory services. We also
typically include maps and directions for addresses included in our directory
services. We further enhance the relevance and accuracy of responses to user
queries by employing a radial search feature to our directory services, which
allows users to specify the geographic scope within a radial distance of a
specific address, rather than more conventional methods of searching by zip
code or city and county.

In addition to our directory services, we distribute other valuable
information of broad appeal with everyday significance, such as classifieds,
news, travel and city guide information, real-time stock quotes and financial
information, Web directories and entertainment.

Our future success will depend on our ability to continue to integrate and
distribute information services of broad appeal. Our ability to maintain our
relationships with content providers and to build new relationships with
additional content providers is critical to the success of our business.

Community and Communications Services

We offer an extensive and integrated platform of consumer services that
includes community services and communication services.

Community-building services that we offer our affiliates include the "sticky"
services that are designed to keep a user on an affiliates' site. These include
personalized Web-based address books and calendars, personal home pages, online
chat and message boards.

We also offer unified communication services including device-independent
email and instant messaging. We integrate these services into the community-
building services we offer, making it easy for users to send email and instant
messages directly from their address book from any device and also view "buddy
lists" on any device.

Our Affiliate Network

We offer our infrastructure services to wireless device manufacturers such as
Nokia and Ericcson, wireless carriers such as GTE and USWEST and wireless
service providers such as AvantGo. Our PC-based affiliate network now consists
of over 2,500 portals and affinity sites, including 4 of the top 5 most
trafficked sites, according to Media Metrix. In addition, we believe our
affiliate network now reaches over 88% of all Internet users based on data as
of December 31, 1999, provided by Media Metrix.

Our consumer services revenue is derived from advertising, licensing fees and
guaranteed transaction fees in lieu of revenue share.

Merchant Services

Our merchant services give merchants the ability to create, promote, sell and
distribute their products and services across multiple channels through our
broad distribution network. We have reseller agreements with RBOCs, including
BellSouth, SBC, Bell Atlantic and USWEST, merchant banks and other local media
networks, such as newspapers, who provide our services to local merchants
worldwide.

Based on a broad platform of technology, we can deliver a broad array of
merchant services such as:

. the online delivery to any device of promotions that can be used online
and offline;

. single-click buying from any Web site directly from a wireless device;

. Page Express, which enables local merchants to create a Web presence;

. StoreBuilder, which enables merchants to build online stores;

. ActivePromotion, which enables merchants to create targeted product
promotions and distribute them across our network; and

. ActiveShopper, which provides an open marketplace where consumers can
find, research and purchase products from our merchant network.

With our acquisition of Prio, Inc. in February 2000, we can now integrate
online promotion technologies with an offline merchant's existing credit card
processing infrastructure, bridging the gap between the online and offline
worlds. Our enhanced commerce infrastructure will be designed to target and
deliver online promotions to consumers on their wireless devices or while they
are looking for goods and services on Web sites. To take advantage of the
promotion, the user can purchase the goods online, through a catalog or at a
physical retail store.

Through our recently announced acquisition of Millet Software
(PrivacyBank.com), we believe we will be able to provide a server-based
technology that enables wireless Internet devices to become commerce-enabled
devices by giving mobile users the ability to press one key to make on-the-spot
purchases from virtually any Web site. This is possible through a patent-
pending secure technology that provides an automated process for completing
payment forms, eliminating the need to continually enter in payment or shipping
information, register at sites or enter any specific passwords.

Buyers can also purchase multiple products from multiple merchants, using our
shopping cart that provides the convenience of single-click purchasing.

Currently, over 350,000 merchants use our merchant service offerings.

Wireless Services

Our wireless services are comprised of an integrated suite of wireless portal
services that provide mobile users with relevant information services, such as
real-time stock quotes and traffic reports, the ability to conduct secure
commerce transactions from a wireless device, including single-click buying,
communication services such as device-independent instant messaging and email,
personalization capabilities and location-based services that enable users to
search for location-based information, such as the restaurant closest to the
mobile user's current location.

As a result of our acquisition of Saraide, we will have relationships with
over 24 wireless carriers worldwide including British Telecom, Cellnet,
Dutchtone, Panafon, J-Phone, Omnitel and Libertel.

Our wireless services are distributed through the following wireless
carriers, device manufacturers and software providers.

Wireless Carriers AT&T Wireless, Airtouch, Sprint, GTE, USWEST
Wireless Software application
developers AvantGo, JP Systems, WolfeTech, Phone.com
Wireless Device Manufacturers Nokia, Ericcson and Neopoint
Pagers Motorola
Web Appliances Intel

Our platform of wireless services includes:

. Form-filling instant buying technology, which allows mobile users to
press a single key to conduct transactions from virtually any Web site.

. Promotions technology, which allows mobile users to find and receive
real-time promotions on wireless devices from retailers and service-based
merchants, such as dry cleaners and restaurants, that can be used online
and offline. To take advantage of the promotion, the user can either
purchase the goods online, go to the retail store or simply utilize the
service. Promotions are seamlessly matched and automatically credited to
the user's credit card statement through secure back-end transaction
processing.

. Location-based directory services, that enable mobile users to search for
information, such as finding an Italian restaurant closest to where they
are when they conduct the search.

. Secure wireless commerce through a collaboration with VeriSign to deliver
a broad range of services aimed at facilitating trusted and secure
commerce applications across the wired and wireless Internet. By
incorporating VeriSign's strengths in Internet authentication, validation
and payment services, we will be able to offer a broad range of secure
services tailored to the wireless market.

Our wireless Internet services are device-independent and provide a platform
which enables our wireless carriers to support HDML and SMTP and a variety of
emerging protocols such as WAP, VXML and PQA's for Palm VII. Our services are
compatible with a variety of gateway technologies including WAP gateways from
Nokia, Phone.com and Ericsson.

Our wireless services are private-labeled for each carrier, preserving the
brand of the carrier and their relationship with their customer and helping to
create a barrier to switch. Revenues are primarily generated from the carrier
and include licensing fees, per subscriber/per month fees in the United States
and per query/per message fees in Europe. In addition, we receive commerce
revenue for the transactions completed on the wireless devices.

International Expansion

We intend to capitalize on what we perceive to be a significant opportunity
for our services in international markets. We currently maintain offices in the
United States, Canada and India and have a joint venture in the United Kingdom.
Our wholly-owned subsidiary, InfoSpaceCanada.com, was formed in early 1999 and
has affiliate relationships with canada.com, a leading Canadian Web site and
search engine, as well as AOL Canada, MSN Canada and Sprint Canada.

InfoSpace.com India was formed as a result of our December 1999 acquisition
of privately-held Zephyr Software and its wholly owned subsidiary, Zephyr
Software (India) Private Limited.

In 1998, we entered into a joint venture with Thomson Directories Limited to
form TDL InfoSpace to replicate our content, community and commerce services in
Europe. TDL InfoSpace has targeted the United Kingdom as its first market, and
content services were launched in the third quarter of 1998. Under the license
agreement between Thomson and TDL InfoSpace, Thomson licenses its U.K.
directory information database to TDL InfoSpace. Under the Web site services
agreement between Thomson and TDL InfoSpace, Thomson also sells Internet yellow
pages advertising for the joint venture through its local sales force. Under
our license agreement with TDL InfoSpace, we license our technology and provide
hosting services to TDL InfoSpace.

Under the joint venture agreement, each of us and Thomson is obligated to
negotiate with TDL InfoSpace and the other party to jointly offer private label
solutions in other European countries prior to offering such services
independently or with other parties.

With our acquisition of Saraide.com, Inc. in March 2000, we intend to expand
our wireless services into Europe, Japan and Canada. We are currently
investigating additional international opportunities, but have no specific
plans to enter any particular market at this time. The expansion into
international markets involves a number of risks. See "Factors Affecting Our
Operating Results, Business Prospects and Market Price of Our Stock--Our
International Expansion Plans Involve Risks" for a description of these risks.

Revenue Sources

We have derived substantially all of our revenues for our consumer, merchant,
and wireless services from national and local advertising, licensing fees,
commerce transaction fees, and guaranteed transaction fees in lieu of revenue
share.

Advertising

National Advertising

Throughout our consumer services, we sell banner advertisements based on
costs per thousand impressions (CPMs) and other CPM-based national advertising.
Our national advertising agreements generally have terms of less than six
months and guarantee a minimum number of impressions. Actual CPMs depend on a
variety of factors, including, without limitation, the degree of targeting, the
duration of the advertising contract and the number of impressions purchased,
and are often negotiated on a case-by-case basis. Because of these factors,
actual CPMs may fluctuate. Our guarantee of minimum levels of impressions
exposes us to potentially significant financial risks, including the risk that
we may fail to deliver required minimum levels of user impressions, in which
case we typically continue to provide advertising without compensation until
such levels are met.

Local Internet Yellow Pages Advertising

We generate a basic Internet yellow pages listing free of charge for all U.S.
local business listings. Similar to traditional yellow pages industry
practices, we generate revenues by selling enhancements to this

basic listing. Internet yellow pages advertising agreements provide for terms
of one year with costs to the local advertisers ranging from $50 to $300 or
greater per year, depending on the types of enhancements selected.

Licensing Fees

We receive licensing fees from some of our consumer, merchant and wireless
services. Licensing fees are derived from the distribution of our consumer
services to many of the affiliates in our network. Licensing fees from merchant
services are derived through our reseller relationships with wireless carriers,
device manufacturers, RBOCs, merchant banks and other local media networks, and
include per store/per month fees and per service/per month fees. Licensing
agreements for our consumer and merchant services generally range from one to
three years in duration.

Commerce Fees

We generate commerce fees from links and completed transactions through our
merchant services delivered on wireless devices and the PC. Under our merchant
services arrangements, merchants agree to pay us a commission-based transaction
fee when a user clicks-through to their site and purchases a product. These
commissions typically range from 5 to 25 percent of the purchase amount. These
fees are generally paid to us monthly or quarterly, after the merchant has
collected its payment from the user.

Guaranteed Transaction Fees

We have agreements with some affiliates and merchants under which they agree
to pay us guaranteed transaction fees. These arrangements are individually
negotiated and have a range of specially adapted features involving various
compensation structures. These are often based on the range and extent of
customization rather than on CPMs. These arrangements vary in terms and
duration, but generally have longer terms than arrangements for our CPM-based
advertising. In some of these arrangements, we may also receive transaction
revenues when transactions exceed the guaranteed minimum payments. If the
merchant offers a commerce opportunity in its promotion, we may derive
transaction revenues based on the number of transactions made through the
promotion.

We also have arrangements with wireless carriers, device manufacturers and
software providers whereby we receive guaranteed transaction fees as well as
transaction revenues on a per-subscriber and per-query basis on existing
devices, such as pagers, in excess of the guaranteed minimum payments.

We generate a significant amount of our revenues from advertising and
guaranteed transaction fees from our affiliates who use our consumer services,
which involves a number of risks. For additional information about these risks,
see "Factors Affecting Our Operating Results, Business Prospects and Market
Price of Our Stock--We Rely on Advertising and Transaction Revenues," "--
Advertisers May Not Adopt the Internet as an Advertising Medium" and "--Our
Advertising Arrangements Involve Risks."

Technology and Infrastructure

One of our principal strengths is our internally developed technology, which
we have designed specifically for our Internet-based consumer, merchant and
wireless services. Our technology architecture features specially adapted
capabilities to enhance performance, reliability and scalability, consisting of
multiple proprietary software modules that support the core functions of our
operations. Our technology includes Web Server Technology, Database Technology,
a Web Scraping Engine, Gateway Technology and database network infrastructure.

Web Server Technology

We designed our Web Server Technology to enable rapid development and
deployment of information over multiple platforms and formats. It incorporates
an automated publishing engine that dynamically builds a page to conform to the
look and feel and navigation features of each affiliate. Our wireless Internet
services are device-independent and provide a platform which enables our
wireless carriers to support HDML and SMTP and a variety of emerging protocols
such as WAP, VXML and PQA's for Palm VII. Our services are compatible with a
variety of gateway technologies including WAP gateways from Nokia, Phone.com
and Ericsson.

Our Web Server Technology includes other features designed to optimize the
performance of our information infrastructure services, including:

. an HTML compressor that enables modifications of file content to reduce
size, thereby reducing download time for users;

. an "Adaptive Keep-Alive" feature that maximizes the time during which
client server connections are kept open, based on current server load,
thereby increasing user navigation and Web site traversal speed; and

. a Proxy Server that provides the capability for real-time integration and
branding of content that resides remotely with third-party content
providers.

Database Technology

We have developed proprietary database technology to address the specific
requirements of our business strategy and information infrastructure services.
We designed our Co-operative Database Architecture to function with a high
degree of efficiency within the unique operating parameters of the Internet, as
opposed to commonly used database systems that were developed prior to the
widespread acceptance of the Internet. The architecture is tightly integrated
with our Web Server Technology and incorporates the following features:

Our Heterogeneous Database Clustering allows disparate data sources to be
combined and accessed through a single uniform interface, regardless of data
structure or content. These clusters facilitate database bridging, which allows
a single database query to produce a single result set containing data
extracted from multiple databases, a vital component of our ability to
aggregate content from multiple sources. Database clustering in this manner
reduces dependence on single data sources, facilitates easy data updates and
reduces integration efforts. In addition, our pre-search and post-search
processing capabilities enable users to modify search parameters in real time
before and after querying a database.

Our Dynamic Parallel Index Traversal mechanism utilizes the search parameters
supplied by the user to determine the appropriate database index (from among
multiple indices) to efficiently locate the data requested. Further, an index
compression mechanism allows us to achieve an efficient balance between disk
space and compression/decompression when storing or accessing data.

In a response to a database query, conventional databases access previously
displayed results in order to display successive results to a given query, thus
increasing response time by performing redundant operations. Our Automatic
Query State Recovery mechanism decreases response time by maintaining the state
of a query to allow the prompt access of successive results. This feature is
particularly important, for example, when an end-user query retrieves a large
number of results.

We incorporate a natural word search interpreter, which successfully utilizes
familiar category and topic headings traditional to print directory media to
generate relevant and related results to information queries. By incorporating
a familiar navigation feature into our services, we believe we provide end
users with a more intuitive mechanism to search for and locate information.

For our merchant services we have developed a comprehensive enterprise-wide
data warehouse. This data warehouse contains information relating to merchants,
products, services, users, customers, profiles, storefronts, purchases, site
traffic and metrics. The aggregation of this information in one place allows us
to leverage our development efforts and reduce redundant information.

Web Scraping Engine

We have developed our Web Scraping Engine to allow data from a variety of
sources on the Internet to be retrieved, parsed and presented as a single
virtual database result, either in real-time or at predetermined intervals. Our
State Machine-Based Profiling system catalogs the data on each source site,
which is later accessed by our Web Scraping Engine for real-time retrieval.
Data results can be internally cached to reduce network traffic and deliver the
fastest possible results to the end user.

The Web Scraping Engine has numerous applications, one of which is collecting
real-time information from multiple sources in a manner that eliminates the
need for a data provider to perform any local modifications. This technology is
currently being applied in the price comparison feature of our ActiveShopper
merchant service. Various other potential uses of the technology have been
identified, including the collection and real-time updating of event data such
as concert information, performing arts schedules and sporting events, and the
aggregation of classified listings, such as employment listings from corporate
Web sites.

Gateway Technology

Our Gateway Technology allows us to take content from one source protocol and
forward it to a device destination that does not include any of the hardware or
software necessary for establishing an Internet connection. The content can be
sent directly or may have some processing performed before transmission to the
destination. This can be used for a single message, or multiple messages sent
on a timed basis such as weather, stock quotes, news and horoscopes. Messages
may be sent to a single user or group of users.

Data Network Infrastructure

We maintain a carrier-class data network center designed to ensure high-level
performance and reliability of our information services. We connect directly to
the Internet from our facilities in Redmond, Washington through redundant,
dedicated DS-3 communication lines provided by multiple telecommunication
service providers. Our hardware resides in a secure climate-controlled room. As
we expand our operations, we expect to locate server facilities at various
strategic geographic locations.

With the acquisitions of Prio and Saraide, we have data centers in Mountain
View, California serving the promotions technology, Dallas, Texas serving
wireless customers in North America, and Papendrecht, Netherlands serving
wireless customers in Europe.

Product Development

We believe that our technology platform is essential to successfully
implement our strategy of expanding our affiliate network, acquiring value-
added content to add to our consumer, merchant and wireless services, expanding
internationally and into other services and maintaining the attractiveness and
competitiveness of our private label solutions. We have invested significant
time and resources in creating our proprietary technology. Product development
expenses were $3.2 million for the year ended December 31, 1999, $1.2 million
for the year ended December 31, 1998 and $383,000 for the year ended December
31, 1997.

Rapidly changing technology, evolving industry standards, evolving customer
demands and frequent new product and service introductions characterize our
market. See "Factors Affecting Our Operating Results, Business Prospects and
Market Price of Our Stock--Rapid Technological Change Affects Our Business" for
a discussion of certain risks in this regard.

Intellectual Property

Our success depends significantly upon our proprietary technology. To protect
our proprietary rights, we rely on a combination of copyright and trademark
laws, patents, trade secrets, confidentiality agreements with employees and
third parties and protective contractual provisions. All of our employees have
executed confidentiality and nonuse agreements that transfer any rights they
may have in copyrightable works or patentable technologies to us. In addition,
prior to entering into discussions with potential content providers and
affiliates regarding our business and technologies, we generally require that
such parties enter into a nondisclosure agreements with us. If these
discussions result in a license or other business relationship, we also
generally require that the agreement setting forth the parties' respective
rights and obligations include provisions for the protection of our
intellectual property rights. For example, our standard affiliate agreement
provides that we retain ownership of all patents and copyrights in our
technology and requires our customers to display our copyright and trademark
notices.

"InfoSpace" is a registered trademark of ours. We also have applied for
registration of certain other service marks and trademarks, including
"InfoSpace.com " "ActiveShopper" and the "InfoSpace" logo in the United States
and in other countries, and will seek to register additional service marks and
trademarks, as appropriate. We may not be successful in obtaining the service
marks and trademarks that we have applied for. As of March 1, 2000 we have
filed 23 U.S. patent applications relating to various aspects of our technology
for querying and developing databases, for developing and constructing web
pages, for electronic commerce for on-line directory services and for web
scraping. With the acquisition of PrivacyBank, we obtain rights to several
additional pending patent applications. During January 2000, we received
notification of an issued patent for commerce infrastructure services on the
Internet and wireless devices. The patent covers private-label commerce
solutions and tracking the purchase of products, services and information on
the Internet and on wireless devices. We are preparing additional patent
applications on other features of our technology. We have instituted a formal
patent program and anticipate on-going patent application activity in the
future. Patents with respect to our technology may not be granted, and, if
granted, patents may be challenged or invalidated. In addition, issued patents
may not provide us with any competitive advantages and may be challenged by
third parties.

Despite our efforts to protect our proprietary rights, unauthorized parties
may copy aspects of our products or services or obtain and use information that
we regard as proprietary. The laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States.
In addition, others could possibly independently develop substantially
equivalent intellectual property. If we do not effectively protect our
intellectual property, our business could suffer.

Companies in the Internet services industry have frequently resorted to
litigation regarding intellectual property rights. We may have to litigate to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of other parties' proprietary rights. From
time to time, we have received, and may receive in the future, notice of claims
of infringement of other parties' proprietary rights. Any such claims could be
time-consuming, result in costly litigation, divert management's attention,
cause product or service release delays, require us to redesign our products or
services or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements, if required, may not be available on
acceptable terms or at all. If a successful claim of infringement were made
against us and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
business could suffer. See "Item 3. Legal Proceedings."

Competition

We operate in the Internet information infrastructure services market, which
is extremely competitive and is rapidly changing. Our current and prospective
competitors include many large companies that have substantially greater
resources than we have. We believe that the primary competitive factors in the
market for Internet information infrastructure services are:

. the ability to provide information of broad appeal, which is likely to
result in increased user traffic and increase the brand name value of the
Web sites and wireless devices to which the services are provided;

. the ability to meet the specific information and service demands of a
particular Web site or wireless device;

. the cost-effectiveness and reliability of the consumer, merchant or
wireless information services;

. the ability to provide consumer, merchant or wireless information
services that are attractive to advertisers and end users;

. the ability to achieve comprehensive coverage of a particular category of
information or services; and

. the ability to integrate related information to increase the utility of
the consumer, merchant or wireless information services offered.

We compete, directly or indirectly, in the following ways, among others:

. our directory services compete with AnyWho? (a division of AT&T), GTE
SuperPages, Switchboard, ZIP2 (which was acquired by Compaq), various
RBOCs' directory services, infoUSA's Lookup USA, City Search's Sidewalk
and Yahoo! Yellow Pages and White Pages;

. other information services we provide, such as classifieds, horoscopes
and real-time stock quotes, compete with specialized content providers;

. our U.K. joint venture competes with British Telecom's YELL service and
Scoot (UK) Limited in directory services; Inktomi and Autonomy in
infrastructure services, Excite, Yahoo! and MSN in syndication;
Shopguide, Shopsmart and Yahoo! shopping for merchant services and
various specialized content providers for information services;

. our community and communication services compete with services offered by
Internet portals such as AOL, Yahoo!, and Excite, as well as specialized
content service providers such as Hotmail;

. our merchant services compete with e-tailers such as Amazon.com, portals
such as AOL, Yahoo! and MSN and merchant aggregators such as Big Step and
Microsoft's Bcentral; and

. our wireless services compete with portals such as AOL, Yahoo!, MSN and
Lycos, and with specialized content providers.

We expect that in the future we will experience competition from other
Internet services companies and providers of Internet software, including
Microsoft, Yahoo!, AOL, Excite, Disney/Infoseek, Lycos, Go2Net's MetaCrawler
and NBC's Snap. Some of these companies are currently customers of ours, the
loss of which could harm our business. We may also face increased competition
from traditional media companies expanding onto the Internet.

Many of our current customers have established relationships with certain of
our current and potential future competitors. If our competitors develop
information infrastructure services that are superior to ours or that achieve
greater market acceptance than ours, our business will suffer.

Governmental Regulation

Because of the increasing use of the Internet, the government may adopt laws
and regulations relating to the Internet, addressing issues such as user
privacy, pricing, content, taxation, copyrights, distribution and product and
services quality.

Recent concerns regarding Internet user privacy has led to the introduction
of federal and state legislation to protect Internet user privacy. In addition,
the Federal Trade Commission has initiated investigations and hearings
regarding Internet user privacy which could result in rules or regulations that
could adversely affect our business. As a result, we could become subject to
new laws and regulations that could limit our ability to conduct targeted
advertising, or to distribute or collect user information.

European legislation to protect Internet user privacy has not heretofore
greatly impacted us. European countries may seek to more strictly enforce such
legislation, which may prevent us from offering some or all of our services in
some European countries.

We may be subject to provisions of the Federal Trade Commission Act that
regulate advertising in all media, including the Internet, and require
advertisers to substantiate advertising claims before disseminating
advertising. The Federal Trade Commission has the power to enforce this Act. It
has recently brought several actions charging deceptive advertising via the
Internet and is actively seeking new cases involving advertising via the
Internet.

We may also be subject to the provisions of the recently enacted
Communications Decency Act. This Act imposes substantial monetary fines and/or
criminal penalties on anyone who distributes or displays certain prohibited
material over the Internet. Although some court decisions have cast doubt on
the constitutionality of this Act, it could subject us to substantial
liability.

These or any other laws or regulations that may be enacted in the future
could have several adverse effects on our business. These effects include:

. we may be subject to substantial liability, including fines and criminal
penalties;

. we could be prevented from offering certain products or services; and

. the growth in Internet usage could be substantially limited.

Government regulation may present a risk to our business. See "Factors
Affecting Our Operating Results, Business Prospects and Market Price of Our
Stock--We May Become Subject to Government Regulation."

Employees

As of February 29, 2000, we had 330 employees. As of March 15, 2000, with the
acquisition of Saraide.com, we had over 450 employees. None of our employees is
represented by a labor union, and we consider our employee relations to be
good. Competition for qualified personnel in our industry is intense,
particularly for software development and other technical staff and for
personnel with experience in wireless services. We believe that our future
success will depend in part on our continued ability to attract, hire and
retain qualified personnel. See "Factors Affecting Our Operating Results,
Business Prospects and Market Price of Our Stock--We Need to Manage Our Growth
and Maintain Procedures and Controls" and "--We Depend on Key Personnel" and
"--We Need to Hire Additional Personnel."

Executive Officers

The following table sets forth certain information as of February 29, 2000
with respect to our executive officers:

Name Age Position
---- --- --------

Naveen Jain......................... 40 Chief Executive Officer and Chairman
of the Board
Ashok Narasimhan.................... 51 President, Merchant Services
Arif Janjua......................... 44 President, Consumer Services
Ellen B. Alben...................... 37 Senior Vice President, Legal and
Business Affairs and Secretary
Tammy D. Halstead................... 36 Vice President, Acting Chief
Financial Officer and Chief
Accounting Officer
Randy Massengale.................... 42 Senior Vice President, Human
Resources

Naveen Jain founded InfoSpace in March 1996. Mr. Jain has served as our Chief
Executive Officer since its inception, as its President since its inception to
November 1998 and as its sole director from its inception to June 1998, when he
was appointed Chairman of the Board upon the Board's expansion to five
directors. From June 1989 to March 1996, Mr. Jain held various positions at
Microsoft Corporation, including Group Manager for MSN, Microsoft's online
service. From 1987 to 1989, Mr. Jain served as Software Development Manager for
Tandon Computer Corporation, a PC manufacturing company. From 1985 to 1987, Mr.
Jain served as Software Manager for UniLogic, Inc., a PC manufacturing company
and from 1982 to 1985, he served as Product Manager and Software Engineer at
Unisys Corporation/Convergent Technologies, a computer manufacturing company.
Mr. Jain holds a B.S. from the University of Roorkee and a M.B.A. from St.
Xavier's School of Management.

Ashok Narasimhan joined InfoSpace in February 2000 as President of Merchant
Services. He founded Prio, Inc. in March 1996 and served as Chairman and Chief
Executive Officer. InfoSpace acquired Prio in February 2000. During the seven
years prior to forming Prio, he was part of the core management team of
VeriFone, where he served as Vice President of Product Development. Prior to
VeriFone, he was the founding Chief Executive Officer of the computer
businesses of Wipro, the largest computer, software and information technology
company in India. He holds B.S. and a M.B.A. from Indian Institute of
Management, associated with the Sloan School of Management at MIT.

Arif Janjua joined InfoSpace.com, Inc. in December 1999 as President of
Consumer Services. From February 1999 to November 1999, he was General Manager
of North American operations at Saraide. Prior to Saraide, from 1995 to 1999,
he was a Vice President at A.T. Kearney, a global management consulting firm,
where he led the firm's high technology practice. Prior to that, Mr. Janjua was
Director of Business Operations at a leading graphics semiconductor firm, S3,
where he had marketing responsibility for all desktop products. From 1991 to
1994, Mr. Janjua was a senior manager with Gemini Consulting, specializing in
the communications and computer industry. From 1985 to 1989, Mr. Janjua was
Director of Marketing at the Imaging and Graphics Division of Gould
Electronics. From 1981 to 1985, Mr. Janjua was Product Marketing Manager at
International Imaging Systems. He holds a B.S and M.S. in Electrical
Engineering from University of Windsor, Canada and an M.B.A. from University of
California, Berkeley.

Ellen B. Alben joined InfoSpace in May 1998 as Vice President, Legal and
Business Affairs and Secretary, and became a Senior Vice President in September
1999. From April 1997 to May 1998, she was a senior attorney with Perkins Coie
LLP. From September 1996 to April 1997, Ms. Alben served as a consultant to
Paragon Trade Brands, Inc., a private-label diaper manufacturer, and as special
securities counsel to companies raising private financing. From September 1995
through June 1996, she served as Vice President, General Counsel and Secretary
of Paragon Trade Brands. Paragon Trade Brands filed for bankruptcy protection
under Chapter 11 of the Bankruptcy Code in January 1997. From July 1994 to
September 1995, she served as Senior Associate Counsel of The Hillhaven
Corporation, a nursing home

provider, and from June 1993 to July 1994 she served as Associate Counsel of
Hillhaven. Prior to joining Hillhaven, Ms. Alben was in private practice,
specializing in corporate securities, finance, and mergers and acquisitions.
She holds a B.A. from Duke University and a J.D. from Stanford Law School.

Tammy D. Halstead joined InfoSpace in July 1998 as Corporate Controller. In
December 1998, she was appointed Vice President and Chief Accounting Officer,
and in November 1999 she became Acting Chief Financial Officer. From March 1997
to June 1998, she worked at the Seattle office of USWeb Corporation, an
Internet professional services firm, where she served as Director of Finance
and Administration and later as Vice President, Finance and Administration.
From April 1996 to March 1997, she was the Director of Finance and
Administration at Cosmix, Inc., which was acquired by USWeb Corporation in
March 1997. From December 1993 to February 1996, she served as Controller of
ConnectSoft, Inc., a software development company. Prior to joining
ConnectSoft, Inc., she spent eight years in private industry with a division of
Gearbulk Ltd., an international shipping company, and in public accounting with
Ernst & Whinney (now Ernst & Young LLP). She holds a B.A. in Business
Administration from Idaho State University and is a licensed CPA.

Randy Massengale joined InfoSpace in December 1998 as Vice President of Human
Resources and became Senior Vice President of Human Resources in September
1999. From 1992 to 1998 he was employed by Microsoft Corporation in human
resources as Director of Diversity. From 1985 to 1992 he was employed by John
Fluke Manufacturing Company Inc., a provider of general purpose electronic test
and measurement equipment located in Everett, Washington. Prior to that he
worked as a Recruiter for Intel Corp. and as Senior Human Resources Specialist
at Tektronix Inc. Mr. Massengale holds a B.A. degree from Lewis and Clark
College and a M. S. in Management from Antioch University.

FACTORS AFFECTING OUR OPERATING RESULTS,
BUSINESS PROSPECTS AND MARKET PRICE OF STOCK

In addition to other information in this report, investors evaluating us and
our business should carefully consider the following risk factors. These risks
may impair our operating results and business prospects and the market price of
our stock. This report contains forward-looking statements that involve risks
and uncertainties. These forward-looking statements include, but are not
limited to, statements regarding our business and growth strategy, the expected
demand for and benefits of our Internet information infrastructure services for
our affiliates, advertisers, content providers and distribution partners
anticipated benefits from the business and technologies we have acquired or
intend to acquire, future carriage fees, increased advertising and public
relations expenditures, increased operating expenses and the reasons for such
increases, expected operating losses, increased product development
expenditures, increased costs of revenues, increased product development
expenses, increased sales and marketing expenses, increased general and
administrative expenses, anticipated capital equipment expenditures and
anticipated cash needs. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause our and the
strategic Internet services industry's actual results, levels of activity,
performance, achievements and prospects to be materially different from those
expressed or implied by such forward-looking statements. The risks set forth
below and elsewhere in this report could cause actual results to differ
materially from those projected.

We Have a Limited Operating History and a History of Losses.

We have a limited operating history, which makes it difficult to evaluate our
business and prospects. We have incurred net losses from our inception in March
1996 through December 31, 1999. At December 31, 1999, we had an accumulated
deficit of approximately $35.7 million. We expect to incur operating losses on
a quarterly basis in the future. Our prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as Internet services. To address the risks we face and to
be able to achieve and sustain profitability, we must, among other things:

. develop and maintain strategic relationships with potential affiliates,
distribution partners and content providers;

. identify and acquire the rights to additional content, technology and
services;

. successfully integrate new features with our consumer, merchant and
wireless services;

. expand our sales and marketing efforts, including relationships with
third parties to sell our merchant services;

. maintain and increase our affiliate, distribution and advertiser base;

. successfully expand into international markets;

. retain and motivate qualified personnel; and

. successfully respond to competitive developments.

If we do not effectively address the risks we face, our business will suffer
and we may not sustain profitability. See "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Our Financial Results Are Likely to Fluctuate.

Our financial results have varied on a quarterly basis and are likely to
fluctuate substantially in the future. These fluctuations may be caused by
several factors, many of which are beyond our control. These factors include:

. the addition or loss of affiliates;

. variable demand for our consumer, merchant and wireless services by our
affiliates;

. the cost of acquiring and the availability of content, technology and
services;

. the growth and overall level of demand for consumer, merchant and
wireless services;

. our ability to attract and retain advertisers, content providers,
affiliates and distribution partners;

. seasonal trends in Internet usage and advertising placements;

. the amount and timing of fees we pay to our affiliates to include our
information services on their Web sites and wireless devices;

. the productivity of our direct sales force and the sales forces of our
distribution partners;

. the amount and timing of increased expenditures for expansion of our
operations, including the hiring of new employees, capital expenditures
and related costs;

. our ability to continue to enhance, maintain and support our technology;

. the result of litigation that is currently ongoing against InfoSpace, or
any litigation that is filed against us in the future;

. our ability to attract and retain personnel;

. our ability to successfully integrate and manage newly acquired
companies;

. the introduction of new or enhanced services by us, our affiliates or
distribution partners, or other companies that compete with us or our
affiliates;

. price competition or pricing changes in Internet information
infrastructure services, such as ours;

. technical difficulties, system downtime, system failures or Internet
brown-outs;

. political or economic events and governmental actions affecting Internet
operations or content; and

. general economic conditions and economic conditions specific to the
Internet.

If one or more of these factors or other factors occur, our business could
suffer.

In addition, because InfoSpace.com only began operations in March 1996, and
because the market for Internet infrastructure services such as ours is new and
evolving, it is very difficult to predict future financial results. We plan to
significantly increase our sales and marketing, research and development and
general and administrative expenses in the year 2000. Our expenses are
partially based on our expectations regarding future revenues and estimated
expenses from our acquisitions, which are largely fixed in nature, particularly
in the short term. As a result, if our revenues in a period do not meet our
expectations, our financial results will likely suffer.

Pending and Potential Acquisitions Involve Risks.

We have acquired complementary technologies or businesses in the past, and
intend to do so in the future. Acquisitions may involve potentially dilutive
issuances of stock, the incurrence of additional debt and contingent
liabilities or large one-time write-offs and amortization expenses related to
goodwill and other intangible assets. Any of these factors could adversely
affect our results of operations or stock price. Acquisitions involve numerous
risks, including:

. difficulties in assimilating the operations, products, technology,
information systems and personnel of the acquired company;

. diverting management's attention from other business concerns;

. impairing relationships with our employees, affiliates, advertisers,
content providers and distribution partners;

. being unable to maintain uniform standards, controls, procedures and
policies;

. entering markets in which we have no direct prior experience; and

. losing key employees of the acquired company.

We may not be able to successfully integrate the technology and personnel we
have acquired or the other businesses, technologies or personnel that we
acquire in the future. We and the businesses acquired by us may require
substantial additional capital, and there can be no assurance as to the
availability of such capital when needed, nor as to the terms on which such
capital might be made available to us. We have retained, and may in the future
retain, existing management of acquired companies or technologies, under the
overall supervision of our senior management. The success of the operations of
these acquired companies and technologies will depend, to a great extent, on
the continued efforts of the management of the acquired companies.

We Need to Manage Our Growth and Maintain Procedures and Controls.

We have rapidly and significantly expanded our operations and anticipate
further significant expansion to accommodate expected growth in our customer
base and market opportunities. We have increased the number of employees from
15 at January 1, 1998 to 330 at February 29, 2000. As of March 15, 2000, with
the acquisition of Saraide, we have over 450 employees. We now have offices in
Redmond, Washington, San Francisco and Mountain View, California, New York City
and Rochester, New York, and Toronto, Canada, With the acquisition of Saraide,
we have added offices in San Mateo, California, Dallas, Texas, Ottawa, Canada,
Papendrecht, Netherlands, and London, UK. This expansion has placed, and is
expected to continue to place, a significant strain on our management and
operational resources. We do not have experience managing multiple offices with
multiple facilities and personnel in disparate locations. As a result, we may
not be able to effectively manage our resources, coordinate our efforts,
supervise our personnel or otherwise successfully manage our resources. We have
recently added a number of key managerial, technical and operations personnel
and we expect to add additional key personnel in the near future. We also plan
to continue to significantly increase our employee base. These additional
personnel may further strain our management resources.

Our relationships with affiliates and distribution partners, content
providers and advertisers are subject to frequent change. Prior to implementing
procedures and controls in this area, these changes were often informal. In
particular, we may have failed to perform our obligations under certain
commercial contracts that may have been modified or terminated by verbal
agreement. We believe that any failure to perform our obligations was not
significant. This practice of the modification or termination of past written
agreements by verbal agreement has resulted, and may result in the future, in
disputes regarding the existence, interpretation and circumstances regarding
modification or termination of commercial contracts. We are currently involved
in litigation with Internet Yellow Pages, Inc., a direct marketing company with
which we had a cooperative sales relationship, and have received other claims.
If our relationships with affiliates and distribution partners, content
providers and advertisers evolve in an adverse manner, if we get into
contractual disputes with affiliates and distribution partners, content
providers or advertisers or if any agreements with such persons are terminated,
our business could suffer. See "Business--Legal Proceedings."

The rapid growth of our business has strained our ability to meet customer
demands and manage the growing number of affiliate relationships. In addition,
our affiliate relationships are also growing in their size and complexity of
services. As a result of the growth in the size, number, and complexity of our
relationships we may be unable to meet the demands of our customer
relationships, which could result in the loss of customers, subject us to
penalties under our affiliate agreements and harm our business reputation.

To manage the expected growth of our operations and personnel, we must
continue maintaining and improving or replacing existing operational,
accounting and information systems, procedures and controls.

Further, we must manage effectively our relationships with various Internet
content providers, distribution partners, wireless carriers, advertisers,
affiliates and other third parties necessary to our business. If we are unable
to manage growth effectively, our business could suffer. See "--We Are Subject
to Pending Legal Proceedings," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Employees" and "--
Our Executive Officers."

We Rely on Advertising and Transaction Revenues.

We derive a significant amount of our revenues from the sale of national and
local advertisements, transaction fees and promotions from our affiliates who
use our consumer services, and we expect this to continue for the first half of
2000. Our ability to increase and diversify our revenues will depend upon a
number of factors, including the following:

. the acceptance of the Internet as an advertising medium by national and
local advertisers;

. the acceptance and regular use of our information infrastructure services
by a large number of users who have demographic characteristics that are
attractive to advertisers;

. the availability of attractive advertising space within our private label
solutions;

. the ability of our business development and sales personnel to
effectively sell our broad suite of consumer, merchant and wireless
services;

. the development of the Internet as an attractive platform for electronic
commerce;

. the use of our integrated merchant tools by small and medium sized online
and offline merchants;

. the adoption of our wireless services and solutions by wireless carriers
and device manufacturers; and

. the use of our information services by subscribers on their wireless
devices.

We Rely on Our Relationships with Affiliates.

We will be able to continue generating revenues from advertising, transaction
fees and promotions only if we can secure and maintain distribution for our
information infrastructure services on acceptable commercial terms through a
wide range of affiliates. In particular, we expect that a limited number of our
affiliates, including, America Online, Inc., or AOL, its CompuServe and Digital
City divisions and its Netscape Communications subsidiary and Microsoft
Network, LLC will account for a substantial portion of our affiliate traffic.
Our distribution arrangements with our affiliates typically are for limited
durations of between six months and two years and automatically renew for
successive terms thereafter, subject to termination on short notice. We cannot
assure you that such arrangements will not be terminated or that such
arrangements will be renewed upon expiration of their terms. We generally share
with each affiliate a portion of the revenues generated by advertising on the
Web pages that deliver our content services. We pay carriage fees to certain
affiliates, including AOL. These relationships may not be profitable or result
in benefits to us that outweigh the costs of the relationships. In addition, if
we lose a major affiliate, we may be unable to timely or effectively replace
the affiliate with other affiliates with comparable traffic patterns and user
demographics. The loss of any major affiliate could harm our business.

Advertisers May Not Adopt the Internet as an Advertising Medium.

Most advertising agencies and potential advertisers, particularly local
advertisers, have only limited experience advertising on the Internet and have
not devoted a significant portion of their advertising expenditures to Internet
advertising. As the Internet evolves, advertisers may find Internet advertising
to be a less effective means of promoting their products and services relative
to traditional methods of advertising and may not continue to allocate funds
for Internet advertising. In addition, advertising on the Internet is at a much
earlier stage of development in international markets compared to the United
States.

Fluid and intense competition in the sale of advertising on the Internet has
led different vendors to quote a wide range of rates and offer a variety of
pricing models for various advertising services. As a result, we have
difficulty projecting future advertising revenues and predicting which pricing
models advertisers will adopt. For example, if many advertisers based their
advertising rates on the number of click throughs from our information services
to their Web pages, instead of solely on the number of impressions received,
our revenues could decrease. There are no widely accepted standards for the
measurement of the effectiveness of Internet advertising, and standards may not
develop sufficiently to support Internet advertising as a significant
advertising medium. We typically base our advertising rates on the number of
impressions received, and our advertising customers may not accept our
measurements or such measurements may contain errors.

Industry analysts and others have made many predictions concerning the growth
of the Internet as a commercial medium. Many of these historical predictions
have overstated the growth of the Internet and should not be relied upon. This
growth may not occur or may occur more slowly than estimated. In addition, if a
large number of consumers use "filter" software programs that limit or remove
advertising from the Web, advertisers may choose not to advertise on the
Internet. If the commercial use of the Internet does not develop, or if the
Internet does not develop as an effective and measurable medium for
advertising, our business will suffer. See "Business--Advertising."

We Rely on a Small Number of Customers.

We derive a substantial portion of our revenues from a small number of
customers. We expect that this will continue in the foreseeable future.

Our top ten customers represented 57% of our revenues in 1999 and 48% of our
revenues for 1998. In particular, 800-U.S. Search, Inc. accounted for
approximately 21% of our revenues for the years ended December 31, 1999 and
1998. If we lose any of these customers, including 800-U.S. Search in
particular, or if any of these customers are unable or unwilling to pay us
amounts that they owe us, our financial results will suffer.

Our Advertising Arrangements Involve Risks.

We typically sell national advertisements pursuant to short-term agreements
of less than six months. As a result, our national advertising customers could
cancel these agreements, change their advertising expenditures or buy
advertising from our competitors on relatively short notice and without
penalty. Because we derive, and expect to continue to derive, a large portion
of our consumer services revenues from sales of national advertising, these
short-term agreements expose us to competitive pressures and potentially severe
fluctuations in our financial results.

In addition, we typically guarantee our national advertising customers a
minimum number of impressions or click throughs by Web users. These
arrangements expose us to potentially significant risks. If we fail to deliver
these minimum levels, we typically have to provide free advertising to the
customer until the minimum level is met, which could harm our financial
results.

We occasionally guarantee the availability of advertising space in connection
with promotion arrangements and content agreements. In addition, we
occasionally provide customized advertising campaigns for advertisers and agree
with certain advertisers that we will not accept advertising from any other
customer within a particular subject matter. All of these arrangements subject
us to certain risks. These risks include:

. our potential inability to meet the guarantees we make to our customers;

. our allocation of resources to create customized advertising that may not
result in successful advertisements;

. a requirement to forego advertising from potential customers whose
advertisements would conflict with those of other customers; and

. a potential limitation on availability of additional advertising space.

Any of these results could harm our financial results.

We Depend on Third Parties for Content.

We typically do not create our own content. Rather, we acquire rights to
information from more than 85 third-party content providers, and our future
success is critically dependent upon our ability to maintain relationships with
these content providers and enter into new relationships with other content
providers.

We typically license content under short-term arrangements that do not
require us to pay royalties or other fees for the use of the content. However,
we do enter into revenue-sharing arrangements with certain content providers,
and we pay certain content providers a one-time fee, a periodic fee or a fee
for each query from Web users. In the future, we expect that certain of our
content providers will likely demand a greater portion of advertising revenues
or increase the fees that they charge us for their content. If we fail to enter
into and maintain satisfactory arrangements with content providers, our
business will suffer. See "--We Need to Manage Our Growth and Maintain
Procedures and Controls."

We Depend on Key Personnel.

Our performance depends on the continued services of our executive officers
and other key personnel, particularly within our merchant services and wireless
services business areas. We maintain key person life insurance on Naveen Jain,
our Chief Executive Officer, in the amount of $5.0 million. We do not maintain
key person life insurance policies on any of our other employees. If we lose
the services of any of our executive officers or other key employees, our
business could suffer. See "Business--Employees" and "--Executive Officers."

We Need to Hire Additional Personnel.

Our future success depends on our ability to identify, attract, hire, train,
retain and motivate highly skilled technical, managerial, sales and marketing
and business development personnel. We intend to hire a significant number of
technical, sales and marketing, business development and administrative
personnel during the next year. Our services and the industries to which we
provide our services are relatively new, particularly with respect to our
wireless and merchant services. As a result, qualified technical personnel with
relevant experience to our business are scarce and therefore difficult to
recruit. If we fail to successfully attract, assimilate and retain a sufficient
number of qualified technical, managerial, sales and marketing, business
development and administrative personnel, our business could suffer.

Our International Expansion Plans Involve Risks.

A key component of our strategy is expanding our operations into
international markets. We have entered into a joint venture agreement with
Thomson Directories Limited to replicate our content, community and commerce
services in Europe. The joint venture, TDL InfoSpace (Europe) Limited, has
targeted the United Kingdom as its first market, and it launched content
services in the third quarter of 1998. Under the joint venture agreement, each
of us is obligated to negotiate with TDL InfoSpace and the other party to
jointly offer content, community and commerce services in other European
countries prior to offering such services independently or with other parties.
In March 1999, we began providing content, community and commerce services to
Canadian affiliates through our wholly-owned subsidiary, InfoSpaceCanada.com.
We expect to launch InfoSpace.com India in 2000 to provide comprehensive
localized consumer, merchant and wireless services to the Indian market. In
addition, with our acquisition of Saraide, we expect to expand our wireless
services into Europe, Japan and Canada.

To date, we have limited experience in developing and syndicating localized
versions of our information infrastructure services internationally, and we may
not be able to successfully execute our business model in these markets. In
addition, international markets experience lower levels of Internet usage and
Internet advertising than the United States. We rely on our business partner in
Europe for U.K. directory information and local sales forces and may enter into
similar relationships if we expand into other international markets.
Accordingly, our success in these markets will be directly linked to the
success of our business partners in such activities. If our business partners
fail to successfully establish operations and sales and marketing efforts in
these markets, our business could suffer. See "Business--International
Expansion."

In addition, we face a number of risks inherent in doing business in
international markets, including, among others:

. unexpected changes in regulatory requirements;

. potentially adverse tax consequences;

. export controls relating to encryption technology;

. tariffs and other trade barriers;

. difficulties in staffing and managing foreign operations;

. changing economic conditions;

. exposures to different legal standards (particularly with respect to
intellectual property and distribution of information over the Internet);

. burdens of complying with a variety of foreign laws;

. fluctuations in currency exchange rates; and

. seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world.

If any of these risks occur, our business could suffer.

Our Business Is Highly Competitive.

. the ability to provide information and services of broad appeal, which is
likely to result in increased user traffic and increase the brand name
value of the Web sites and wireless devices to which the services are
provided;

. the ability to meet the specific information and service demands of a
particular Web site or wireless devices;

. the cost-effectiveness and reliability of the consumer, merchant and
wireless information services;

. the ability to provide consumer, merchant and wireless information
services that are attractive to advertisers and end users;

. the ability to achieve comprehensive coverage of a particular category of
information or services; and

. the ability to integrate related information to increase the utility of
the consumer, merchant and wireless information services offered.

We compete, directly or indirectly, in the following ways, among others:

. our directory services compete with AnyWho? (a division of AT&T), GTE
SuperPages, Switchboard, ZIP2 (which was recently acquired by Compaq),
various RBOCs' directory services, infoUSA's Lookup USA, City Search
Sidewalk and Yahoo! Yellow Pages and White Pages;

. other information services we provide, such as classifieds, horoscopes
and real-time stock quotes, compete with specialized content providers;

. our community services compete with services offered by Internet portals
such as AOL, Yahoo! and Excite, as well as specialized content service
providers such as Hotmail;

. our merchant services compete with e-tailers such as Amazon.com, portals
such as AOL, Yahoo! and MSN, and merchant aggregators such as Big Step
and Microsoft's Bcentral; and

. our wireless commerce services compete with portals such as AOL, Yahoo!,
MSN and Lycos, and with specialized content providers.

Many of our current customers have established relationships with certain of
our current and potential future competitors. If our competitors develop
Internet information infrastructure services that are superior to ours or that
achieve greater market acceptance than ours, our business will suffer.

Our Business Relies on the Performance of Our Systems.

Our success depends, in part, on the performance, reliability and
availability of our consumer, merchant and wireless services. Our revenues
depend, in large part, on the number of users that access our consumer,
merchant and wireless services. Our computer and communications hardware is
currently located at our main headquarters in Redmond, Washington.

With the acquisitions of Prio and Saraide, we will have data centers in
Mountain View, California serving the promotions technology, Dallas, Texas
serving wireless customers in North America, and Papendrecht, Netherlands
serving wireless customers in Europe. None of our data centers are currently
redundant. Our success on a global basis will depend in part on our ability to
create carrier class infrastructure systems and build network operations
centers worldwide that can support the delivery of integrated consumer,
merchant and wireless services and the expected growth of these services. We
may be unable to develop or successfully manage the infrastructure necessary to
meet current demands for reliability and scalability of our systems.

The Company has entered into Service Level Agreements with certain merchant
services distributors including merchant banks and most of our wireless
customers. These agreements call for system up times, 24/7 support and include
penalties for non-performance. We may be unable to fulfill these commitments,
which would subject us to penalties under our agreements, harm our reputation
and could result in the loss of customers and distributors, which would harm
our business.

Our systems and operations could be damaged or interrupted by fire, flood,
power loss, telecommunications failure, Internet breakdown, break-in,
earthquake and similar events. We do not have a formal disaster recovery plan,
and we do not carry business interruption insurance that is adequate to
compensate us for all the losses that may occur. In addition, systems that use
sophisticated software may contain bugs, which could also interrupt service.
Any system interruptions resulting in the unavailability of our consumer,
merchant and wireless services would reduce the volume of users able to access
our

consumer, merchant and wireless services and the attractiveness of our service
offerings to our affiliates, advertisers and content providers, which could
harm our business.

Our Industry Is Experiencing Consolidation.

The Internet industry has recently experienced substantial consolidation. For
example, AOL has acquired Netscape and has agreed to acquire Time-Warner, At
Home has acquired Excite, and Compaq has acquired ZIP2. We expect this
consolidation to continue. These acquisitions could affect us in a number of
ways, including:

. companies from whom we acquire content could be acquired by one of our
competitors and stop licensing us content;

. our customers could be acquired by one of our competitors and stop buying
advertising from us; and

. our customers could merge with other customers, which could reduce the
size of our customer base.

This consolidation in the Internet industry could harm our business.

We Are Subject to Pending Legal Proceedings.

From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of our business, including
claims of alleged infringement of third-party trademarks and other intellectual
property rights by us. Such claims, even if not meritorious, could require the
expenditure of significant financial and managerial resources, which could harm
our business.

On February 8, 2000, we reached a settlement with an alleged former employee.
Under the terms of the settlement, the alleged employee received a cash payment
of $10.5 million.

On December 15, 1999, a complaint was filed against us by a former employee
alleging claims for breach of contract, fraud, negligent misrepresentation, and
promissory estoppel. The former employee contends he agreed to work for us on
the basis of certain misrepresentation, that he entered into an agreement with
the Company that entitles him to an option to purchase 150,000 shares of the
Company's common stock, and that he was terminated without cause. The former
employee is seeking the right to purchase the shares of stock, unspecified
compensatory and punitive damages, and litigation costs and attorney's fees.

On December 23, 1998, we filed a complaint against Internet Yellow Pages,
Inc., or IYP, and Greg Crane, asserting claims for (a) account stated, (b)
breach of contract, and (c) fraud. IYP has asserted counterclaims against us
for breach of contract, fraud, extortion and violation of the Consumer
Protection Act (RCW 19.86), and seeks relief consisting of $1,500,000 and other
unquantified money damages, punitive damages, treble damages and attorney's
fees.

We believe we have meritorious defenses to all of these claims against us.
Nevertheless, litigation is inherently uncertain, and we may not prevail in
these suits.

We had discussions with a number of individuals in the past regarding
employment by us and also hired and subsequently terminated a number of
individuals as employees or consultants. Furthermore, primarily during our
early stage of development, our procedures with respect to the manner of
granting options to new employees were not clearly documented. As a result of
these factors, and in light of the receipt of the above claims, we have in the
past received, and may in the future receive, similar claims from one or more
individuals asserting rights to acquire shares of our stock or to receive cash
compensation. We cannot predict whether such future claims will be made or the
ultimate resolution of any currently outstanding or future claim See "Item
3. Legal Proceedings."

We Rely on Internally Developed Software and Systems.

We have developed custom software for our network servers and our private
label solutions. This software may contain undetected errors, defects or bugs.
Although we have not suffered significant harm from any errors or defects to
date, we may discover significant errors or defects in the future that we may
or may not be able to fix. We must expand and upgrade our technology,
transaction-processing systems and network infrastructure if the volume of
traffic on our Web site or our affiliates' Web sites increases substantially.
In addition, as we continue to expand our merchant and wireless services, we
may have to significantly modify our systems. We could experience periodic
temporary capacity constraints, which may cause unanticipated system
disruptions, slower response times and lower levels of customer service. We may
be unable to accurately project the rate or timing of increases, if any, in the
use of our consumer, merchant and wireless services or expand and upgrade our
systems and infrastructure to accommodate these increases in a timely manner.
Any inability to do so could harm our business.

Rapid Technological Change Affects Our Business.

Rapidly changing technology, evolving industry standards, evolving customer
demands and frequent new product and service introductions characterize our
market. Our market's early stage of development exacerbates these
characteristics. Our future success depends in significant part on our ability
to develop and introduce compelling services on a timely and competitive basis
and to improve the performance, content and reliability of our consumer,
merchant and wireless services in response to both the evolving demands of the
market and competitive product offerings. Our efforts in these areas may not be
successful. If a large number of affiliates adopt new Internet technologies or
standards, we may need to incur substantial expenditures modifying or adapting
our enabling technologies and Internet information infrastructure services.

We Rely on the Internet System Infrastructure.

Our success depends, in large part, on other companies maintaining the
Internet system infrastructure. In particular, we rely on other companies to
maintain a reliable network backbone that provides adequate speed, data
capacity and security and to develop products that enable reliable Internet
access and services. If the Internet continues to experience significant growth
in the number of users, frequency of use and amount of data transmitted, the
Internet system infrastructure may be unable to support the demands placed on
it, and the Internet's performance or reliability may suffer as a result of
this continued growth. In addition, the Internet could lose its commercial
viability as a form of media due to delays in the development or adoption of
new standards and protocols to process increased levels of Internet activity.
Any such degradation of Internet performance or reliability could cause
advertisers to reduce their Internet expenditures. If other companies do not
develop the infrastructure or complementary products and services necessary to
establish and maintain the Internet as a viable commercial medium, or if the
Internet does not become a viable commercial medium or platform for
advertising, promotions and electronic commerce, our business could suffer.

We Receive Information that May Subject Us to Liability.

We obtain content and commerce information from third parties. When we
integrate and distribute this information over the Internet, we may be liable
for the data that is contained in that content. This could subject us to legal
liability for such things as defamation, negligence, intellectual property
infringement and product or service liability. Many of the agreements by which
we obtain content do not contain indemnity provisions in favor of us. Even if a
given contract does contain indemnity provisions, these provisions may not
cover a particular claim. We carry general business insurance, however, this
coverage may be inadequate.

In addition, individuals whose names appear in our yellow pages and white
pages directories have occasionally contacted us. These individuals believed
that their phone numbers and addresses were unlisted, and our directories are
not always updated to delete phone numbers or addresses when they are changed
from listed to unlisted. While we have not received any claims from these
individuals, we may receive claims in the future. Any liability that we incur
as a result of content we receive from third parties could harm our financial
results.

Our Networks Face Security Risks.

Even though we have implemented security measures, our networks may be
vulnerable to unauthorized access by hackers or others, computer viruses and
other disruptive problems. Someone who is able to circumvent security measures
could misappropriate our proprietary information or cause interruptions in our
Internet operations. Internet and online service providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. We may need to expend significant capital or other
resources protecting against the threat of security breaches or alleviating
problems caused by breaches. Although we intend to continue to implement
industry-standard security measures, persons may be able to circumvent the
measures that we implement in the future. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to users accessing Web pages that deliver our content
services, any of which could harm our business. See "Business--Technology and
Infrastructure--Data Network Infrastructure".

Users of online commerce services are highly concerned about the security of
transmissions over public networks. Concerns over security and the privacy of
users may inhibit the growth of the Internet and other online services
generally, and the Web in particular, especially as a means of conducting
commercial transactions. As we expand our merchant services, we intend to rely
on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary to securely transmit
confidential information, such as member profiles and customer credit card
numbers. Users could possibly circumvent the measures we take to protect
customer transaction data. To the extent that our activities involve the
storage and transmission of proprietary information, such as credit card
numbers, security breaches could damage our reputation and expose us to a risk
of loss or litigation and possible liability. Any compromise of our security
could harm our business.

We May Be Unable to Adequately Protect or Enforce Our Intellectual Property
Rights.

Companies in the computer industry have frequently resorted to litigation
regarding intellectual property rights. We may have to litigate to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of other parties' proprietary rights. From time to time, we
have received, and we may receive in the future, notice of claims of
infringement of other parties' proprietary rights. Any such claims could be
time-consuming, result in costly litigation, divert management's attention,
cause product or service release delays, require us to redesign our products or
services or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements, if required, may not be available on
acceptable terms or at all. If a successful claim of infringement were made
against us and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
business could suffer. See "Business--Intellectual Property" and "Item 3. Legal
Proceedings."

We May Become Subject to Governmental Regulation.

Because of the increasing use of the Internet, the government may adopt laws
and regulations with regard to the Internet covering issues such as user
privacy, pricing, content, taxation, copyrights, distribution and product and
services quality. For a description of certain risks relating to government
regulation, see "Business--Governmental Regulation."

We May Require Additional Funding.

Although we believe that our cash reserves and cash flows from operations
will be adequate to fund our operations for at least the next 12 months, such
sources may be inadequate. Consequently, we may require additional funds during
or after such period. Additional financing may not be available on favorable
terms or at all. If we raise additional funds by selling stock, the percentage
ownership of our then current stockholders will be reduced. If we cannot raise
adequate funds to satisfy our capital requirements, we may have to limit our
operations significantly. Our future capital requirements depend upon many
factors, including, but not limited to:

. the rate at which we expand our sales and marketing operations;

. the amount and timing of fees paid to affiliates to include our consumer,
merchant and wireless services on their site or service;

. the extent to which we expand our consumer, merchant and wireless
services;

. the extent to which we develop and upgrade our technology and data
network infrastructure;

. the occurrence, timing, size and success of acquisitions;

. the cash requirements of entities we have acquired;

. the number and amount of investments we make in privately held technology
companies;

. the rate at which we expand internationally; and

. the response of competitors to our service offerings.

See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."

Management Owns a Large Percentage of Our Stock.

As of February 29, 2000, our officers, directors and affiliated persons
beneficially owned approximately 38% of our common stock. Naveen Jain, our
Chief Executive Officer, currently beneficially owns approximately 29% of our
common stock. As a result, our officers, directors and affiliated persons may
effectively be able to:

. elect, or defeat the election of, our directors;

. amend or prevent amendment of our Certificate of Incorporation or Bylaws;

. effect or prevent a merger, sale of assets or other corporate
transaction; and

. control the outcome of any other matter submitted to the stockholders for
vote.

Our public stockholders may have little control over the outcome of such
transactions. Management's stock ownership may discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of
InfoSpace, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.

Our Stock Price Has Been and May Continue to be Volatile.

The trading price of our common stock has been and is likely to continue to
be highly volatile. Since we began trading on December 15, 1998, our stock
price has ranged from $7.50 to $277.00. Our stock price could be subject to
wide fluctuations in response to factors such as the following:

. actual or anticipated variations in quarterly results of operations;

. the addition or loss of affiliates, distribution partners or content
providers;

. announcements of technological innovations, new products or services by
us or our competitors;

. changes in financial estimates or recommendations by securities analysts;

. conditions or trends in the Internet and online commerce industries;

. changes in the market valuations of other Internet, online service or
software companies;

. our announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;

. additions or departures of key personnel;

. sales of our common stock;

. general market conditions; and

. other events or factors, many of which are beyond our control.

In addition, the stock market in general, and the Nasdaq National Market and
the market for Internet and technology companies in particular, have
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of these companies.
These broad market and industry factors may materially and adversely affect our
stock price, regardless of our operating performance. The trading prices of the
stocks of many technology companies are at or near historical highs and reflect
price-earnings ratios substantially above historical levels. These trading
prices and price-earnings ratios may not be sustained.

You Should Not Rely on Forward-looking Statements.

You should not rely on forward-looking statements in this report. This report
contains forward-looking statements that involve risks and uncertainties. We
use words such as "anticipates," "believes," "plans," "expects," "future,"
"intends," "may," "will," "should," "estimates," "predicts," "potential,"
"continue," and similar expressions to identify such forward-looking
statements. Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause our results and the Internet
information infrastructure services industry results, levels of activity,
performance, achievements and prospects to be materially different from those
expressed or implied by such forward-looking statements. These risks,
uncertainties and other factors include, among others, those identified under
"Factors Affecting Our Operating Results, Business Prospects and Market Price
of Stock" and elsewhere in this report.

Item 2. Properties

Prior to the acquisitions of Saraide and Prio, our principal administrative,
engineering, marketing and sales facilities total approximately 16,864 square
feet and are located in Redmond, Washington. Under the current lease, which
commenced on July 13, 1998, and expires on August 31, 2003, we pay a monthly
base rent of $19,775 through August 2001 and $22,030 during the final two years
of the lease. We have both the right to extend the term of this lease for an
additional 60 months and the right of first opportunity on adjacent expansion
space. Under this right of first opportunity we have expanded into an
additional 6,587 square foot space at a rate of $7,875 per month under a
sublease that expires on April 30, 2000. We will be relocating to significantly
larger facilities in the second quarter of 2000 under a lease for a new
principal administrative, engineering, marketing and sales facility located in
Bellevue, Washington totaling approximately

108,000 square feet. Under the five-year lease which is projected to commence
in May 2000, we will pay a monthly base rent of $199,783 per month during the
first two years, $208,864 per month during the second two years and $217,864
per month during the final year. We maintain a sales office housed in an
approximately 2,271-square-foot space in San Francisco, California under a
lease that expires on November 30, 2001 with a monthly base rent of $5,299. We
also maintain a sales office in New York City for 1,900 square feet with a
monthly base rent of $3,667, under a lease that expires April 2004. Under the
lease at our former location in Redmond, we paid an aggregate rent of $28,840
for the first seven months of 1998 and an aggregate rent of $49,440 during
1997. We do not own any real estate.

With the acquisitions of Saraide and Prio, we now have facilities in Mountain
View, California, San Mateo, California, Dallas, Texas, Ottawa, Canada,
Papendrecht, Netherlands and London, UK.

Substantially all of our computer and communications hardware is located at
our facilities in Redmond, Washington and we also lease redundant network
facilities at two locations in the Seattle, Washington area under a month-to-
month agreement and an agreement that expires in July 2001. We intend to
install additional hardware and high-speed Internet connections at a location
outside the West Coast as well as in the United Kingdom to support our joint
venture, TDL InfoSpace.

Our systems and operations at these locations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure, break-
ins, earthquake and similar events. See "Factors Affecting Our Operating
Results, Business Prospects and Market Price of Our Stock--Our Business Relies
on the Performance of Our Systems."

Item 3. Legal Proceedings

From time to time we have been, and expect to continue to be, subject to
legal proceedings and claims in the ordinary course of our business, including
claims of alleged infringement of third-party trademarks and other intellectual
property rights by us. These claims, even if not meritorious, could require the
expenditure of significant financial and managerial resources.

On December 15, 1999, a complaint was filed against us on behalf of a former
employee in federal court in New Jersey alleging claims for breach of contract,
breach of the covenant of good faith and fair dealing, fraud, negligent
misrepresentation, and promissory estoppel. The former employee contends he
agreed to work for InfoSpace on the basis of certain misrepresentations, that
he entered into an agreement with us that entitles him to an option to purchase
150,000 shares of our common stock, and that he was terminated without cause.
The former employee seeks (1) the right to purchase 150,000 shares of our
common stock, (2) unspecified compensatory and punitive damages, and (3)
litigation costs and attorney's fees. On January 31, 2000, we answered the
complaint, denying the claims. Discovery is ongoing, and trial is set for
September 2000. We are currently investigating the claims at issue and believe
we have meritorious defenses to such claims. Nevertheless, litigation is
uncertain and we may not prevail in this suit.

On February 18, 1999, a former consultant filed a complaint in the Superior
Court for Santa Clara County, California alleging, among other things, that he
had the right in connection with his consulting to the Company to purchase
56,924 shares of our common stock. We settled this lawsuit in September 1999.
Under the settlement, the former consultant was permitted to purchase 33,012
shares of our common stock at a price of $.05 per share.

On January 26, 1999, Civix-DDI, LLC filed a complaint in the U.S. District
Court in Colorado against us and 19 other defendants for infringement of two
patents relating to electronic mapping systems. In July 1999 we settled this
litigation by entering into a license agreement for these patents, pursuant to
which we made a single lump sum royalty payment.

On December 23, 1998, we initiated litigation against Internet Yellow Pages,
Inc. ("IYP") by filing suit in United States District Court for the Western
District of Washington. On February 3, 1999, we served a first amended
complaint on IYP and Greg Crane, an agent of IYP, in which we asserted claims
for

(a) account stated, (b) breach of contract, and (c) fraud. On March 5, 1999,
IYP answered our complaint in the Washington action, and asserted claims for
breach of contract, fraud, extortion and Consumer Protection Act violations.
IYP seeks relief consisting of $1,500,000 and other unquantified money damages,
treble damages under the CPA, and attorneys' fees. Discovery is ongoing. We are
currently investigating the claims at issue and believe we have meritorious
defenses to such claims. Nevertheless, litigation is uncertain and we may not
prevail in these suits. Trial is set for April 2000, but the parties are
finalizing an agreement to dispose of the case through a streamlined mini-trial
before a federal magistrate.

On December 7, 1998, a complaint was filed against us on behalf of an alleged
former employee in Superior Court for Suffolk County in the Commonwealth of
Massachusetts alleging that he was terminated without cause and that he entered
into an agreement with us that entitles him to an option to purchase 4,000,000
shares of our common stock or 10% of our equity. We settled this lawsuit in
February 2000. Under the settlement, we made a cash payment of $10.5 million.

On April 16, 1998, one of our former employees filed a complaint in the
Superior Court for Santa Clara County, California alleging, among other things,
that he had the right in connection with his employment to purchase shares of
our common stock representing up to 5% of our equity as of an unspecified date.
We settled this lawsuit in February 1999. Under the settlement, we made a cash
payment of $4.5 million.

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

Not applicable.

PART II

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

Market for Our Common Stock

Our common stock has traded on the Nasdaq National Market under the symbol
"INSP" since December 15, 1998, the date of the initial public offering. Prior
to that time, there was no public market for our common stock. The following
table sets forth the range of high and lows sales prices for the Company's
Common Stock for the periods indicated:

High Low
-------- --------

For the quarter ended:
December 31, 1999.......................................... $ 108.50 $ 19.375
September 30, 1999......................................... $ 29.469 $18.4375
June 30, 1999.............................................. $36.3125 $ 17.625
March 31, 1999............................................. $24.8125 $ 7.125
December 31, 1998 (from December 15, 1998)................. $ 13.00 $ 3.75

The Company has never declared, nor has it paid, any cash dividends on its
Common Stock. The Company currently intends to retain its earnings to finance
future growth and, therefore, does not anticipate paying any cash dividends on
its Common Stock in the foreseeable future.

As of March 15, 2000, the approximate number of stockholders of record of
Common Stock was 397. See "Factors Affecting Our Operating Results, Business
Prospects and Market Price of Stock--Our Stock Price Has Been and May Continue
to be Volatile."

Recent Sales of Unregistered Securities

Since October 1, 1999 we issued and sold unregistered securities as follows:

(a) In connection with our acquisition of INEX Corporation, on October
14, 1999, we issued 185,226 shares of our common stock to some of the
former shareholders of INEX in exchange for their shares of capital stock
in INEX. InfoSpace.com Canada Holdings Inc., our wholly owned indirect
subsidiary, issued 540,001 Exchangeable Shares to some of the former
shareholders of INEX in exchange for their shares of capital stock of INEX.
The Exchangeable Shares are exchangeable on a one-to-one basis into shares
of our common stock. The shares of our common stock and the Exchangeable
Shares were issued pursuant to exemptions from registration under the
Securities Act of 1933, as amended (the "Securities Act") under Section
3(a)(10) of the Securities Act.

(b) In connection with our acquisition of Union-Street.com, Inc., on
October 14, 1999, we issued 873,294 shares of our common stock to the
former shareholders of Union-Street.com, Inc. in exchange for all of the
outstanding capital stock of Union-Street.com. We issued these shares
pursuant to an exemption from registration pursuant to Section 4(2) of the
Securities Act.

(c) In connection with our acquisition of eComLive, Inc., on December 16,
1999, we issued 711,248 shares of our common stock to the former
stockholders of eComLive in exchange for all outstanding shares and options
to purchase shares of eComLive, Inc. We issued these shares pursuant to an
exemption from registration under Section 4(2) of the Securities Act.

(d) In connection with our acquisition of Zephyr Software Inc., on
December 29, 1999, we issued 333,912 shares of our common stock to the
former stockholders of Zephyr Software in exchange for all of the
outstanding shares of capital stock of Zephyr Software. We issued these
shares pursuant to an exemption from registration under Section 4(2) of the
Securities Act.

No underwriters were used in connection with these sales and issuances.

Report of Offering of Securities and Use of Proceeds Therefrom

In December 1998, we completed a firm commitment underwritten initial public
offering of, 23,000,000 shares (the "Shares") of our Common Stock, including
3,000,000 shares related to the underwriter's over-allotment option, at a price
of $3.75 per share (as adjusted for two-for-one stock splits effected by the
Company in May 1999 and January 2000). The Shares were registered with the
Securities and Exchange Commission pursuant to a Registration Statement on Form
S-1 (No. 333- 62323), which was declared effective on December 15, 1998. After
deducting underwriting discounts and commissions and offering expenses, we
received net proceeds of approximately $77,800,000.

Pending their use, we have invested the net proceeds from our initial public
offering in short- and long-term investments in order to meet anticipated cash
needs for future working capital. We invested our available cash principally in
high-quality corporate issuers and in debt instruments of the U.S. Government
and its agencies. We have used the net proceeds of our initial public offering
for general corporate purposes, including for working capital, and to a lesser
extent, to acquire assets from Active Voice Corporation, to invest in a variety
of private and early stage public Internet companies and to make settlement
payments in connection with litigation.

Item 6. Selected Consolidated Financial Data

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our Consolidated Financial Statements and Notes
thereto and other financial information included elsewhere in this report.

Year Ended December 31,
-----------------------------------
1999 1998 1997 1996
-------- -------- ------- ------
(in thousands, except
per share data)

Consolidated Statements of Operations
Data:
Revenues................................ $ 36,907 $ 9,623 $ 1,743 $ 199
Cost of revenues........................ 5,259 1,635 419 96
-------- -------- ------- ------
Gross profit............................ 31,648 7,988 1,324 103
Operating expenses:
Product development................... 3,189 1,245 383 149
Sales and marketing................... 23,695 6,286 1,477 257
General and administrative............ 9,688 4,575 944 234
Amortization of intangibles........... 3,223 710 64 --
Acquisition and related charges ...... 13,250 2,800 -- --
Other--non-recurring charges ......... 11,359 4,500 137 --
-------- -------- ------- ------
Total operating expenses............ 64,404 20,116 3,005 640
-------- -------- ------- ------
Loss from operations.................... (32,756) (12,128) (1,681) (537)
Other income, net....................... 11,074 434 20 21
Equity in loss from joint venture....... (12) (125) -- --
-------- -------- ------- ------
Net loss ............................... $(21,694) $(11,819) $(1,661) 516
======== ======== ======= ======
Basic and diluted net loss per share.... $ (0.23) $ (0.22) $ (0.04) $(0.01)
======== ======== ======= ======
Shares used in computing basic net loss
per share.............................. 93,566 54,847 44,114 37,530
======== ======== ======= ======
Shares used in computing diluted net
loss per share......................... 93,566 54,847 44,341 37,530
======== ======== ======= ======

December 31,
-------------------------------
1999 1998 1997 1996
-------- -------- ------ ------
(in thousands)

Consolidated Balance Sheet Data:
Cash and short-term investments ............. $154,176 $ 87,334 $ 358 $ 693
Working capital.............................. 164,603 86,342 424 788
Total assets................................. 352,571 103,005 1,514 1,139
Total stockholders' equity................... 331,627 94,724 792 1,000

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

You should read the following discussion and analysis in conjunction with
"Selected Consolidated Financial Data" and our Consolidated Financial
Statements and Notes thereto included elsewhere in this report. In addition to
historical information, the following discussion contains certain forward-
looking statements that involve known and unknown risks and uncertainties, such
as statements of our plans, objectives, expectations and intentions. You should
read the cautionary statements made in this prospectus as being applicable to
all related forward-looking statements wherever they appear in this prospectus.
Our actual results could differ materially from those discussed in the forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and in the section
entitled "Factors Affecting Our Operating Results, Business Prospects and
Market Price of Stock," as well as those discussed elsewhere herein. See
"Factors Affecting Our Operating Results, Business Prospects and Market Price
of Stock--You Should Not Rely on Forward-Looking Statements." You should not
rely on these forward-looking statements, which reflect only our opinion as of
the date of this report. We do not assume any obligation to revise forward-
looking statements.

Overview

InfoSpace.com, Inc. is a global Internet information infrastructure services
company. InfoSpace provides enabling technologies and Internet services to Web
sites, merchants and wireless devices. We began operations in March 1996.
During the period from inception through December 31, 1996, we had
insignificant revenues and were primarily engaged in the development of
technology for the aggregation, integration and distribution of Internet
content and the hiring of employees. In 1997, we expanded our operations,
adding business development and sales personnel in order to capitalize on the
opportunity to generate Internet advertising revenues. We began generating
material revenues in 1997 with our consumer services. Revenue in 1998 was also
primarily generated through our consumer services. Throughout 1999, we have
expanded our information infrastructure services to enhance our consumer,
merchant and wireless services. The following provides greater detail on each
of our service offerings:

Consumer Services: We provide information of broad appeal to users of
wireless devices and PC's including directories, sports, news and
entertainment, financial data and traffic reports. We also offer an integrated
platform of consumer services that includes community building services such as
online address books, calendars, online chat and message boards and
communication services including device independent e-mail and instant
messaging. Our consumer services are designed for the end user and are
distributed through wireless devices and Web sites.

Revenues from our consumer services are generated from advertising, licensing
fees and guaranteed transaction fees in lieu of revenue share.

Merchant Services: We provide comprehensive end-to-end merchant services and
an extensive distribution network that includes regional bell operating
companies (known as RBOCs), merchant banks and other local media networks. Our
end-to-end merchant services give merchants the ability to create, promote,
sell and distribute their products and services across multiple channels
through our broad distribution network. We have extensive reseller agreements
with RBOCs, including BellSouth, SBC, Bell Atlantic, GTE and USWEST, merchant
banks such as American Express and other local media networks such as
newspapers and television and radio stations who provide our services to
millions of local merchants worldwide.

Our merchant services are based on of a comprehensive platform of technology
that enables us to deliver unique services such as:

. the online delivery of promotions to any device that can be used online
and offline;

. single-click buying from any Web site directly from a wireless device;

. Page Express, which enables local merchants to create a Web presence;

. StoreBuilder, which enables merchants to build on-line stores;

. ActivePromotion, which enables merchants to create targeted product
promotions and distribute them across our network;

. ActiveShopper, which provides an open marketplace where consumers can
find, research and purchase products from our merchant network.

Revenues from our merchant services are primarily generated from commerce
fees and licensing, including per store/per month or per promotion/per month
fees.

Wireless Services: Our wireless services are comprised of a comprehensive,
integrated suite of wireless portal services that provide mobile users relevant
information services such as real-time stock quotes and traffic reports, the
ability to conduct secure commerce transactions including single click buying,
communication services such as device-independent instant messaging and e-mail,
personalization capabilities and location-based services that enable the user
to search for location-based information such as the restaurant closest to the
mobile user's current location. These services are distributed through wireless
carriers, device manufacturers and software providers.

Our wireless services are private-labeled for each carrier, preserving the
brand of the carrier and their relationship with their customer and creating a
barrier to switch. Revenues are primarily generated from the carrier and
include licensing fees, per subscriber/per month fees in the U.S. and per
query/per message fees in Europe and Japan. In addition, we receive commerce
revenue for the transactions delivered on the wireless devices.

All three of our services are built on our core technology platform and use
the same operational infrastructure. We do not allocate development or
operating costs to any of these services.

In May 1997, we acquired Yellow Pages on the Internet, LLC, or YPI, a
Washington limited liability company that provided Internet yellow pages
directory information. In June 1998, we acquired Outpost, a Washington
corporation engaged primarily in electronic commerce through the sale of cards
and gifts via the Internet. In June 1999, we acquired the MyAgent technology
and related assets from Active Voice Corporation. In October 1999, we acquired
Union-Street.com, a provider of business services including private label e-
mail, address book, calendar, personal home page, chat and message boards. In
December 1999, we acquired eComLive.com, Inc., a provider of Web-based real-
time collaboration and interaction solutions specialized for consumer-to-
consumer, business-to-business and business-to-consumer vertical markets and
Zephyr Software Inc., an infrastructure services company for the Indian market.
These acquisitions were accounted for under the purchase method and,
accordingly, are included in our operating results from the date of acquisition
forward. The impact of the YPI acquisition on our consolidated statement of
operations was not substantial. The acquisitions of Outpost, MyAgent, Union-
Street and eComLive resulted in write-offs of in-process research and
development and the recording of goodwill, assembled workforce and core
technology. The acquisition of Zephyr Software resulted in the recording of
goodwill. We have integrated these businesses and the acquired technologies
with our other products and services.

In October 1999, we acquired INEX Corporation, a developer of Internet
commerce solutions designed for small and medium-sized merchants. This
transaction was accounted for as a pooling of interests. The consolidated
financial statements for the three years ended December 31, 1999 and the
accompanying notes reflect the Company's financial position and results of
operations as if INEX was a wholly-owned subsidiary since inception.

In July 1998, we entered into a joint venture agreement with Thomson to form
TDL InfoSpace to replicate our content, community and commerce services in
Europe. TDL InfoSpace has targeted the United Kingdom as its first market, and
content services were launched in the third quarter of 1998. Under

the Web site services agreement, Thomson provides its directory information to
TDL InfoSpace and sell Internet yellow pages advertising for the joint venture
through its local sales forces. We also license our technology and provide
hosting services to TDL InfoSpace. Thomson and we each purchased a 50% interest
in TDL InfoSpace and are required to provide reasonable working capital to TDL
InfoSpace. As of December 31, 1999, we had contributed $496,000 to the joint
venture. We account for our investment in the joint venture under the equity
method. For the years ended December 31, 1999 and 1998, we recorded a loss from
the joint venture of $12,000 and $125,000, respectively.

We have incurred losses since our inception and, as of December 31, 1999, we
had an accumulated deficit of approximately $35.7 million. For the year ended
December 31, 1999, our net loss totaled $21.7 million, including $13.2 million
in acquisition and related charges associated with the acquisitions of
eComLive, Union-Street, INEX and MyAgent Technology and $11.4 million in other
non-recurring charges related to two lawsuit settlements. See "--Acquisitions
and Item 3. Legal Proceedings." For the year ended December 31, 1998, our net
loss totaled $11.8 million, including a $2.8 million write-off associated with
our acquisition of Outpost and a $4.5 million cash payment to settle a lawsuit
filed by a former employee. See "--Acquisitions and Item 3. Legal Proceedings."

We believe that our future success will depend largely on our ability to
continue to offer consumer, merchant and wireless solutions that are attractive
to our existing and potential future affiliates and distribution partners.
Accordingly, we plan to significantly increase our operating expenses in order
to, among other things:

. expand our affiliate network, which may require us to pay additional
carriage fees to certain affiliates;

. expand our sales and marketing operations and hire more salespersons;

. increase our advertising and promotional activities;

. develop and upgrade our technology and purchase equipment for our
operations and network infrastructure;

. expand internationally; and

. expand our commerce, merchant and wireless services.

After giving effect to our recent acquisitions, we expect to incur
significant operating losses on a quarterly basis in the future. In light of
the rapidly evolving nature of our business and limited operating history, we
believe that period-to-period comparisons of our revenues and operating results
are not necessarily meaningful, and you should not rely upon them as
indications of future performance. Although we have experienced sequential
quarterly growth in revenues over the past ten quarters, we do not believe that
our historical growth rates are necessarily sustainable or indicative of future
growth. For information on recent and pending acquisitions see "Acquisitions--
Subsequent to Year End and Pending."

Results of Operations for the Years Ended December 31, 1999, 1998 and 1997

Revenues. Currently our revenue is derived from our consumer, merchant and
wireless services. These include advertising, licensing fees, commerce
transaction fees, and guaranteed transaction fees in lieu of revenue share. We
tailor agreements to fit the needs of our advertisers, affiliates and
distribution partners, and under any one agreement we may earn revenue from a
combination of these sources. We also have agreements that utilize services
from more than one of our areas of service. Revenues were $36.9 million the
year ended December 31, 1999, $9.6 million the year ended December 31, 1998 and
$1.7 million for the year ended December 31, 1997. The increases are primarily
due to significant growth in our consumer and merchant services as a result of
increased expansion of our affiliate network, which consists of more than 2,500
Web sites and wireless devices, increased traffic to our affiliate network that
results in increased page views, increased use of our consumer, merchant and
wireless services, as well as larger and longer term agreements with
advertisers, affiliates and distribution partners. We entered into 286 new
agreements with advertisers, affiliates and distribution partners during the
year ended December 31, 1999.

A portion of our revenues represents barter transactions resulting from our
exchange with other companies of banner advertising space for reciprocal banner
advertising space, for content licenses or for print advertising. Barter
revenues totaled $948,000, or 3% of revenues for the year ended December 31,
1999, and $852,000, or 9% of revenues for the year ended December 31, 1998.

Cost of Revenues. Cost of revenues consists of expenses associated with the
enhancement, maintenance and support of our consumer, merchant and wireless
services, including direct personnel expenses, communication costs such as
high-speed Internet access, server equipment depreciation, and content license
fees. Cost of revenues were $5.3 million, or 14% of revenues, for the year
ended December 31, 1999 compared to $1.6 million, or 17% of revenues, for the
year ended December 31, 1998 and $419,000, or 24% of revenues, for the year
ended December 31, 1997. The absolute dollar increases are primarily
attributable to personnel costs and other costs incurred in order to support
greatly increased delivery of our consumer, merchant and wireless solutions,
including communication lines, data licenses and equipment. We expect the
absolute dollars spent on personnel, enhanced content and expanded
communications will continue to increase for the foreseeable future.

Product Development Expenses. Product development expenses consist
principally of personnel costs, for research, design and development of the
proprietary technology we use to integrate and distribute our consumer,
merchant and wireless services. Product development expenses were $3.2 million
or 9% of revenues for the year ended December 31, 1999, compared to $1.2
million or 13% of revenues, for the year ended December 31, 1998 and $383,000,
or 22% of revenues, for the year ended December 31, 1997. These expenses have
declined significantly as a percentage of revenues due to our rapid revenue
growth. The increases in absolute dollars are primarily attributable to
increases in engineering personnel needed for continued development of our
products and service offerings. We believe that significant investments in
technology are necessary to remain competitive. Accordingly, we expect product
development expenses to continue to increase in absolute dollars as we hire
additional personnel who will develop and enhance our proprietary technology.

On January 1, 1999 we adopted Statement of Position 98-1 (SOP 98-1),
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, which requires certain product development costs to be
capitalized and amortized over future periods, which, prior to the adoption of
SOP 98-1, were expensed. For the year ended December 31, 1999, we capitalized
approximately $340,000 of product development costs.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of salaries and related benefits for sales and marketing personnel, advertising
expenses, trademark licensing, carriage fees and distribution revenue share
paid to certain affiliates to include our content services on their Web sites,
sales office expenses and travel expenses. Sales and marketing expenses were
$23.7 million or 64% of revenues, for the year ended December 31, 1999 compared
to $6.3 million or 65% of revenues, for the year ended December 31, 1998 and
$1.5 million or 85% of revenues, for the year ended December 31, 1997. The
absolute dollar increases from the prior year were primarily due to carriage
fees paid to certain affiliates, increased advertising, expansion of our sales
and business development teams in Redmond, San Francisco and New York and
distribution revenue sharing.

General and Administrative Expenses. General and administrative expenses
consist primarily of salaries, fees for professional services, occupancy and
general office expenses, B&O tax paid to the State of Washington on gross
revenues and franchise tax paid to the State of Delaware on total assets and
authorized shares. General and administrative expenses were $9.7 million or 26%
of revenues, for the year ended December 31, 1999 compared to $4.6 million or
48% of revenues, for the year ended December 31, 1998 and $944,000 or 54% of
revenues, for the year ended December 31, 1997. The absolute dollar increases
were primarily due to increased staffing levels necessary to manage and support
our expanding operations, expansion of our facilities and professional
services. On a going forward basis, we will need to continue to strengthen our
infrastructure to support our planned growth.

Amortization of Intangibles. Amortization of intangibles includes
amortization of goodwill, core technology, purchased domain names, trademark
and assembled workforce. Amortization of Intangibles was $3.2 million in 1999,
compared to $710,000 in 1998 and $64,000 in 1997. The increases are a result of
amortization of intangibles recorded from the acquisitions of Union-Street in
October 1999, MyAgent technology acquisition in June 1999 and Outpost Network
in July 1998. Intangibles in all three of these acquisitions include goodwill,
core technology and acquired workforce. These assets are being amortized over a
five-year period. In December 1999, we also acquired Zepher Software and
eComLive. Amortization on the goodwill, core technology and assembled workforce
for these two acquisitions will begin in January 2000. In the first quarter of
2000, we completed the acquisition of Saraide.com which will be accounted for
as a purchase and have definitive agreements to acquire Millet Software and
Orchest, Inc., both of which will be accounted for as purchases. These
acquisitions will significantly increase our amortization of intangibles in
2000 and beyond. In the event we complete additional acquisitions, expenses
relating to the amortization of intangibles could increase in the future.

Acquisition and Related Charges. Acquisition and other related charges
consist of in-process research and development and other one-time charges
related directly to acquisitions, such as legal and accounting fees. The
acquisition and related charges in 1999 were one-time in-process research and
development charges and costs incurred in the purchase acquisitions of
eComLive, Union-Street and the My Agent technology. Also included in
acquisition and other related charges in 1999 are the costs incurred in the
acquisition of INEX, which was accounted for as a pooling of interests. Total
in-process research and development charges in 1999 were $9.2 million. We
expect to continue to pursue an aggressive growth strategy to enhance and
expand our consumer, merchant and wireless services. We will incur acquisition
and related charges in the first quarter of 2000 and future quarters related to
the acquisitions we have completed and which are pending. In the event we
complete additional acquisitions, we could incur additional acquisition and
related charges in the future.

Other Non-Recurring Charges. Other non-recurring charges in 1999 and 1998
consist of costs associated with litigation settlements. In February 2000, we
reached a settlement with an alleged employee in a lawsuit for a cash payment
of $10.5 million. We accrued and expensed this liability in 1999. On July 23,
1999, we settled a patent infringement claim in exchange for a lump sum royalty
payment of $209,500. This expense was recorded in 1999. On February 22, 1999,
we reached a settlement with a former employee for a cash payment of $4.5
million. We accrued and expensed this liability in 1998.

Other Income, Net. Other income consists primarily of interest income for all
periods. Other income was $11.1 million in 1999, $434,000 in 1998 and $20,000
in 1997. The increase from the prior years is primarily due to interest earned
on higher average cash balances resulting from private financings in July and
August of 1998, the net proceeds from our initial public offering completed in
December 1998, and the net proceeds from our follow-on offering, which closed
in April 1999.

We have re-invested and will continue to re-invest part of our fixed income
securities in equity investments. We anticipate that our expansion plans may
require greater cash uses in 2000 than in prior years. With these two factors,
we anticipate that our interest income from our fixed securities will decrease
in 2000.

Equity in Loss from Joint Venture. Equity in loss from joint venture consists
of losses attributable to our 50% interest in TDL InfoSpace, our joint venture
with Thomson in the United Kingdom. Our 1999 loss was $12,000, compared to
$125,000 in 1998. The losses incurred in 1998 were primarily from start-up
operating costs associated with the venture.

Provision for Income Taxes. Net operating losses have been incurred to date
on a cumulative basis, and no tax benefit has been recorded, as sufficient
uncertainty exists regarding the realizability of the deferred tax assets.

Liquidity and Capital Resources

From our inception in March 1996 through May 1998, we funded operations with
approximately $1.5 million in equity financing and, to a lesser extent, from
revenues generated for services performed. In May 1998, we completed a $5.1
million private placement of our common stock, and in July and August 1998, we
completed an additional private placement of our common stock for $8.2 million.
Sales of our common stock to employees pursuant to our 1998 Stock Purchase
Rights Plan also raised $1.7 million in July 1998. Our initial public offering
in December 1998 yielded net proceeds of $77.8 million and a follow-on public
offering in April 1999 yielded net proceeds of $185.0 million. As of December
31, 1999, we had cash, cash equivalents and short-term investments of $154.2
million and long-term investments of $88.2 million.

Net cash used by operating activities was $18.5 million in 1999. Cash used in
operating activities for the year ended December 31, 1999 consisted primarily
of net operating losses and increases in accounts receivable, notes receivable
and prepaid expenses. These uses of cash were partially offset by increases in
accrued expenses. Net cash used by operating activities was $2.7 million in
1998. Cash used in operating activities in 1998 consisted primarily of net
operating losses and increases in accounts receivable and prepaid expenses.
These uses of cash were partially offset by increases in accrued expenses. Net
cash used by operating activities was $1.2 million in 1997, which was primarily
comprised of the net loss.

Net cash used by investing activities was $160.1 million in the year ended
December 31, 1999. For 1999, cash used in investing activities was primarily
comprised of business acquisitions, securities investments, other investments
and purchase of fixed assets. The change in securities investments is primarily
a result of investing proceeds from our follow-on offering in short and long-
term investments. Net cash used in investing activities in 1998 was $78.7
million. This was primarily a result of investing the cash proceeds from the
initial public offering in short and long-term investments. Net cash used by
investing activities in 1997 was $225,000 and was primarily for the purchase of
fixed assets.

Cash provided by financing activities in 1999 was $193.0 million and was
primarily comprised of our net proceeds from our follow-on offering in April
1999. Cash provided by financing activities in 1998 was $96.2 million. The 1998
net proceeds were primarily from our initial public offering and, to a lesser
extent, from private placements of common stock. Cash provided by financing
activities in 1997 was primarily from private placements of our common stock.

We plan to use our cash for strategic investments and acquisitions,
investments in internally developed technology and advertising and marketing
initiatives. In addition, we are relocating our headquarter offices from
Redmond, Washington to Bellevue, Washington in the second quarter of 2000.
Included in the costs of this move is the construction of a new data center,
tenant improvements and furniture. We will also purchase capital equipment for
our headquarters and our other world-wide locations, including Mountain View,
California; Dallas, Texas; Ottawa, Canada; and Pependrecht, Netherlands. We
expect these capital expenditures to be approximately $29 million for the year
2000. These costs will be capitalized and amortized over their estimated useful
lives.

We believe that existing cash balances, cash equivalents and cash generated
from operations will be sufficient to meet our anticipated cash needs for
working capital and capital expenditures for at least the next 12 months.
However, the underlying assumed levels of revenues and expenses may not prove
to be accurate. We may seek additional funding through public or private
financings or other arrangements prior to such time. Adequate funds may not be
available when needed or may not be available on favorable terms. If we raise
additional funds by issuing equity securities, dilution to existing
stockholders will result. If funding is insufficient at any time in the future,
we may be unable to develop or enhance our products or services, take advantage
of business opportunities or respond to competitive pressures, any of which
could harm our business. See "Risk Factors Affecting Our Operating Results,
Business Prospects and Market Price of Stock--We May Require Additional
Funding."

Factors Affecting Results of Operations

. the addition or loss of affiliates;

. variable demand for our consumer, merchant and wireless services by our
affiliates and distribution providers;

. the cost of acquiring and the availability of content, technology and
services;

. the overall growth level of demand for consumer, merchant and wireless
services;

. our ability to attract and retain affiliates and distribution providers;

. seasonal trends in Internet usage and advertising placements;

. the amount and timing of fees we pay to our affiliates to include our
consumer and merchant services on their Web sites;

. the productivity of our direct sales force and the sales forces of our
distribution partners;

. the amount and timing of increased expenditures for expansion of our
operations, including the hiring of new employees, capital expenditures
and related costs;

. our ability to continue to enhance, maintain and support our technology;

. the result of litigation that is currently ongoing against InfoSpace or
any litigation that is filed against us in the future;

. our ability to attract and retain personnel;

. the introduction of new or enhanced services by us or our affiliates, or
other companies that compete with us or our affiliates;

. price competition or pricing changes in Internet information
infrastructure services, such as ours;

. technical difficulties, system downtime, system failures or Internet
brown-outs;

. political or economic events and governmental actions affecting Internet
operations or content; and

. general economic conditions and economic conditions specific to the
Internet.

If one or more of these factors or other factors occur, our business could
suffer.

In addition, because we only began operations in March 1996, and because the
market for Internet information infrastructure services such as ours is new and
evolving, it is very difficult to predict future financial results. Our
expenses are partially based on our expectations regarding future revenues, and
are largely fixed in nature, particularly in the short term. As a result, if
our revenues in a period do not meet our expectations, our financial results
will likely suffer.

Acquisitions

Zephyr Software Inc.: On December 29, 1999, we acquired all of the common
stock of Zephyr Software Inc., a privately held company, and its wholly owned
subsidiary Zephyr Software (India) Private Limited ("Zephyr") for a purchase
consideration of 325,696 shares of our common stock and acquisition expenses of
$539,512. The acquisition was accounted for as a purchase in accordance with
Accounting Principles Board ("APB") No. 16. Results of operations for Zephyr
have been included with our results of operations for the period subsequent to
the date of acquisition.

In this transaction, we assumed net liabilities of $20,690, issued shares
with a fair value of $8,643,105 and incurred acquisition costs of $539,512.
This acquisition resulted in our recording $9,203,307 of goodwill.

eComLive.com, Inc.: On December 16, 1999, we acquired all of the common stock
of eComLive.com, Inc., a privately held company, for a purchase consideration
of 686,356 shares and acquisition expenses of $582,246. The acquisition was
accounted for as a purchase in accordance with the provisions of APB No. 16.

In this transaction, we assumed net assets of $5,439,075. This includes
$5,300,000 in purchased technology which includes in-process research and
development, $140,000 of acquired workforce and $925 in net liabilities. We
issued shares with a fair value of $31,995,220 and incurred acquisition costs
of $582,246. This acquisition resulted in our recording $27,138,391 of
goodwill.

We recorded a non-recurring charge of $2.0 million for in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Among the factors we considered in determining the
amount of the allocation of the purchase price to in-process research and
development were the estimated stage of development of each module of the
technology, including the complexity and technical obstacles to overcome, the
estimated expected life of each module, the estimated cash flows resulting from
the expected revenues, margins, and operating expenses generated from each
module, and the discounted present value of the cash flows associated with the
in-process technologies. The percentage completed pre-acquisition for each
application was based primarily on the evaluation of three major factors: time-
based data, cost-based data, and complexity-based data.

The eComLive technology is built on client-server architecture. There are
three main applications, Interactive eComLive for the Consumer to Consumer
(C2C) market, Business eComLive targeted to the Business to Business (B2B)
market and Consumer eComLive for the Business to Consumer (B2C) market. We have
the ability to integrate the C2C eComLive technology into the InfoSpace Web
site and launch this technology with our consumer services. We also plan to
offer a co-branded version to our affiliates as part of our suite of co-branded
service offerings. The expected life of the modules being developed was assumed
to be five years, after which substantial modification and enhancement would be
required for the modules to remain competitive.

Our revenue assumptions for these modules were based on the number of
licenses we estimated to sell. Our expense assumptions for these modules
included cost of revenues, which we estimated to be less than 3% of revenues in
the first year and thereafter to drop to 2% as we will incur minimal costs to
deliver this technology on the platforms already developed and in use by us.
Sales and marketing expenses combined with general and administrative expenses
were estimated to be 130% in the first year, and thereafter to drop to 35% and
remain relatively constant as a percentage of revenues. However, cost of
revenues, sales and marketing expenses and general and administrative expenses
may vary, both in absolute dollars and as a percentage of revenues.

While we believe that the assumptions discussed above were made in good faith
and were reasonable when made. Accordingly, the assumptions we made may prove
to be inaccurate, and there can be no assurance that we will realize the
revenues, gross profit, growth rates, expense levels or other variables set
forth in such assumptions. Considering the inherent difficulty in developing
estimates of future performance for emerging technologies such as the eComLive
applications, we utilized a relatively high rate of return (30%) to discount to
present value the cash flows associated with the in-process technologies.

The next version of C2C Client and Server are scheduled for completion and
beta testing and release in the first half of 2000. The B2B and B2C Client and
Server are scheduled for release in the second or third quarters of 2000.
Significant technology development efforts are necessary before any one of
these modules can successfully be completed and integrated into our full suite
of service offerings of on-line services available both on the our Web site and
on those of the our many affiliates Web sites.

We expect these modules to be fully integrated into our full suite of
Internet service offerings. Further, the modules will not be distinguishable
market segments for financial reporting purposes or for management purposes.
Consequently, there will be no separate and distinguishable allocations or
utilizations of net working capital, and no specific charges for use of
contributory assets. None of our operating expenses are allocated to specific
service offerings.

We do not expect to have the ability to calculate revenues specifically and
exclusively attributable to the integrated eComLive technology. Further, the
absence of such attribution will not be material to any module's success. The
amount that we can charge customers for access and use of these modules will be
greatly influenced by market forces and competitor's pricing of their own
packaged and integrated offerings.

Union-Street: On October 14, 1999 we acquired all of the common stock of
Union-Street, a privately held company, for a purchase consideration of 873,294
shares and acquisition expenses of $395,656. The acquisition was accounted for
as a purchase in accordance with the provisions of APB No. 16.

In this transaction, we assumed net assets of $5,352,781. This includes
$5,300,000 in purchased technology which includes in-process research and
development, $160,000 of acquired workforce and $107,219 in net liabilities. We
issued shares with a fair value of $20,487,518 and incurred acquisition costs
of $395,656. This acquisition resulted in our recording $15,530,393 of
goodwill.

We recorded a non-recurring charge of $3.3 million for in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Among the factors we considered in determining the
amount of the allocation of the purchase price to in-process research and
development were various factors such as estimating the stage of development of
each module of the technology, including the complexity and technical obstacles
to overcome, estimating the expected life of each module, estimating cash flows
resulting from the expected revenues, margins, and operating expenses generated
from each module, and discounting to present value the cash flows associated
with the in-process technologies. The percentage completed pre-acquisition for
each application was based primarily on the evaluation of three major factors:
time-based data, cost-based data, and complexity-based data.

The Union-Street technology called Traction Series 3.0 is comprised of six
modules that promote inter-activity on the customer's Web site. Businesses can
integrate individual modules onto their sites or integrate all of the modules
to form a comprehensive community solution. The modules include 1) Web Site
Creator, 2) Event Manager, 3) Relationship Manager, 4) Forums, 5) Chat and 6)
Email. We have integrated most of the Union-Street technology into the
InfoSpace Web site and have launched the technology with our consumer services.
We also plan to offer a co-branded version to our affiliates as part of our
suite of co-branded service offerings. The expected life of the modules being
developed was assumed to be five years, after which substantial modification
and enhancement would be required for the modules to remain competitive.

Our revenue assumptions for these modules were based on the number of page
views we estimated would be generated and the portion of those page views we
estimated would be attributable to the Union-Street modules. We estimated that
the Union-Street modules will generate approximately 1.6 million incremental
pages views in fiscal 2000, increasing to 3 million in 2001. Thereafter, we
expect the incremental growth attributed to this technology to be 8-12%
annually.

While we believe that the assumptions discussed above were made in good faith
and were reasonable when made, such assumptions remain largely untested, as the
modules are in the early stages of being placed in service on the InfoSpace Web
site and our affiliates' Web sites. Accordingly, the assumptions we made may
prove to be inaccurate, and there can be no assurance that we will realize the
revenues, gross profit, growth rates, expense levels or other variables set
forth in such assumptions. Considering the inherent difficulty in developing
estimates of future performance for emerging technologies such as the Union-
Street applications, we utilized a relatively high rate of return (30%) to
discount to present value the cash flows associated with the in-process
technologies.

At the time of acquisition, we expected the Union-Street Traction Series 3.0
to be released in 1999. We have now fully integrated this technology into our
consumer services. The modules are not distinguishable market segments for
financial reporting purposes or for management purposes and consequently, we
cannot segregate results from specific service offerings.

We do not expect to have the ability to calculate revenues specifically and
exclusively attributable to the integrated Union-Street technology. Further,
the absence of such attribution will not be material to any

module's success. The amount that we can charge customers for access and use of
these modules will be greatly influenced by market forces and competitors'
pricing of their own packaged and integrated offerings.

INEX Corporation: On October 14, 1999, we consummated an Agreement and Plan
of Acquisition and Amalgamation with INEX Corporation, a privately held
company. The combination was accounted for as a pooling of interests. We issued
1,800,000 shares of our common stock (1) directly to those INEX shareholders
who elected to receive our common stock in exchange for their INEX shares at
the closing of the combination, (2) upon the exchange or redemption of the
exchangeable shares of InfoSpace.com Canada Holdings Inc., an indirect
subsidiary of ours, which exchangeable shares were issued to those INEX
shareholders who elected to receive exchangeable shares, or who did not make an
election to receive shares of our common stock at the closing, and (3) upon the
exercise of outstanding warrants and options to purchase INEX common shares,
which we assumed and which will become exercisable for shares of our common
stock.

INEX developed and marketed Internet commerce applications that deliver
solutions designed for small and medium-sized merchants to build, manage and
promote online storefronts. We have added these products to our merchant
services. The consolidated financial statements for the three years ended
December 31, 1999 and the accompanying notes reflect our financial position and
the results of operations as if INEX were our wholly-owned subsidiary since
inception.

MyAgent Technology: On June 30, 1999, we acquired the MyAgent technology and
related assets from Active Voice Corporation for a cash payment of $18 million
dollars. In addition, we hired six employees who comprised the MyAgent
development team at Active Voice. The acquisition was accounted for as a
purchase in accordance with the provisions of APB No. 16. Other than the
MyAgent technology modules, no other assets or liabilities were assumed as part
of this acquisition.

The total purchase price of the acquisition of the MyAgent technology was
$18.1 million including direct acquisition expenses of $83,054. In this
transaction, we assumed net assets of $4,380,000. This includes $4,300,000 in
purchased technology, which includes in-process research and development, and
$80,000 of acquired workforce. This acquisition resulted in our recording
$13,703,054 of goodwill.

We recorded a non-recurring charge of $3.9 million for in-process research
and development that had not yet reached technological feasibility and had no
alternative future use. Separately, we recorded a one-time charge of $1.0
million for expenses related to bonus payments made to the Active Voice MyAgent
team employees who accepted employment with us on the date of the MyAgent
technology acquisition, but who have no obligation to continue their employment
with us.

Among the factors we considered in determining the amount of the allocation
of the purchase price to in-process research and development were various
factors such as estimating the stage of development of each module of the
technology, including the complexity and technical obstacles to overcome,
estimating the amount of core technology leveraged into the in-process
projects, estimating the expected life of each module, estimating cash flows
resulting from the expected revenues, margins, and operating expenses generated
from each module, and discounting to present value the cash flows associated
with the in-process technologies. We utilized a rate of return of 30% to
discount to present value the cash flows associated with the in-process
technologies.

Within the MyAgent technology there are three main modules, the Client,
Server Intelligence, and Web Interface. We integrated the MyAgent technology
into the InfoSpace Web site and launched the technology with our desktop
portal. We also plan to offer a co-branded version to our affiliates as part of
our suite of co-branded service offerings. As of the date of acquisition, we
estimated that the Client, Server Intelligence, and Web Interface were 50%,
49%, and 29% completed, respectively. The percentage completed pre-acquisition
for each module was based primarily on the evaluation of three major factors:
time-based data, cost-based data, and complexity-based data.

The expected life of the modules being developed was assumed to be five
years, after which substantial modification and enhancement would be required
for the modules to remain competitive.

Our revenue assumptions for these modules were based on the number of page
views we estimate the desktop portal will generate and the portion of those
page views we estimate would be attributable to the MyAgent technology modules.
We estimated that the number of page views will double as a result of the
launch of the desktop portal. We estimated that 50% of the incremental page
view growth would be attributable to the MyAgent modules. Page view revenue
generated by the desktop portal will vary from our standard page view revenue
since fewer advertisements can be placed on the desktop portal.

Our expense assumptions for these modules included cost of revenues, which we
estimated to be 17% of revenues in 2000 and thereafter to drop to 9% as we will
incur minimal costs as we leverage the technology in future periods. Sales and
marketing expenses combined with general and administrative expenses were
estimated to be 34% in 2000, and thereafter to drop to 22% of revenues.
However, cost of revenues, sales and marketing expenses and general and
administrative expenses may vary, both in absolute dollars and as a percentage
of revenues.

While we believe that the assumptions discussed above were made in good faith
and were reasonable when made, the assumptions we made may prove to be
inaccurate, and there can be no assurance that we will realize the revenues,
gross profit, growth rates, expense levels or other variables set forth in such
assumptions. Considering the inherent difficulty in developing estimates of
future performance for emerging technologies such as the MyAgent modules, we
utilized a relatively high rate of return (30%) to discount to present value
the cash flows associated with the in-process technologies. The discount rate
was selected based on evaluation of our weighted average cost of capital, the
weighted average return on assets, the internal rate of return implied from the
transaction, and management's assessment of the risk inherent in the future
performance estimates utilized in the valuation.

The Client and Server Intelligence and Web interface were released in the
fourth quarter of 1999. Significant technology development efforts were
necessary before any one of these modules could be successfully be completed
and integrated into our full suite of service offerings of on-line services
available both on the our Web site and on those of the our many affiliates Web
sites. We made the Client modular and reduced its size considerably in order
shorten the download time. The modules are not distinguishable market segments
for financial reporting purposes or for management purposes and consequently,
we cannot segregate results from specific service offerings.

We do not expect to have the ability to calculate revenues specifically and
exclusively attributable to the integrated MyAgent technology. Further, the
absence of such attribution will not be material to any module's success. The
amount that we can charge customers for access and use of these modules will be
greatly influenced by market forces and competitors' pricing of their own
packaged and integrated offerings.

The MyAgent product team was not accounted for by Active Voice as a separate
entity, a subsidiary, or a line of business, or division of the business, but
rather was rolled up as part of the research and development group.
Accordingly, historical financial information was not available and we were
unable to utilize historical results of operations in the valuation of the
MyAgent technology.

Technology from Outpost: In June 1998, we acquired Outpost, which included
the acquisition of the Outpost Technology and the hiring of approximately ten
employees. In the second quarter of 1998, we wrote off approximately $2.8
million of in-process research and development in connection with the Outpost
acquisition.

We conducted a valuation of the assets acquired from Outpost, including core
technology, assembled workforce and in-process research and development,
utilizing the following major assumptions:

. the revenue and margin contribution of each technology (in-process and
future yet-to-be defined);

. the percentage of carryover of technology from products under development
and products scheduled for development in the future;

. the expected life of the technology;

. anticipated module development and module introduction schedules;

. revenue forecasts, including expected aggregate growth rates for the
business as a whole and expected growth rates for the Internet content
provider industry;

. forecasted operating expenses, including selling, general and
administrative expenses, as a percentage of revenues; and

. a rate of return of 30% utilized to discount to present value the cash
flows associated with the in-process technologies.

Within the acquired Outpost Technology (smart-shopping services) there are
four main modules. These modules in their developed state as of the acquisition
date of Outpost had certain technological limitations. Subsequent to the
acquisition date, we revised our strategy with respect to the transaction proxy
module, with the result being that most of the in-process technology was
discarded. Accordingly, no value was assigned to this module in connection with
our valuation of the assets acquired from Outpost. The four modules are:

. integrated content that provides users with product pricing and merchant
information;

. transaction proxy that allows us to track sales transactions from
beginning to end and to receive confirmation reports from the retailers;

. branding that allows users to travel to affiliate Web sites without
leaving the InfoSpace.com Web site; and

. universal shopping cart that allows users to make multiple purchases at
different retailers in one execution.

These modules have been integrated into our full suite of Internet service
offerings. The integrated content module was completed and integrated into our
Web site in the third quarter of 1998. Relevant portions of the transaction
proxy, branding and shopping cart modules were completed and integrated into
our ActiveShopper electronic commerce private label solution that was launched
in 1999.

The direct impact of the smart-shopping service on current and future results
of operations, liquidity and capital resources is not known, as we do not have
the ability to calculate revenues specifically and exclusively attributable to
Outpost's integrated technology. Further, the modules are not distinguishable
market segments for financial reporting purposes or for management purposes.
However, we believe that these services will allow our affiliates to broaden
and enhance their core programming at minimal cost and to generate additional
advertising and transaction revenue opportunities for both us and our
affiliates, initially through our launching, and affiliates utilizing,
ActiveShopper as a private label electronic commerce solution. Further, the
benefits to us and our affiliates can potentially extend beyond electronic
commerce transactions by:

. enabling us to apply the Outpost Technology to other functions such as
building employment classifieds and databases of local events;

. allowing end users to access consolidated bank statements or statements
of airline frequent flyer miles; and

. attracting additional Web users who are then exposed to the many other
features in our suite of content, community and commerce solutions.

Acquisitions--Subsequent to Year-End/Pending

On March 10, 2000, we acquired San Mateo, California-based Saraide.com Inc, a
provider of wireless Internet services in Europe, Japan and Canada. Under the
terms of the acquisition, which we will account for as a purchase, we exchanged
4,795,432 shares of our common stock and contributed our wireless assets in
exchange for an 80% controlling interest in Saraide.

On March 6, 2000, we signed a definitive agreement to acquire Cupertino,
California-based Orchest, Inc. (MoneyPlant.com). Orchest has developed a Web
site to provide online account information aggregation for consumers. Under the
terms of the acquisition, which will be accounted for as a purchase, we will
exchange 123,211 shares of our common stock for all of Orchest's outstanding
shares.

On February 15, 2000, we acquired Mountain View, California-based Prio, Inc.
Prio was a privately held provider of "e-nabled" commerce solutions
specializing in the development of strategic partnerships, technologies and
programs that drive commerce in both traditional and online shopping
environments. Under the terms of the acquisition, which we will account for as
a pooling of interests, we exchanged 5,293,456 shares of our common stock for
all of Prio's outstanding shares, warrants and options.

On December 23, 1999, we entered into a definitive agreement to acquire
Berkeley, California-based Millet Software (privacybank.com). Millet develops
e-commerce solutions to make online transactions more convenient, while
enabling shoppers to check the privacy policies of online merchants at the
point of purchase. Under the terms of the acquisition, which we will account
for as a purchase, we will exchange 297,552 shares of our common stock for all
of Millet's outstanding shares, warrants and options. We expect to complete the
acquisition in the first quarter of 2000, subject to satisfaction of customary
closing conditions.

Recent Accounting Pronouncements

In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The
SAB establishes certain criteria for net versus gross recording of sales
transactions and requires companies to comply with the SAB no later than the
first fiscal quarter of the fiscal year beginning after December 15, 1999 and
to retroactively reclassify for all periods presented. We are adopting SAB 101
on January 1, 2000. Prior to January 1, 2000 and implementation of the SAB, we
recorded gross revenues from customers for development fees, implementation
fees and/or integration fees when the service was completed. If this revenue
were recognized on a straight-line basis, in accordance with SAB 101, we
estimate that approximately $700,000 in revenue would have been deferred and
recognized in 2000 and 2001. In accordance with SAB 101, we will recognize this
revenue over the straight-lined basis and record a cumulative effect of change
in accounting principle.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates
and equity price fluctuations.

Interest Rate Risk: We invest our excess cash in high-quality corporate
issuers, and in debt instruments of the U.S. Government and its agencies. By
policy, we limit our credit exposure to any one issuer. We do not have any
derivative instruments in our investment portfolio. We protect and preserve
invested funds by limiting default, market and reinvestment risk. Investments
in both fixed rate and floating rate interest earning instruments carries a
degree of interest rate risk. Fixed rate securities may have their fair market
value adversely impacted due to a rise in interest rates, while floating rate
securities may produce less income than expected if interest rates fall. Due in
part to these factors, the Company's future investment income may fall short of
expectations due to changes in interest rates or the Company may suffer losses
in principal if forced to sell securities which have declined in market value
due to changes in interest rates.

Equity Investment Risk The Company invests in equity instruments of public
and privately-held, technology companies for business and strategic purposes.
These investments are recorded as long-term assets and are classified as
available-for-sale. For the privately-held investments, our policy is to
regularly review the assumptions underlying the operating performance and cash
flow forecasts in assessing the carrying value. For our publicly-held
investments, we are subject to significant fluctuations in fair market value
due to the volatility of the stock market. Changes in fair market value are
recorded as a component of other comprehensive income and do not effect net
income until the securities are sold and a realized gain or loss is incurred.

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Page
----

InfoSpace.com, Inc.:

Independent Auditors' Report............................................. 49

Consolidated Balance Sheets.............................................. 50

Consolidated Statements of Operations.................................... 51

Consolidated Statements of Changes in Stockholders; Equity and
Accumulated Other Comprehensive Income.................................. 52

Consolidated Statements of Cash Flows.................................... 53

Notes to Consolidated Financial Statements............................... 54

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of InfoSpace.com.
Redmond, Washington

We have audited the accompanying consolidated balance sheets of
InfoSpace.com, Inc. and subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity and accumulated other comprehensive income, and cash flows
for the years ended December 31, 1999, 1998 and 1997. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of InfoSpace.com, Inc. and
subsidiaries as of December 31, 1999 and 1998, and results of their operations
and their cash flows for the years ended December 31, 1999, 1998 and 1997, in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Seattle, Washington
March 10, 2000

INFOSPACE.COM, INC.

CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998

1999 1998
---- ----
ASSETS

Current assets:
Cash and cash equivalents ................... $ 29,456,033 $ 15,174,009
Short-term investments, held-to-maturity
(fair market value $124,656,362 and
$72,173,013) ............................... 124,720,142 72,159,522
Accounts receivable, net of allowance for
doubtful accounts of $677,960 and $603,278.. 6,539,602 3,469,976
Interest receivable.......................... 3,321,956 9,874
Notes receivable, net of allowance of $12,075
and $0 ..................................... 11,394,016 35,061
Prepaid expenses and other assets ........... 10,117,391 3,611,535
------------ ------------
Total current assets ...................... 185,549,140 94,459,977
Long-term investments, held-to-maturity (fair
market value $70,971,645 and $1,252,051) ..... 71,416,777 1,252,438
Property and equipment, net ................... 4,502,582 1,238,802
Other long-term assets ........................ 496,622 405,906
Other investments ............................. 16,779,149 370,790
Intangible assets, net......................... 73,827,125 5,276,880
------------ ------------
Total assets................................... $352,571,395 $103,004,793
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable............................. $ 1,865,151 $ 1,683,379
Accrued expenses............................. 16,598,382 5,032,450
Deferred revenues............................ 2,480,612 1,401,865
------------ ------------
Total current liabilities.................. 20,944,145 8,117,694
Convertible debentures payable................. -- 163,345
------------ ------------
Total liabilities.......................... 20,944,145 8,281,039
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, par value $.0001--
Authorized, 15,000,000 shares; issued and
outstanding, 1 share........................ -- --
Common stock, par value $.0001--Authorized,
200,000,000 shares; issued and outstanding,
101,450,816 and 85,320,264 shares........... 10,145 8,532
Additional paid-in capital................... 368,368,889 112,309,440
Accumulated deficit.......................... (35,689,908) (13,996,133)
Deferred expense--warrants................... (2,311,159) (3,126,862)
Unearned compensation--stock options......... (68,165) (428,875)
Accumulated other comprehensive income....... 1,317,448 (42,348)
------------ ------------
Total stockholders' equity................. 331,627,250 94,723,754
------------ ------------
Total liabilities and stockholders' equity..... $352,571,395 $103,004,793
============ ============

See notes to consolidated financial statements.

INFOSPACE.COM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 1999, 1998 and 1997

1999 1998 1997
------------ ------------ -----------

Revenues............................. $ 36,907,171 $ 9,623,360 $ 1,742,542
Cost of revenues .................... 5,259,043 1,634,726 418,809
------------ ------------ -----------
Gross profit..................... 31,648,128 7,988,634 1,323,733
Operating expenses:
Product development................ 3,189,279 1,244,638 383,136
Sales and marketing................ 23,694,754 6,285,897 1,476,576
General and administrative ........ 9,688,297 4,575,414 944,138
Amortization of intangibles ....... 3,223,031 709,923 64,056
Acquisition and related charges ... 13,249,533 2,800,000 --
Other--non-recurring charges ...... 11,359,500 4,500,000 137,000
------------ ------------ -----------
Total operating expense ......... 64,404,394 20,115,872 3,004,906
------------ ------------ -----------
Loss from operations ............ (32,756,266) (12,127,238) (1,681,173)
Other income, net ................... 11,074,008 433,511 20,258
Equity in loss from joint venture ... (11,517) (124,976) --
------------ ------------ -----------
Net loss............................. $(21,693,775) $(11,818,703) $(1,660,915)
============ ============ ===========
Basic and diluted net loss per share
.................................... $ (0.23) $ (0.22) $ (0.04)
============ ============ ===========
Shares used in computing basic net
loss per share ..................... 93,565,780 54,847,259 44,113,886
============ ============ ===========
Shares used in computing diluted net
loss per share ..................... 93,565,780 54,847,259 44,340,553
============ ============ ===========

See notes to consolidated financial statements.

INFOSPACE.COM, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE INCOME

Years Ended December 31, 1999, 1998 and 1997

1999 1998 1997
------------ ------------ -----------

Common stock and additional paid in
capital:
Balance, beginning of year............ $112,317,972 $ 3,157,235 $ 1,593,597
Common stock issued................. 185,039,027 92,943,855 679,030
Common stock issued for
acquisitions....................... 61,125,843 7,902,309 292,188
Common stock issued for stock
options............................ 2,313,210 1,019,850 23
Common stock issued in exchange
transactions....................... 650,000 162,726 84,720
Common stock issued for warrants and
preferred shares................... 5,315,541 2,356,412 272,957
Common stock issued for conversion
of special shares and debentures... 170,369 -- --
Common stock issued for employee
stock purchase plan................ 286,088 -- --
Unearned compensation--stock
options............................ 1,160,984 1,512,772 234,720
Deferred expense--warrants.......... -- 3,262,813 --
------------ ------------ -----------
Balance, end of year.................. 368,379,034 112,317,972 3,157,235
------------ ------------ -----------
Balance attributed to common stock.... 10,145 8,532 4,476
Balance attributed to additional paid
in capital........................... 368,368,889 112,309,440 3,152,759
------------ ------------ -----------
Balance, common stock and additional
paid in capital...................... 368,379,034 112,317,972 3,157,235
------------ ------------ -----------
Accumulated deficit:
Balance, beginning of year............ (13,996,133) (2,177,430) (516,515)
Net loss............................ (21,693,775) (11,818,703) (1,660,915)
------------ ------------ -----------
Balance, end of year.................. (35,689,908) (13,996,133) (2,177,430)
------------ ------------ -----------
Deferred expense--warrants:
Balance, beginning of year............ (3,126,862) -- --
Deferred expense--warrants.......... -- (3,262,813) --
Warrant expense..................... 815,703 135,951 --
------------ ------------ -----------
Balance, end of year.................. (2,311,159) (3,126,862) --
------------ ------------ -----------
Unearned compensation--stock options:
Balance, beginning of year............ (428,875) (162,235) (71,437)
Unearned compensation--stock
options............................ (1,160,984) (1,512,772) (234,720)
Compensation expense--stock
options............................ 1,521,694 1,246,132 143,922
------------ ------------ -----------
Balance, end of year.................. (68,165) (428,875) (162,235)
------------ ------------ -----------
Accumulated other comprehensive
income:
Balance, beginning of year............ (42,348) (25,780) (5,181)
Unrealized gain (loss) on equity
investments........................ 1,324,301 -- --
Foreign currency translation
adjustment......................... 35,495 (16,568) (20,599)
------------ ------------ -----------
Balance, end of year.................. 1,317,448 (42,348) (25,780)
------------ ------------ -----------
$331,627,250 $ 94,723,754 $ 791,790
============ ============ ===========

See notes to consolidated financial statements.

INFOSPACE.COM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 1999, 1998 and 1997

1999 1998 1997
------------- ------------ -----------

Operating Activities:
Net loss........................... $ (21,693,775) $(11,818,703) $(1,660,915)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Trademark amortization............. 1,500,000 1,500,000 --
Depreciation and other
amortization...................... 4,098,201 1,018,543 285,325
Write-off of in-process research
and development................... 9,200,000 2,800,000 --
Compensation expense--stock
options........................... 1,521,694 1,246,132 143,922
Exchange transaction............... 650,000 -- --
Currency translation............... 42,520 (28,308) (29,830)
Warrants expense................... 815,703 135,951 --
Noncash issuance of common stock... -- 70,000 --
Noncash services exchanged......... -- 155,436 24,720
Bad debt expense................... 499,464 687,602 47,000
Equity in loss in joint venture.... 11,517 124,976 --
Gain on sale of intangibles........ (7,830) -- --
Loss (gain) on disposal of fixed
assets............................ 15,019 (3,771) 3,743
Warrants--income................... (1,295,325) -- --
Cash provided (used) by changes in
operating assets and liabilities,
net of assets acquired in business
combinations:
Accounts receivable............... (3,557,965) (3,681,668) (396,990)
Notes receivable.................. (11,314,171) -- --
Interest receivable............... (3,312,082) -- --
Prepaid expenses and other
assets........................... (7,979,947) (2,086,941) (45,253)
Other long-term assets............ (90,716) (337,500) --
Other intangible assets........... -- (66,865) --
Accounts payable.................. 181,772 1,468,405 147,374
Accrued expenses.................. 11,112,077 4,805,428 199,648
Deferred revenue.................. 1,057,294 1,337,716 58,261
------------- ------------ -----------
Net cash used by operating
activities........................ (18,546,550) (2,673,567) (1,222,995)

Investing Activities:
Business acquisitions, net of cash
acquired.......................... (19,514,794) (311,951) (14,000)
Other investments.................. (13,800,250) -- --
Purchase of domain name............ (120,000) -- --
Proceeds from sale of domain name.. 10,000 -- --
Purchase of trademark.............. -- (3,290,000) --
Internally developed software...... (340,498) -- --
Purchase of property and
equipment......................... (3,634,792) (1,201,162) (181,666)
Investment in joint venture........ -- (495,767) --
Proceeds from sale of fixed
assets............................ -- 4,997 --
Purchase of short-term investments
held-to-maturity.................. (52,560,620) (72,159,522) --
Purchase of long-term investments
held-to-maturity.................. (70,164,338) (1,252,438) --
Other.............................. -- -- (29,087)
------------- ------------ -----------
Net cash used by investing
activities........................ (160,125,292) (78,705,843) (224,753)
Financing Activities:
Proceeds from issuance of common
stock............................. -- 17,332,871 952,010
Payment to shareholders for
fractional shares................. -- (28) --
Proceeds from public offerings, net
of expenses....................... 185,039,027 77,830,903 --
Proceeds from issuance of
promissory notes payable.......... -- 235,992 21,670
Repayment of promissory notes
payable........................... -- (256,220) (1,234)
Repayment of stockholder loan
payable........................... -- (5,116) (39,728)
Proceeds from issuance of
debentures payable................ -- -- 180,584
Proceeds from issuance of ESPP
shares............................ 286,088 -- --
Proceeds from exercise of
warrants.......................... 5,315,541 40,161 --
Proceeds from exercise of stock
options........................... 2,313,210 1,016,210 --
------------- ------------ -----------
Net cash provided by financing
activities........................ 192,953,866 96,194,773 1,113,302
------------- ------------ -----------
Net increase (decrease) in cash and
cash equivalents................... 14,282,024 14,815,363 (334,446)
Cash and cash equivalents, beginning
of period.......................... 15,174,009 358,646 693,092
------------- ------------ -----------
Cash and cash equivalents, end of
period............................. $ 29,456,033 $ 15,174,009 $ 358,646
------------- ------------ -----------
Supplemental Disclosure of Noncash
Financing and Investing Activities:
Acquisitions from purchase
transactions:
Stock issued....................... $ 61,125,843 $ 7,932,000 $ 382,188
Net assets assumed................. (149,723) (191,000) (90,000)
Warrants issued with abandoned
financing.......................... 650,000
Stock issued in exchange
transaction........................ -- 292,726 84,720
Stock issued for retirement of
debentures......................... 170,369 -- --
Interest paid....................... -- 14,923 --

See notes to consolidated financial statements.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 1999, 1998 and 1997

Note 1: Summary of Significant Accounting Policies

Description of business: InfoSpace.com, Inc., (the Company or InfoSpace),
previously known as InfoSpace, Inc., a Delaware corporation, was founded in
March 1996. The Company is a global Internet information infrastructure
services company that provides enabling technologies and Internet services to
Web sites, merchants and wireless devices.

Principles of consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

Business combinations: Business combinations accounted for under the purchase
method of accounting include the results of operations of the acquired business
from the date of acquisition. Net assets of the companies acquired are recorded
at their fair value at the date of acquisition. Amounts allocated to in-process
research and development are expensed in the period of acquisition.

Business combinations accounted for under the pooling-of-interests method of
accounting include the financial position and results of operations as if the
acquired company had been a wholly-owned subsidiary since inception. In such
cases, the assets, liabilities and stockholders' equity of the acquired
entities were combined with the Company's respective amounts at their recorded
values. The equity of the acquired entity is reflected on an as-if-converted
basis to InfoSpace.com, Inc. equity at the time of issuance. Prior period
financial statements have been recast to give effect to the merger.

Cash and cash equivalents: The Company considers all highly liquid debt
instruments with an original maturity of 90 days or less to be cash
equivalents. Cash and cash equivalents are carried at cost, which approximates
market.

Investments: The Company principally invests its available cash in high-
quality corporate issuers, and in debt instruments of the U.S. Government and
its agencies. All debt instruments with original maturities greater than three
months up to one year from the balance sheet date are considered short-term
investments. Investments maturing after twelve months from the balance sheet
date are considered long-term. The Company accounts for investments in
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company's short-term and long-term investments are
classified as held-to-maturity as of the balance sheet date as the company has
both the ability and the intent to hold the investments to maturity and are
reported at amortized cost.

Property and equipment: Property and equipment are stated at cost.
Depreciation is computed under the straight-line method over the following
estimated useful lives:

Computer equipment and software................................. 3 years
Office equipment................................................ 5 years
Office furniture................................................ 7 years
Leasehold improvements.......................................... lease term

On January 1, 1999, the Company adopted Statement of Position 98-1,
Accounting for the Costs of Computer Software developed or Obtained for
Internal Use. This requires capitalization of certain costs

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

incurred in connection with developing or obtaining internal use software and
amortization of these costs over future periods, which prior to the adoption of
SOP 98-1, were expensed. For the year ended December 31, 1999, the Company has
capitalized $340,498 of costs associated with internally developed software.
These costs are included in property and equipment on the accompanying balance
sheet and are generally amortized over five years.

Intangible assets: Goodwill, purchased technology and other intangibles are
amortized on a straight-line basis over their estimated useful lives. Goodwill
and purchased technology are generally amortized over three to five years.
Other intangibles, primarily consisting of purchased trademarks and domain name
licenses are amortized over an estimated useful life of three years.

Other investments: The Company invests in equity investments of public and
privately-held technology companies for business and strategic purposes. These
investments are included in long-term assets and are classified as available-
for-sale. Investments in companies whose securities are not publicly traded are
recorded at cost. Investments in companies whose securities are publicly traded
are recorded at fair value. Unrealized gains or losses on these investments are
recorded as comprehensive income in the Company's stockholders' equity.
Realized gains or losses are recorded based on the identified cost of the
investment sold.

Other long-lived assets: Management periodically evaluates long-lived assets,
consisting primarily of purchased technology, goodwill, property and equipment,
to determine whether there has been any impairment of the value of these assets
and the appropriateness of their estimated remaining life. No impairment loss
has been recognized through December 31, 1999.

Revenue recognition: The Company's revenues are derived from its consumer,
merchant and wireless services. These include advertising, content carriage,
licensing fees, e-commerce fees and guaranteed transaction fees in lieu of
revenue share.

Advertising: Revenues from contracts based on the number of impressions
displayed or click throughs provided are recognized as services are
rendered.

Content carriage: Revenues from fixed fee content carriage agreements are
recognized ratably over the related contract term. For content carriage fee
contracts that are performance based with an established maximum, the
Company recognizes revenues as the services are rendered, not to exceed the
maximum amount over the fixed term.

Licensing fees: Revenue from licensed services is recognized ratably over
the term of the license agreement.

Commerce fees: Transaction fees are recognized in the period the
transaction occurred and was reported to the Company by the content
providers or online merchants.

Guaranteed transaction fees: Guaranteed minimum payments are recognized
ratably over the term of the agreements. Revenues earned above the
guaranteed minimum payments are recognized ratably over the remaining term
of the agreements.

Also included in revenues are barter revenues generated from exchanging
banners for banners, banners for content or banners for print or other
advertising. Barter revenues are recorded at the lower of the estimated fair
market value of goods and services received or impressions given, and are
recognized when the Company's advertisements are run. For barter agreements,
the Company records a receivable or liability at the end of the reporting
period for the difference in the fair value of the services provided or
received.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Cost of revenues: Cost of revenues consists of expenses associated with the
enhancement, maintenance and support of our content services, including direct
personnel expenses, communication costs such as high-speed Internet access,
server equipment depreciation and content license fees. Fees paid for content
licenses are capitalized and amortized over the license period.

Product development: Product development expenses consist principally of
personnel costs for research, design, development, enhancement and maintenance
of the proprietary technology used to integrate and distribute the Company's
consumer, merchant and wireless services. These expenses are net of capitalized
internally developed software costs.

Advertising costs: Costs for print advertising are recorded as expense when
the advertisement appears. Advertising costs related to electronic impressions
are recorded as expense as impressions are provided. Advertising expense
totaled approximately $5,369,000, $1,265,000 and $251,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.

Unearned compensation: Unearned compensation represents the unamortized
difference between the option exercise price and the fair market value of the
Company's common stock for shares subject to grant at the grant date, for
options issued under the Company's stock incentive plan (Note 5). The
amortization of unearned compensation is charged to operations and is amortized
over the vesting period of the options.

Deferred expense-warrants: Deferred expense-warrants represents the fair
value of the warrants that were issued and is expensed ratably over the four
year vesting period. The amortization of deferred warrant expense is charged to
sales and marketing expense.

Acquisition and other related charges: Acquisition and other related charges
consist of in-process research and development and other one-time charges
related directly to the acquisitions, such as legal and accounting fees.

Other non-recurring charges: Other non-recurring charges in 1999 and 1998
consist of costs associated with litigation settlements.

Foreign currencies: Assets and liabilities denominated in foreign currencies
are translated at the exchange rate on the balance sheet date. Translation
adjustments resulting from this process are charged or credited to other
comprehensive income. Revenue and expenses are translated at average rates of
exchange prevailing during the period. Gains and losses on foreign currency
transactions are included in Other income, net.

Concentration of credit risk: Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments, and trade receivables. These instruments
are generally unsecured and uninsured. The Company places its cash equivalents
and investments with major financial institutions. The Company operates in one
business segment and sells advertising to various companies across several
industries. Accounts receivable are typically unsecured and are derived from
revenues earned from customers primarily located in the United States operating
in a wide variety of industries and geographic areas. The Company performs
ongoing credit evaluations of its customers and maintains reserves for
potential credit losses. For the years ended December 31, 1999 and 1998, one
customer accounted for approximately 21% of revenues. For the year ended
December 31, 1997, no one customer accounted for more than 10% of revenues. At
December 31, 1999, one customer accounted for approximately 14% of accounts
receivable. At December 31, 1998, one customer accounted for approximately 27%
of accounts receivable.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income taxes: The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS No. 109,
deferred tax assets, including net operating loss carryforwards, and
liabilities are determined based on temporary differences between the book and
tax basis of assets and liabilities. The Company believes sufficient
uncertainty exists regarding the realizability of the deferred tax assets such
that a full valuation allowance is required.

Reclassification: Certain reclassifications have been made to the 1998 and
1997 balances to conform with the 1999 presentation.

Reverse stock split: A one-for-two reverse stock split of the Company's
common stock was effected on August 25, 1998. All references in the financial
statements to shares, share prices, per share amounts and stock plans have been
adjusted retroactively for the one-for-two reverse stock split.

Stock splits: A two-for-one stock split of the Company's common stock was
effected in May 1999. A second two-for-one stock split of the Company's common
stock was effected in January 2000. All references in the financial statements
to shares, share prices, per share amounts and stock plans have been adjusted
retroactively for these stock splits.

Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts may differ from estimates.

Recent accounting pronouncements: In December 1999, the Securities and
Exchange Commission staff issued Staff Accounting Bulletin (SAB) 101, Revenue
Recognition in Financial Statements. The SAB establishes certain criteria for
net versus gross recording of sales transactions and requires companies to
comply with the SAB no later than the first fiscal quarter of the fiscal year
beginning after December 15, 1999. The Company is adopting SAB 101 on January
1, 2000. Prior to January 1, 2000 and implementation of the SAB, the Company
recorded revenues from customers for development fees, implementation fees
and/or integration fees when the service was completed. If this revenue was
recognized on a straight-line basis over the term of the related service
agreements, in accordance with SAB 101, the Company estimates that
approximately $700,000 in revenue would have been deferred and recognized in
2000 and 2001. In accordance with SAB 101, the Company will record a cumulative
effect of change in accounting principle beginning in January 2000 and
recognize this revenue on a straight-lined basis.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivatives and
Hedging Activities, which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. Because the Company has never used nor currently intends to use
derivatives, management does not anticipate that the adoption of this new
standard will have a significant effect on earnings or the financial position
of the Company.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 2: Balance Sheet Components

Investments at December 31, 1999 consist of the following:

Gross Gross
Amortized Unrealized Unrealized Market
Cost Gain Loss Value
------------ ---------- ---------- ------------

Corporate notes and bonds
......................... $100,604,357 $ 61,109 $(530,513) $100,134,953
U.S. Government securities
......................... 52,920,693 14,198 (249,720) 52,685,171
Commercial paper ......... 27,362,325 147,997 -- 27,510,322
Certificate of deposit ... 15,249,544 79,125 (31,108) 15,297,561
------------ -------- --------- ------------
$196,136,919 $302,429 $(811,341) $195,628,007
============ ======== ========= ============

Maturity information is as follows:

Amortized
Cost Fair Value
------------ ------------

Within one year .................................. $124,720,142 $124,656,362
1 year through 5 years ........................... 71,416,777 70,971,645
------------ ------------
$196,136,919 $195,628,007
============ ============

Investments at December 31, 1998 consist of the following:

Gross Gross
Amortized Unrealized Unrealized Market
Cost Gain Loss Value
----------- ---------- ---------- -----------

Commercial paper ............ $66,668,475 $13,259 $(253) $66,681,481
Municipal securities ........ 1,499,665 485 -- 1,500,150
U.S. Government securities
............................ 5,243,820 -- (387) 5,243,433
----------- ------- ----- -----------
$73,411,960 $13,744 $(640) $73,425,064
=========== ======= ===== ===========

Maturity information is as follows:

Amortized
Cost Fair Value
----------- -----------

Within one year .................................... $72,159,522 $72,173,013
1 year through 5 years ............................. 1,252,438 1,252,051
----------- -----------
$73,411,960 $73,425,064
=========== ===========

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, December 31,
1999 1998
------------ ------------

Property and equipment:
Computer equipment ............................. $ 3,852,352 $1,509,905
Purchased software ............................. 869,206 1,813
Internally developed software .................. 340,498 --
Office equipment ............................... 278,489 54,366
Office furniture ............................... 160,598 77,789
Leasehold improvements ......................... 320,498 17,632
----------- ----------
5,821,641 1,661,505
Accumulated depreciation ....................... (1,319,059) (422,703)
----------- ----------
$ 4,502,582 $1,238,802
=========== ==========
Intangible assets:
Goodwill ....................................... $70,436,117 $4,860,671
Core technology ................................ 6,500,000 800,000
Assembled workforce ............................ 420,000 40,000
Other .......................................... 552,292 435,417
----------- ----------
77,908,409 6,136,088
Accumulated amortization ....................... (4,081,284) (859,208)
----------- ----------
$73,827,125 $5,276,880
=========== ==========
Accrued expenses:
Salaries and related expenses .................. $ 2,357,981 $ 193,592
Accrued carriage fees .......................... 907,503 --
Accrued revenue share .......................... 1,064,638 93,067
Accrued settlement costs ....................... 10,500,000 4,500,000
Other .......................................... 1,768,260 245,791
----------- ----------
$16,598,382 $5,032,450
=========== ==========

3. Notes Receivable

On June 30, 1999, the Company loaned an unrelated third party $6.0 million at
12% interest per annum. The short-term note and accrued interest was repaid on
February 7, 2000.

On December 1, 1999, the Company loaned an unrelated third party $2.5
million. This short-term note is due by August 1, 2000, and accrues interest at
12% per annum. The note is secured by all of the assets and properties of the
borrower and is considered fully collectible. At December 31, 1999, accrued
interest on this note is $25,000.

On December 21, 1999, the Company loaned a director of the Company $1.9
million. The promissory note is due on December 16, 2001, and accrues interest
at the prime rate. The note is secured by a pledge of the officer's shares of
the Company's common stock. The pledged shares are valued in excess of the note
balance. At December 31, 1999, accrued interest on this note is $4,405. At
December 31, 1999, the Company also had approximately $1 million in short-term
loans to employees and unrelated parties at various interest rates.
Approximately $939,000 of this balance has been repaid subsequent to year-end.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Other Investments

The Company invests in equity instruments of public and privately-held
technology companies for business and strategic purposes. These investments are
recorded as long-term assets and are classified as available-for-sale
securities.

The Company also holds warrants in public and privately-held technology
companies for business and strategic purposes. Certain of these warrant
agreements contain provisions that require the Company to meet specific
performance criteria for the warrants to vest. When the Company meets its
performance obligations it records revenue equal to the difference in the
exercise price of the warrant and the fair market value of the underlying
security. The Company recorded revenue in the amount of $1,895,325 for vesting
in performance warrants and stock for the year ended December 31, 1999.

Unrealized Carrying
Gain Value
---------- -----------

Investments in public companies...................... $1,324,301 $ 4,060,076
Investments in privately-held companies.............. -- 12,359,800
Investment in joint venture.......................... -- 359,273
---------- -----------
Total other investments.............................. $1,324,301 $16,779,149
========== ===========

Note 5: Stockholders' Equity

Authorized shares: On May 1, 1998, the Company's Certificate of Incorporation
was amended to increase the authorized number of shares of all classes of
Company stock to 55,000,000 shares, consisting of 40,000,000 shares of common
stock with a par value of $.0001 per share and 15,000,000 shares of preferred
stock with a par value of $.0001 per share.

On August 25, 1998, the Board of Directors approved and the Company effected
a one-for-two reverse stock split of the Company's common stock.

Also, on August 25, 1998, the Company filed a Restated Certificate of
Incorporation. The effect was to change the authorized number of all classes of
Company stock to 65,000,000 shares, consisting of 50,000,000 shares of common
stock with a par value of $.0001 per share and 15,000,000 shares of preferred
stock with a par value of $.0001 per share after giving effect to the one-for-
two reverse stock split.

In April 1999, the Company closed a follow-on offering. The Company sold
8,680,000 shares and raised approximately $185 million, net of expenses.
Certain shareholders sold 6,040,000 shares.

On April 6, 1999, the Board of Directors approved a two-for-one stock split
of the Company's common stock. The stock split was effected on May 5, 1999.

On May 24, 1999, the stockholders of the Company approved an amendment to the
Company's Certificate of Incorporation to increase the authorized number of
shares of the Company's common stock to 200,000,000 shares.

On November 29, 1999, the Board of Directors approved a two-for-one stock
split of the Company's common stock. The stock split was effected on January 5,
2000.

Restated 1996 Flexible Stock Incentive Plan: On June 3, 1998, the Board of
Directors approved the Restated 1996 Flexible Stock Incentive Plan (the Plan).
The Plan provides employees (including officers and

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

directors who are employees) of the Company an opportunity to purchase shares
of stock pursuant to options which may qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and
employees, officers, directors, independent contractors and consultants of the
Company an opportunity to purchase shares of stock pursuant to options which
are not described in Section 422 of the Code (nonqualified stock options). The
Plan also provides for the sale or bonus of stock to eligible individuals in
connection with the performance of service for the Company. Finally, the Plan
authorizes the grant of stock appreciation rights, either separately or in
tandem with stock options, which entitle holders to cash compensation measured
by appreciation in the value of the stock. Not more than 3,000,000 shares of
stock shall be available for the grant of options or the issuance of stock
under the Plan. If an option is surrendered or for any other reason ceases to
be exercisable in whole or in part, the shares which were subject to option but
on which the option has not been exercised shall continue to be available under
the Plan. The Plan is administered by the Board of Directors. Options granted
under the Plan typically vest over four years, 25% one year from the date of
grant and ratably thereafter on a monthly basis. Additional options have been
granted to retain certain existing employees, which options vest monthly over
four years.

On June 3, 1998, the Board of Directors approved the Option Exchange Program
and the Option Replacement Program, allowing employees of the Company to
exchange their nonqualified stock options for incentive stock options.
Nonqualified stock options to purchase a total of 1,450,212 shares were
exchanged for incentive stock options to purchase the equivalent number of
shares with an exercise price equal to the fair market value at the date of
exchange.

On May 24, 1999, the stockholders approved an amendment to the Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by 4,000,000 shares.

On May 24, 1999, the stockholders approved an amendment to the Plan to
annually increase the number of shares reserved for issuance on the first day
of the Company's fiscal year beginning January 1, 2000 by an amount equal to
the lesser of (A) 4,000,000 shares, (B) three percent of the Company's
outstanding shares at the end of the Company's preceding fiscal year, and (C) a
lesser amount determined by the Board of Directors.

On May 24, 1999, the stockholders approved an amendment to the Plan to limit
the number of shares of Common Stock that may be granted to any one individual
pursuant to stock options in any fiscal year of the Company to 4,000,000
shares, plus an additional 4,000,000 shares in connection with his or her
initial employment with the Company, which grant shall not count against the
limit.

Included in the table below as outstanding at December 31, 1999 are options
to purchase 225,192 shares that were issued outside of the Plan, of which
156,269 were exercisable as of December 31, 1999. The options issued outside
the Plan include 166,340 options that were assumed in acquisitions.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Activity and price information regarding the options are summarized as
follows:

Weighted average
Options Exercise price
---------- ----------------

Outstanding, December 31, 1996 ................. 4,164,424 0.06
Granted ...................................... 1,525,234 0.74
Exercised .................................... (488) 0.02
----------
Outstanding, December 31, 1997 ................. 5,689,170 0.24
Granted ...................................... 7,978,532 2.59
Cancelled .................................... (1,878,476) 0.53
Exercised .................................... (1,118,676) 0.91
----------
Outstanding, December 31, 1998 ................. 10,670,550 1.88
Granted ...................................... 4,137,212 27.93
Cancelled .................................... (380,377) 5.67
Exercised .................................... (1,990,442) 1.14
----------
Outstanding, December 31, 1999 ................. 12,436,943 10.55
==========
Options exercisable, December 31, 1999 ......... 4,185,769 2.05
==========

Information regarding stock option grants during the years ended December 31,
1999, 1998 and 1997 is summarized as follows:

Year ended Year ended Year ended
December 31, 1999 December 31, 1998 December 31, 1997
--------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted Weighted Weighted Weighted
Average Average Average Average Average Average
exercise fair exercise fair exercise fair
Shares price value Shares price value Shares price value
--------- -------- -------- --------- -------- -------- --------- -------- --------

Exercise price exceeds
market price........... -- $ -- $ -- -- -- $ -- 1,000,000 $1.00 $0.75
Exercise price equals
market price........... 4,137,212 27.93 28.26 6,932,532 2.93 2.91 57,738 0.70 0.22
Exercise price is less
than market price...... -- -- -- 1,066,000 0.33 0.89 467,496 0.19 0.60

The Company has elected to follow the measurement provisions of Accounting
Principles Board Opinion No. 25, under which no recognition of expense is
required in accounting for stock options granted to employees for which the
exercise price equals or exceeds the fair market value of the stock at the
grant date. In those cases where options have been granted when the option
price is below fair market value, the Company recognizes compensation expense
over the vesting period using the aggregated percentage of compensation accrued
method as prescribed by Financial Standards Accounting Board Interpretation
No. 28. Compensation expense of $284,102, $1,246,132, and $143,922, was
recognized during the years ended December 31, 1999, 1998 and 1997,
respectively, for options granted with exercise prices less than grant date
fair market value.

To estimate compensation expense which would be recognized under SFAS No.
123, Accounting for Stock-based Compensation, the Company uses the modified
Black-Scholes option-pricing model with the following weighted-average
assumptions for options granted through December 31, 1999: risk-free interest
rate ranging from 4.24% to 6.56%; expected dividend yield of 0-%; 121%
volatility; and an expected life of five years for 1999 and six years for 1998
and prior.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Had compensation expense for the Plan been determined based on fair value at
the grant dates for awards under the Plan consistent with SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net losses for the years
ended December 31, 1999, 1998 and 1997, would have been adjusted to the
following pro forma amounts:

1999 1998 1997
------------ ------------ -----------

Net loss as reported.................. $(21,693,775) $(11,818,703) $(1,660,915)
Net loss, pro forma................... (37,146,066) (12,234,567) (1,662,405)
Basic net loss per share, pro forma... $ (0.40) $ (0.22) $ (0.04)

Additional information regarding options outstanding as of December 31, 1999,
is as follows:

Options outstanding Options exercisable
------------------------------------- -----------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise Number contractual exercise Number exercise
prices outstanding life (yrs.) price Exercisable price
-------- ----------- ----------- -------- ----------- --------

$ 0.01- 1.88 3,870,687 6.68 $ 0.94 2,820,076 $ 0.84
2.00- 9.77 4,552,296 7.91 3.66 1,193,633 3.59
10.75- 19.94 1,236,968 6.47 14.11 147,168 13.71
20.22- 28.63 2,020,900 9.75 23.48 -- --
31.19- 57.56 437,000 9.87 41.09 -- --
74.50-101.63 319,092 9.97 90.87 24,892 76.25
---------- ---- ------ --------- ------
12,436,943 8.14 10.55 4,185,769 2.05
========== ==== ====== ========= ======

At December 31, 1999 6,179,815 shares were available for future grants under
the Plan.

In connection with the May and August 1998 private placement offering, the
Company issued warrants to purchase 8,255,344 shares of common stock to five
third-party participants for consulting services performed in identifying,
structuring and negotiating future financings. These warrants expire between
May 21, 2008 and August 6, 2008. The activity and additional information are as
follows:

Outstanding, December 31, 1998................................ 8,255,344
Exercised..................................................... (935,436)
---------
Outstanding, December 31, 1999................................ 7,319,908
=========

Range of
Exercise Number
prices Outstanding
-------- -----------

$0.50-1.00.................................................. 3,934,984
1.25-1.50.................................................. 1,707,980
2.50....................................................... 1,676,944

In July 1998, the Company issued warrants to purchase 1,911,868 shares of
common stock at an exercise price of $0.01 to a former consultant in
conjunction with the acquisition of Outpost (Note 4). All of these warrants
were exercised in 1999.

On August 24, 1998, the Company issued to AOL warrants to purchase up to
3,959,664 shares of common stock, which warrants vest in 16 equal quarterly
installments over four years, conditioned on the

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

delivery by AOL of a minimum number of searches each quarter on the Company's
white pages directory service. The warrants have an exercise price of $3.00 per
share. The warrants were valued using the fair value method, as required under
SFAS No. 123. The fair value of the warrants was approximately $3,300,000 at
the date of grant, and is being amortized ratably over the four-year vesting
period. The underlying assumptions used to determine the value of the warrants
are an expected life of six years and a 5.5% risk-free interest rate.

The Company assumed warrants to purchase 72,202 shares of the Company's
common stock as a result of the acquisition of INEX Corporation (Note 6). These
warrants were issued to seven third-party participants. Two of the third party
participants exercised 12,243 of the warrants in December 1999. The remaining
warrants expire between January 29, 2000 and July 31, 2000. The range of
exercise prices and number outstanding at December 31, 1999 are as follows:

Range of Number
Exercise prices Outstanding
--------------- -----------

$3.75........................................................ 17,139
8.00........................................................ 42,820

Stock purchase rights plan: On June 26, 1998, the Board of Directors approved
the InfoSpace Stock Purchase Rights Plan. The plan was offered to employees of
the Company and its subsidiaries. The purpose of the plan was to provide an
opportunity for employees to invest in the Company and increase their incentive
to remain with the Company. A maximum of 2,000,000 shares of common stock were
available for issuance under the plan. During July 1998, the Company offered
shares to employees under the plan, resulting in the sale of 893,004 shares at
$1.88 per share. The plan was terminated on August 24, 1998.

1998 Employee Stock Purchase Plan: The Company adopted the 1998 Employee
Stock Purchase Plan (the ESPP) in August 1998. The ESPP was implemented upon
the effectiveness of the initial public offering. The ESPP is intended to
qualify under Section 423 of the Code, and permits eligible employees of the
Company and its subsidiaries to purchase common stock through payroll
deductions of up to 15% of their compensation. Under the ESPP, no employee may
purchase common stock worth more than $25,000 in any calendar year, valued as
of the first day of each offering period. In addition, owners of 5% or more of
the Company or subsidiary's common stock and the Company's executives may not
participate in the ESPP. An aggregate of 1,800,000 shares of common stock are
authorized for issuance under the ESPP.

The ESPP was implemented with six-month offering periods, with the first such
period commencing upon the effectiveness of the initial public offering and
ending July 31, 1999. Thereafter, offering periods will begin on each February
1 and August 1. The price of common stock purchased under the ESPP will be the
lesser of 85% of the fair market value on the first day of an offering period
and 85% of the fair market value on the last day of an offering period, except
that the purchase price for the first offering period was equal to the lesser
of 100% of the initial public offering price of the common stock offered hereby
and 85% of the fair market value on July 31, 1999. The ESPP does not have a
fixed expiration date, but may be terminated by the Company's Board of
Directors at any time. There were 76,290 shares issued for the first ESPP
offering period which ended on July 31, 1999.

Note 6: Business Combinations

Zephyr Software Inc: On December 29, 1999, the Company acquired all of the
common stock of Zephyr Software Inc., a privately held company, and its wholly
owned subsidiary Zephyr Software (India) Private Limited ("Zephyr") for a
purchase consideration of 325,696 shares of the Company's common stock and
acquisition expenses of $539,512. The acquisition was accounted for as a
purchase in accordance with

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Accounting Principles Board Opinion ("APB") No. 16. Results of operations for
Zephyr have been included with those of the Company for the period subsequent
to the date of acquisition.

The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as follows:

Book and
Fair Value
----------

Tangible assets acquired....................................... $ 217,932
Liabilities assumed............................................ (238,622)
----------
Book value of net liabilities acquired....................... (20,690)
Purchase price:
Fair value of shares issued.................................. 8,643,105
Acquisition costs............................................ 539,512
----------
Excess of purchase price over net assets acquired, allocated to
goodwill...................................................... $9,203,307
==========

The Company is amortizing the goodwill over an estimated useful life of three
years.

eComLive.com, Inc.: On December 16, 1999, the Company acquired all of the
common stock of eComLive.com, Inc., a privately held company, for a purchase
consideration of 686,356 shares and acquisition expenses of $582,246. The
acquisition was accounted for as a purchase in accordance with the provisions
of APB No. 16.

The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as follows:

Book and
Fair Value
-----------

Tangible assets acquired...................................... $ 59,128
Liabilities assumed........................................... (60,053)
-----------
Book value of net liabilities acquired...................... (925)
Fair value adjustments:
Fair value of purchased technology, including in-process
research and development................................... 5,300,000
Fair value of assembled workforce........................... 140,000
-----------
Fair value of net assets acquired............................. 5,439,075
Purchase price:
Fair value of shares issued................................. 31,995,220
Acquisition costs........................................... 582,246
-----------
Excess of purchase price over net assets acquired, allocated
to goodwill.................................................. $27,138,391
===========

The $5,300,000 value of purchased technology includes purchased in-process
research and development for future InfoSpace products. Generally accepted
accounting principles require purchased in-process research and development
with no alternative future use to be recorded and charged to expense in the
period acquired. Accordingly, the results of operations for the year ended
December 31, 1999, include the write-off of $2,000,000 of purchased in-process
research and development. The remaining $3,300,000 represents the purchase of
core technology and existing products which are being amortized over an
estimated useful life of five years. The Company is amortizing the goodwill
over an estimated life of five years.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Union-Street.com: On October 14, 1999, the Company acquired all of the common
stock of Union-Street.com, a privately held company, for a purchase
consideration of 873,294 shares and acquisition expenses of $395,656. The
acquisition was accounted for as a purchase in accordance with the provisions
of APB No. 16.

The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values as follows:

Book and
Fair Value
-----------

Tangible assets acquired...................................... $ 69,412
Liabilities assumed........................................... (176,631)
-----------
Book value of net liabilities acquired...................... (107,219)
Fair value adjustments:
Fair value of purchased technology, including in-process
research and development................................... 5,300,000
Fair value of assembled workforce........................... 160,000
-----------
Fair value of net assets acquired............................. 5,352,781
Purchase price:
Fair value of shares issued................................. 20,487,518
Acquisition costs........................................... 395,656
-----------
Excess of purchase price over net assets acquired, allocated
to goodwill.................................................. $15,530,393
===========

The $5,300,000 value of purchased technology includes purchased in-process
research and development for future InfoSpace products. Generally accepted
accounting principles require purchased in-process research and development
with no alternative future use to be recorded and charged to expense in the
period acquired. Accordingly, the results of operations for the year ended
December 31, 1999, include the write-off of $3,300,000 of purchased in-process
research and development. The remaining $2,000,000 represents the purchase of
core technology and existing products which are being amortized over an
estimated useful life of five years. The Company is amortizing the goodwill
over an estimated useful life of five years.

INEX Corporation: On October 14, 1999, the Company completed the merger with
INEX Corporation, a privately held company that developed and marketed Internet
commerce applications to deliver solutions designed for small and medium-sized
merchants to build, manage and promote online storefronts. Under the terms of
the merger , which was accounted for as a pooling-of-interests, the Company
exchanged 1,800,000 shares of common stock for (1) directly to those INEX
shareholders who elected to receive our common stock in exchange for their INEX
shares at the closing of the combination, (2) upon the exchange or redemption
of the exchangeable shares of InfoSpace.com Canada Holdings Inc., an indirect
subsidiary of the Company, which exchangeable shares were issued to those INEX
shareholders who elected to receive exchangeable shares, or who did not make an
election to receive shares of our common stock at the closing, and (3) upon the
exercise of outstanding warrants and options to purchase INEX common shares,
which the Company assumed and which will become exercisable for shares of
InfoSpace common stock. The consolidated financial statements for the three
years ended December 31, 1999 and the accompanying notes reflect the Company's
financial position and the results of operations as if INEX was a wholly-owned
subsidiary since inception.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

My Agent technology: On June 30, 1999 the Company acquired the MyAgent
technology and related assets from Active Voice Corporation for $18 million
dollars. The acquisition was accounted for as a purchase in accordance with the
provisions of APB No. 16. Under the purchase method of accounting, the purchase
price is allocated to the assets acquired and the liabilities assumed based on
their fair values at the date of the acquisition. Other than the MyAgent
technology modules, no other assets or liabilities were assumed as part of this
acquisition.

The Company recorded a non-recurring charge of $3.9 million for in-process
research and development that had not yet reached technological feasibility and
had no alternative future use. Separately, the Company also recorded a one-time
charge of approximately $1.0 million for expenses related to bonus payments
made to certain Active Voice MyAgent team employees who accepted employment
with InfoSpace but who are under no agreement to continue their employment with
InfoSpace. The Company also recorded $13.7 million of goodwill and $480,000 of
other intangible assets. These intangibles will be amortized over their useful
life, which the Company has estimated to be five years.

The allocation of the purchase price is summarized as follows:

Fair value of purchased technology, including in-process
research and development..................................... $ 4,300,000
Fair value of assembled workforce............................. 80,000
-----------
Fair value of net assets acquired............................. 4,380,000
Purchase price:
Cash paid................................................... 18,000,000
Acquisition costs........................................... 83,054
-----------
Excess of purchase price over net assets acquired, Allocated
to goodwill.................................................. $13,703,054
===========

The $4.3 million value of purchased technology includes purchased in-process
research and development for future InfoSpace products. Generally accepted
accounting principles require purchased in-process research and development
with no alternative future use to be recorded and charged to expense in the
period acquired. Accordingly, the results of operations for the quarter ended
June 30, 1999, include the write-off of $3.9 million of purchased in-process
research and development. The remaining $400,000 represents the purchase of
core technology which is being amortized over an estimated useful life of five
years. The Company is amortizing the goodwill over an estimated life of five
years.

Prior to the acquisition, the MyAgent product team was not accounted for as a
separate entity, a subsidiary, or a line of business, or division of the
business, but rather was an integral part of the research and development
group. Accordingly, historical financial information is not available.

Outpost Network, Inc.: On June 2, 1998, the Company acquired all of the
common stock of Outpost, a privately held company, for a purchase consideration
of 5,999,952 shares of the Company's common stock, cash of $35,000, assumed
liabilities of $264,000, and acquisition expenses of $1,957,000. In conjunction
with the acquisition, the Company was required to issue warrants valued at
$1,902,000 to a former consultant, which are included in acquisition costs. The
transaction was accounted for as a purchase.

Of the purchase price of $7,992,000, $2,800,000 was allocated to in-process
research and development, $800,000 was allocated to core technology and
existing products and $4,543,000 was recorded as goodwill. Generally accepted
accounting principles require purchased in-process research and development
with no

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

alternative future use to be recorded and charged to expense in the period
acquired. Accordingly, the results of operations for the year ended December
31, 1998, include the write-off of the purchased in-process research and
development. The core technology and goodwill are being amortized over a useful
life of five years.

YPI: On May 16, 1997, the Company acquired all outstanding Membership
Interest Units of YPI, a limited liability company, in a transaction accounted
for as a purchase. YPI operations began to be included in the Company's
financial statements on the effective date of the acquisition, May 1, 1997. In
conjunction with the acquisition, the Company acquired certain advertising
agreements and assumed a note payable for $90,000. The purchase price of
$306,000 was allocated to advertising agreements of $85,417, note payable of
$90,000 and goodwill of $310,383. The aggregate number of shares of the stock
issued was derived from revenues generated by the business during the specified
measurement period. Before December 31, 1997, the number of shares to be issued
was finalized and a total of 340,000 shares were issued to the sellers on
January 2, 1998.

Pro forma information relating to acquisitions (unaudited)

The following unaudited pro forma information shows the results of the
Company for the year ended December 31, 1999 as if the acquisitions of Zephyr
Software, eComLive and Union-Street occurred on January 1, 1999 The pro forma
results of operations are unaudited, have been prepared for comparative
purposes only and do not purport to indicate the results of operations which
would actually have occurred had the combinations been in effect on the dates
indicated or which may occur in the future.

(unaudited)
------------

Revenue....................................................... $ 36,987,351
Net loss...................................................... (23,377,606)
Basic and diluted net loss per share.......................... $ (0.25)

Note 7: Commitments and Contingencies

The Company has noncancellable operating leases for corporate facilities. The
leases expire through 2003. Rent expense under operating leases totaled
approximately $621,000, $266,000 and $134,000, for the years ended December 31,
1999, 1998 and 1997, respectively. The Company also has noncancellable carriage
fee agreements with certain affiliates.

Future minimum rental payments required under noncancellable operating leases
are as follows for the years ending December 31:

2000............................................................ $ 727,000
2001............................................................ 437,000
2002............................................................ 389,000
2003............................................................ 225,000
2004............................................................ 17,000
----------
$1,795,000
==========

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Future payments required under noncancellable affiliate carriage fee
agreements are as follows for the years ending December 31:

2000........................................................... $12,083,000
2001........................................................... 11,572,000
2002........................................................... 900,000
2003........................................................... 900,000
2004........................................................... 900,000
-----------
$26,355,000
===========

Litigation: On December 15, 1999, a complaint was filed against the Company
on behalf of a former employee in federal court in New Jersey alleging claims
for breach of contract, breach of the covenant of good faith and fair dealing,
fraud, negligent misrepresentation, and promissory estoppel. The former
employee contends he agreed to work for InfoSpace on the basis of certain
misrepresentations, that he entered into an agreement with the Company that
entitles him to an option to purchase 150,000 shares of the Company's common
stock, and that he was terminated without cause. The former employee seeks
(1) the right to purchase the shares of stock, (2) unspecified compensatory and
punitive damages, and (3) litigation costs and attorney's fees. On January 31,
2000, the Company answered the complaint. Discovery is ongoing, and trial is
set for September 2000. The Company is currently investigating the claims at
issue and believes the Company has meritorious defenses to such claims.
Nevertheless, litigation is uncertain and the Company may not prevail in this
suit.

One of the shareholders of INEX Corporation filed a complaint on September
22, 1999 alleging that the original shareholders of INEX and INEX itself were
bound by a shareholders agreement that entitled it to pre-emptive rights and
rights of first refusal. The complaint alleges that INEX improperly made
private placements, issued employee options and permitted share transfers after
February 1997. The complainant alleges it should have acquired rights in
approximately 88% of the INEX share capital, which would be less than one
percent of our common stock. The complaint also alleges other breaches of
contract, breach of fiduciary duty, corporate oppression, unlawful interference
with economic relations and conspiracy. The complaint was amended on December
20, 1999 to allege that the Company assumed the obligations of INEX under the
alleged shareholders agreement as a result of our acquisition of INEX on
October 14, 1999. The complaint seeks damages against the Company and named
former INEX shareholders for the difference between the issue or sale price of
INEX shares issued or transferred after February 1997 and before October 14,
1999 and the highest trading value of shares of the Company's common stock
received or receivable in exchange attained before the date of trial. In the
alternative, the complaint seeks special damages in the amount of $50,000,000
Canadian. The complaint also seeks $500,000 in punitive damages and
constructive trusts, equitable liens and tracing remedies in both INEX shares
formerly held by certain shareholders and shares of the Company's common stock
received by those shareholders in exchange for their INEX shares. 217,567
shares of the Company's common stock and shares exchangeable into the Company's
common stock that were part of the INEX purchase price which are held to
satisfy this claim. The Company is currently investigating the claims at issue
and believes the Company has meritorious defenses to such claims. Nevertheless,
litigation is uncertain and the Company may not prevail in this suit.

On December 23, 1998, the Company initiated litigation against Internet
Yellow Pages, Inc., or IYP, by filing suit in United States District Court for
the Western District of Washington. On February 3, 1999, the Company served a
first amended complaint on IYP and Greg Crane, an agent of IYP, in which the
Company asserted claims for (a) account stated, (b) breach of contract, and (c)
fraud. On March 5, 1999, IYP answered the Company's complaint in the Washington
action, and asserted claims for breach of contract, fraud,

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

extortion and Consumer Protection Act violations. IYP seeks relief consisting
of $1,500,000 and other unquantified money damages and treble damages for the
CPA and attorneys' fees. Discovery is ongoing. The Company is currently
investigating the claims at issue and believes the Company has meritorious
defenses to such claims. Nevertheless, litigation is uncertain and the Company
may not prevail in these suits. Trial is set for April 2000, but the parties
are finalizing an agreement to dispose of the case by a streamlined mini-trial
before a federal magistrate.

Settlement of litigation: On February 8, 2000, the Company reached a
settlement with an alleged former employee. Under the terms of the settlement,
the alleged former employee received a cash payment of $10.5 million. As this
subsequent event was settled prior to the issuance of the financial statements,
the expense has been recorded in the fourth quarter of 1999 in Other non-
recurring expense.

On February 22, 1999, the Company reached a settlement with a former
employee. Under the terms of the settlement the former employee received a cash
payment of $4.5 million. As this subsequent event was settled after December
31, 1998 but prior to the issuance of the financial statements, the expense was
recorded in the fourth quarter of 1998 in Other non-recurring expense.

Contingencies: In the Company's early stage of development, the Company did
not clearly document arrangements with employees and consultants, including
matters relating to the issuance of stock options. As a result of this
incomplete documentation, the Company may receive claims in the future
asserting rights to acquire common stock.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 8: Income Taxes

No provision for federal income tax has been recorded as the Company has
incurred net operating losses through December 31, 1999. The tax effects of
temporary differences and net operating loss carryforwards that give rise to
the Company's deferred tax assets and liabilities are as follows:

1999 1998
------------ -----------

Deferred tax assets:
Net operating loss carryforward ................... $ 17,371,000 $ 36,000
Tax credits........................................ 372,000 --
Intangible amortization ........................... 428,000 60,000
Compensation expense--stock options ............... -- 59,000
Allowance for bad debt ............................ 237,000 203,000
Litigation accrual ................................ 3,675,000 1,530,000
Accrued carriage fees.............................. 318,000 --
Other, net ........................................ 225,000 34,000
Warrants .......................................... -- 46,000
Deferred revenue .................................. 199,000 473,000
------------ -----------
Gross deferred tax assets ....................... 22,825,000 2,441,000
Deferred tax liabilities:
Purchased technology .............................. 868,000 252,000
Prepaid expenses .................................. 125,000 113,000
Depreciation ...................................... 115,000 13,000
Unrealized investment gains ....................... 463,000 --
Other ............................................. 5,000 --
------------ -----------
Gross deferred tax liabilities .................. 1,576,000 378,000
------------ -----------
Net deferred tax assets ......................... 21,249,000 2,063,000
Valuation allowance ................................. (21,249,000) (2,063,000)
------------ -----------
Deferred tax balance ................................ $ -- $ --
============ ===========

At December 31, 1999 and 1998, the Company provided a full valuation
allowance for its deferred tax assets. The Company believes sufficient
uncertainty exists regarding the realizability of the deferred tax assets such
that a full valuation allowance is required. The net change in the valuation
allowance during the years ended December 31, 1999 and 1998, was $19,186,000
and $1,792,000, respectively.

As of December 31, 1999, the Company's federal net operating loss
carryforward for income tax purposes was approximately $50 million. If not
utilized, the federal net operating loss carryforwards will begin to expire
between 2011 and 2019. The Company's federal research tax credit carryforwards
for income tax purposes are approximately $372,000. If not utilized, the
federal tax credit carryforwards will begin to expire between 2011 and 2019.

Deferred tax assets of approximately $17.5 million as of December 31, 1999
pertain to certain net operating loss carryforwards and credit carryforwards
resulting from the exercise of employee stock options. When recognized, the tax
benefit of these loss and credit carryforwards are accounted for as a credit to
additional paid-in capital rather than a reduction of the income tax provision.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 9: Net Loss Per Share

The Company has adopted SFAS No. 128, Earnings per Share. Basic earnings per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares consist of the incremental common
shares issuable upon conversion of the exercise of stock options and warrants
(using the treasury stock method). Common equivalent shares are excluded from
the computation if their effect is antidilutive. The Company had a net loss for
all periods presented herein; therefore, none of the options and warrants
outstanding during each of the periods presented, as discussed in Note 5, were
included in the computation of diluted loss per share as they were
antidilutive. Options and warrants to purchase a total of 9,063,508, 6,016,789
and 1,574,181 shares of common stock were excluded from the calculations of
diluted loss per share for the years ended December 31, 1999, 1998 and 1997,
respectively. 340,000 contingently issuable shares of common stock have been
excluded from the calculation of basic earnings per share for the year ended
December 31, 1997 (Note 6).

Note 10: Information on Products and Services

In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, SFAS No. 131 establishes standards for the
way that companies report information about operating segments in annual
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers as well as
the reporting of selected information about operating segments in interim
financial statements for the year ended December 31, 1998. The adoption of SFAS
131 did not have a material effect on the Company's primary consolidated
financial statements but did affect the Company's disclosures.

The Company generates substantially all of its revenues through integrated
technology and services delivered through a common physical infrastructure, and
therefore the Company has only one reportable segment. Substantially all
revenues are generated from domestic sources. Substantially all of the
Company's long-lived assets are physically located within the United States.

Total operating expenses are controlled centrally based on established
budgets by operating department. Operating departments include product
development, sales and marketing, account management and customer service, and
finance and administration. Assets, technology, and personnel resources of the
Company are shared and utilized for all of the Company's service offerings.
These resources are allocated based on contractual requirements, the
identification of enhancements to the current service offerings, and other non-
financial criteria. The Company does not prepare operating statements by
revenue source. The Company does not account for, and does not report to
management, its assets or capital expenditures by revenue source.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Information

Revenues are derived from the Company's consumer, merchant and wireless
services. These services generate revenues from advertising, content carriage,
licensing fees, commerce transaction fees and guaranteed transaction fees in
lieu of revenue share. Contracts with customers often utilize services from
more than one area of service and include revenue from more than one revenue
source.

Year Ended December 31,
---------------------------------
1999 1998 1997
----------- ---------- ----------

Consumer revenues........................ $29,371,286 $8,370,965 $1,424,748
Merchant revenues........................ 6,872,585 1,252,395 317,794
Wireless revenues........................ 663,300 -- --
----------- ---------- ----------
Total revenues........................... $36,907,171 $9,623,360 $1,742,542
=========== ========== ==========

Note 11: Related-party transactions

During the years ended December 31, 1999, 1998 and 1997, the Company sold
advertising to other entities in which the Company's chief executive officer
had equity interests resulting in revenues of $580,912, $19,269 and $200,000,
respectively.

During 1999, the Company entered into a technology license and development
agreement for the development of a shopping cart technology with a software
development company whose majority owner is related to the Company's chief
executive officer. Under the terms of the agreement the Company paid a
development fee of $400,000. The Company owns all rights to the technology and
has granted a perpetual license to the software development company to use the
developed technology for certain limited uses.

Note 12: Investment in Joint Venture

In 1998, the Company entered into a joint venture with Thomson Directories
Limited to form TDL InfoSpace to replicate the Company's content, community and
commerce services in Europe. TDL InfoSpace has targeted the United Kingdom as
its first market, and content services were launched in the third quarter of
1998. Under the license agreement between Thomson and TDL InfoSpace, Thomson
licenses its U.K. directory information database to TDL InfoSpace. Under the
Web site services agreement between Thomson and TDL InfoSpace, Thomson also
sells Internet yellow pages advertising for the joint venture through its local
sales force. Under the Company's license agreement with TDL InfoSpace, the
Company licenses technology and provides hosting services to TDL InfoSpace.

Under the joint venture agreement, the Company and Thomson is obligated to
negotiate with TDL InfoSpace and the other party to jointly offer private label
solutions in other European countries prior to offering such services
independently or with other parties.

INFOSPACE.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 13: Subsequent Events

Business Combinations:

On March 10, 2000, the Company acquired San Mateo, California-based
Saraide.com, Inc., a provider of wireless Internet services in Europe, Japan
and Canada. Under the terms of the agreement, InfoSpace merged Saraide with its
own wireless services and issued 4,795,432 shares of the Company's common stock
valued at approximately $347.2 million to the existing shareholders of Saraide
in a transaction to be accounted for as a purchase. InfoSpace will control 80%
of the combined company.

On March 6, 2000, the Company signed a definitive agreement to acquire
Cupertino, California-based, Orchest, Inc. (MoneyPlant.com). Orchest has
developed a Web site to provide online account information aggregation for
consumers. Under the terms of the acquisition, which will be accounted for as a
purchase, InfoSpace will exchange 123,211 shares of the Company's common stock
valued at approximately $31.3 million for all of Orchest's outstanding shares.

On February 15, 2000, the Company closed the acquisition of Mountain View,
California-based Prio, Inc. Under the terms of the acquisition, which will be
accounted for as a pooling of interests, InfoSpace will exchange 5,293,456
shares of the Company's common stock for all of Prio's outstanding shares,
warrants and options. Prior period financial statements will be recast for this
acquisition in future filings.

On December 23, 1999, the Company signed a definitive agreement to acquire
Berkeley, California-based Millet Software (privacybank.com). Under the terms
of the acquisition, which will be accounted for as a purchase, InfoSpace will
exchange 297,552 shares of the Company's common stock valued at approximately
$29.7 million for all of Millet's outstanding shares, warrants and options. The
Company expects to close this acquisition in the first quarter of 2000.

Stockholder's Equity:

On January 21, 2000, the Board of Directors approved a two-for-one stock
split of the Company's common stock. In order to effect this split the Board of
Directors has approved, pending stockholder approval, increase the number of
authorized shares of Common Stock from 200,000,000 to 900,000,000 shares. A
special shareholder meeting of stockholders has been scheduled for April 3,
2000.

On January 21, 2000, the Board of Directors approved the deletion of the
4,000,000 limitation to the annual number of additional shares reserved for
issuance under the Restated 1996 Flexible Stock Incentive Program. The Company
intends to solicit stockholder approval for this amendment at its 2000 Annual
Meeting of Stockholders.

Commitments:

In March 2000, the Company entered into a five-year lease agreement for the
corporate headquarters in Bellevue, Washington. The Company will pay a monthly
base rent of $199,783 per month during the first two years, $208,864 per month
during the second two years and $217,864 per month during the final year.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

PART III

We have omitted certain information from this Report that is required by Part
III. We intend to file a definitive proxy statement pursuant to Regulation 14A
with the Securities and Exchange Commission relating to our annual meeting of
stockholders not later than 120 days after the end of the fiscal year covered
by this Report, and such information is incorporated by reference herein.

Item 10. Executive Officers and Directors of the Registrant

The information concerning our directors required by this Item is
incorporated by reference to our proxy statement under the heading "Election of
Directors."

Information regarding our executive officers is included in Part I under the
caption "Executive Officers of the Registrant" and is incorporated by reference
into this Item.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to our
proxy statement under the heading "Additional Information Relating to Directors
and Officers of the Company."

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference to our
proxy statement under the heading "Security Ownership of Certain Beneficial
Owners and Management."

Item 13. Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference to our
proxy statement under the heading "Additional Information Relating to Directors
and Officers of the Company--Certain Relationships and Related Transactions."

PART IV

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

(a) 1. Consolidated Financial Statements.

See Index to Consolidated Financial Statements at Item 8 on page 48 of this
report.

2. Financial Statement Schedules.

All financial statement schedules required by 14(a)(2) have been omitted
because they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.

3. Exhibits

Number Description
------ -----------

10.13* Form of Amendment to Common Stock and Common Stock Warrant Purchase
Agreements, dated August 6, 1998, between the Registrant and each of
Acorn Ventures-IS, LLC, Kellett Partners, LLP and John and Carolyn
Cunningham.
10.14* License Agreement, dated July 28, 1998, between the registrant and
American Business Information, Inc. (now known as infoUSA, Inc.).
10.15* Amended and Restated Content Provider Agreement, made as of August 24,
1998, effective as of April 25, 1998, between the registrant and 800-
U.S. Search.
10.16* Letter Agreement with Bernee D. L. Strom, dated November 22, 1998.
10.17 Lease, dated February 2000, between the registrant and Three Bellevue
Center, LLC.
10.18 Letter Agreement with Bernee D. L. Strom, dated December 15, 1999.
10.19 Letter Agreement with Naveen Jain, dated February 10, 2000.
23.1* Consent of Deloitte & Touche LLP, Independent Auditors.
24.1 Power of Attorney (contained on signature page hereto).
27.1 Financial Data Schedule

- --------
* Previously filed.

Reports on Form 8-K.

The following reports on Form 8-K were filed during the quarter ended
December 31, 1999:

Item # Description Filing Date
------ ----------- -----------

1. On October 4, 1999, we filed a Current Report on Form 8-K
(a "Form 8-K")
with the Securities and Exchange Commission (the
"Commission") to report under Item 5 that we had entered
into a definitive agreement to acquire Union-Street.com,
Inc.
2. On October 28, 1999, we filed a Form 8-K with the
Commission to report under Item 2 that we had completed
our acquisition of INEX Corporation and under Item 5
that we had completed our acquisition of Union-
Street.com, Inc. and had entered into a definitive
agreement to acquire Zephyr Software Inc. and its wholly
owned subsidiary, Zephyr Software (India) Private
Limited.
3. On December 20, 1999, we filed a Amendment to Current
Report on Form 8-K on Form 8-K/A with the Commission to
amend the Form 8-K filed on October 28, 1999 to report
under Item 7 updated financial information relating to
our acquisition of INEX Corporation.
4. On December 29, 1999, we filed a Form 8-K with the
Commission to report under Item 2 that we had completed
our acquisition of eComLive, Inc.

(b) Exhibits.

See Item 14 (a) above.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d), as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redmond, State of
Washington, on the 30th of March, 2000.

InfoSpace.com, Inc.

/s/ Naveen Jain
By: _________________________________
Naveen Jain, Chief Executive
Officer and Chairman of the Board

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Naveen Jain and Ellen B. Alben and each of them,
with full power of substitution and resubstitution and full power to act
without the other, as his true and lawful attorney-in-fact and agent to act in
his name, place and stead and to execute in the name and on behalf of each
person, individually and in each capacity stated below, and to file, any and
all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing,
ratifying and confirming all that said attorneys-in-fact and agents or any of
them or their and his or her substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons in the
capacities indicated on the 30th day of March, 2000.

Signature Title
--------- -----

/s/ Naveen Jain Chief Executive Officer and
____________________________________ Chairman of the Board
Naveen Jain (Principal Executive
Officer)

/s/ Tammy D. Halstead Vice President, Acting Chief
____________________________________ Financial Officer and Chief
Tammy D. Halstead Accounting Officer
(Principal Financial and
Accounting Officer)

/s/ John E. Cunningham, IV Director
____________________________________
John E. Cunningham, IV

/s/ Peter L .S. Currie Director
____________________________________
Peter L. S. Currie

Director
____________________________________
Gary C. List

Signature Title
--------- -----

/s/ Rufus W. Lumry III Director
____________________________________
Rufus W. Lumry III
/s/ Carl Stork Director
____________________________________
Carl Stork
/s/ Bernee D. L. Strom Director
____________________________________
Bernee D. L. Strom
/s/ David House Director
____________________________________
David House

INDEX TO EXHIBITS

Number Description
------ -----------

3.1* Restated Certificate of Incorporation of the registrant.
3.2* Restated Bylaws of the registrant.
4.1* Form of Certificate of the Powers, Designations, Preferences and Rights
of Series A Preferred Stock.
10.1* Form of Indemnification Agreement between the registrant and each of
its Directors and Executive Officers.
10.2* Restated 1996 Flexible Stock Incentive Plan and Terms of Stock Option
Grant Program for Nonemployee Directors under the Restated 1996
Flexible Stock Incentive Plan.
10.3* 1998 Employee Stock Purchase Plan
10.4* Lease, dated May 14, 1998, between the registrant and TIAA Realty, Inc.
10.5* Registration Rights Agreement, dated May 1, 1997, among the registrant,
John E. Richards, Peter S. Richards, John Enger and Alexander Hutton
Capital L.L.C., as subsequently amended by Agreement dated as of
January 2, 1998, among the registrant, John E. Richards, Peter S.
Richards, John Enger and Alexander Hutton Capital L.L.C.
10.6* Agreement, dated January 2, 1998, among the registrant, John E.
Richards, Peter S. Richards, John Enger and Alexander Hutton Capital,
L.L.C.
10.7* Form of Common Stock and Common Stock Warrant Purchase Agreements,
dated May 21, 1998, between the registrant and each of Acorn Ventures-
IS, LLC, Kellett Partners, LLP and John and Carolyn Cunningham.
10.8* Form of Investor Rights Agreements, dated as of May 21, 1998, between
the registrant and each of Acorn Ventures-IS, LLC, Kellett Partners,
LLP and John and Carolyn Cunningham.
10.9* Form of Co-Sale Agreements, dated as of May 21, 1998, among the
registrant, Naveen Jain and each of Acorn Ventures-IS, LLC, Kellett
Partners, LLP and John and Carolyn Cunningham.
10.10* Form of Common Stock Warrant, dated May 21, 1998, between the
registrant and each of Acorn Ventures-IS, LLC, Kellett Partners, LLP
and John and Carolyn Cunningham.
10.11* Common Stock Purchase Agreement, dated as of August 6, 1998, by and
among the registrant and the investors named therein.
10.12* Stockholder Rights Agreement, dated as of August 6, 1998, by and among
the registrant and the investors named therein.
10.13* Form of Amendment to Common Stock and Common Stock Warrant Purchase
Agreements, dated August 6, 1998, between the Registrant and each of
Acorn Ventures-IS, LLC, Kellett Partners, LLP and John and Carolyn
Cunningham.
10.14* License Agreement, dated July 28, 1998, between the registrant and
American Business Information, Inc. (now known as infoUSA, Inc.).
10.15* Amended and Restated Content Provider Agreement, made as of August 24,
1998, effective as of April 25, 1998, between the registrant and 800-
U.S. Search.
10.16* Letter Agreement with Bernee D. L. Strom, dated November 22, 1998.
10.17 Lease, dated February 2000, between the registrant and Three Bellevue
Center, LLC.
10.18 Letter Agreement with Bernee D. L. Strom, dated December 16, 1999.
10.19 Letter Agreement with Naveen Jain, dated February 10, 2000.
23.1* Consent of Deloitte & Touche LLP, Independent Auditors.
24.1 Power of Attorney (contained on signature page hereto).
27.1 Financial Data Schedule

- --------
* Previously filed.