XOOM INC, S-1/A, 1998-11-18

XOOM INC
S-1/A, 1998-11-18
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1998
REGISTRATION NO. 333-62395
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
XOOM.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

---------------
<TABLE>
<CAPTION>
DELAWARE 7310 88-0361536
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>

300 MONTGOMERY STREET, SUITE 300
SAN FRANCISCO, CALIFORNIA 94104
(415) 288-2500
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)

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

CHRIS KITZE
CHAIRMAN
XOOM.COM, INC.
300 MONTGOMERY STREET, SUITE 300
SAN FRANCISCO, CALIFORNIA 94104
(415) 288-2500
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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

COPIES TO:
<TABLE>
<CAPTION>
BRUCE ALAN MANN, ESQ. NORA L. GIBSON, ESQ.
<S> <C>
TAMRA D. BROWNE, ESQ. RANDALL M. LAKE, ESQ.
KRISTIAN E. WIGGERT, ESQ. BARBARA SKAGGS GALLAGHER, ESQ.
JOEL S. FISCH, ESQ. Brobeck, Phleger & Harrison LLP
Morrison & Foerster LLP Spear Street Tower
425 Market Street One Market
San Francisco, California 94105-2482 San Francisco, California 94105
</TABLE>

---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.

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- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED NOVEMBER 18, 1998

PRELIMINARY PROSPECTUS
3,000,000 SHARES

XOOM.COM, INC.

COMMON STOCK

All of the 3,000,000 shares of Common Stock, par value $0.0001 per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by XOOM.com,
Inc. ("Xoom.com" or the "Company"). Prior to the Offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price for the Common Stock will be between
$9.00 and $11.00 per share. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. Application has
been made for quotation of the Common Stock on the Nasdaq National Market under
the symbol "XMCM."

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $1,900,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
450,000 additional shares of Common Stock on the same terms and conditions
set forth above, to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ , and $
respectively. See "Underwriting."

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The shares of Common Stock are being offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters
against payment therefor and subject to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify the Offering and
to reject orders in whole or in part. It is expected that delivery of the
shares will be made against payment therefor on or about , 1998 at
the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167.

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BEAR, STEARNS & CO. INC.
DEUTSCHE BANK SECURITIES

The date of this Prospectus is , 1998
<PAGE>

[INSIDE FRONT COVER]

[DEPICTIONS OF XOOM.COM WEB SITE WELCOME PAGE AND EXAMPLES OF XOOM.COM MEMBER
SERVICES, WITH TEXT, "FREE SERVICES AND COMMUNITIES MADE XOOM.COM THE 2ND
FASTEST GROWING WEB SITE IN THE FIRST HALF OF 1998."]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

[GATE 1]

[DEPICTIONS OF PROCEDURES FOR HOW MEMBERS JOIN, WITH TEXT, "MEMBERS REGISTER
BY GIVING A VALID E-MAIL ADDRESS AND PERMISSION TO BE CONTACTED WITH NEWS AND
OFFERS." DEPICTIONS OF EXAMPLES OF COMMUNITIES WITH TEXT, "OVER 200 XOOM.COM
COMMUNITIES BRING PEOPLE TOGETHER AND CREATE A CONTEXT FOR BUYING."]

[GATE 2]

[DEPICTION OF PROCEDURES FOR PURCHASING PRODUCTS AND EXAMPLES OF PRODUCTS.]

2
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PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information including "Risk Factors" and the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus. The discussion in this Prospectus contains forward-looking
statements. The outcome of the events described in such forward-looking
statements is subject to risks and uncertainties. The Company's actual results
may differ materially from those discussed in such forward-looking statements.
Factors that may cause or contribute to such differences include those
discussed in "Risk Factors," "Management's Discussion And Analysis Of Financial
Condition And Results Of Operations" and "Business" as well as those discussed
elsewhere in this Prospectus. The information in this Prospectus (i) assumes an
initial public offering price of $10.00 per share, (ii) assumes no exercise of
the Underwriters' over-allotment option, (iii) reflects a 2-for-3 reverse split
of the Common Stock and (iv) reflects the assumed exercise of outstanding
warrants to purchase 306,427 shares of Common Stock prior to the closing of the
Offering.

THE COMPANY

Xoom.com is one of the fastest growing direct marketing companies on the
Internet. The Company attracts members to its community site with a variety of
free services, including homepages, e-mail, chat rooms, clip art and software
libraries and online greeting cards. Xoom.com members can also join topical
communities where they can exchange ideas and information. Upon registration,
members agree to receive periodic offers of products and services via e-mail.
These offerings are competitively priced and continuously updated, and include
computer software, computer accessories and peripherals, consumer electronics
and clip art on CD-ROM. New product offerings will include a DVD movie club,
gift items, health-related products and a travel club. Xoom.com believes that
its rapidly growing base of self-qualified members provides the Company with
highly attractive and effective electronic commerce opportunities. In addition,
the Company believes that its high levels of traffic and online reach present
an attractive platform for advertising.

Xoom.com was the second fastest growing site on the Web measured by online
reach in the first half of 1998 and the thirteenth most trafficked site in
September 1998, according to Media Metrix. Xoom.com's reach increased to over
11% in September 1998 from less than 2% in January 1998, according to Media
Metrix. Xoom.com had approximately 4.5 million members as of November 13, 1998,
adding an average of approximately 20,000 new members per day for the last
thirty days. The current growth rates of Xoom.com's reach and new customers are
not necessarily indicative of growth rates the Company may experience in the
future. In the first nine months of 1998, 69% of the Company's net revenue was
derived from electronic commerce and approximately 29% of net revenue was
derived from non-U.S. sales. The Company does not generate revenue from fees
charged to its members.

IDC estimates that the number of Web users will grow from approximately 69
million worldwide in 1997 to approximately 320 million worldwide by the end of
2002 and that transactions on the Internet are expected to increase from
approximately $12 billion in 1997 to approximately $426 billion in 2002. In
addition, the percentage of users that are buyers of products and services is
expected to increase from 26% to 40% in the same period. The same advantages
that facilitate the growth of electronic commerce make the Internet a
compelling medium for direct marketing campaigns. Direct marketing over the
Internet uses e-mail to reach prospective buyers worldwide, potentially
offering them a significantly broader selection of products and services than
is available locally. Internet-based direct marketing also allows marketers to
rapidly collect meaningful demographic information and feedback from consumers,
and to use this information to tailor new messages quickly. Further, the costs
of direct marketing via e-mail are dramatically lower than those of traditional
direct marketing techniques. As a result, Internet-based direct marketing
campaigns can be profitable at response rates that are a fraction of the rates
required for traditional campaigns.

By offering its members a variety of compelling free services and communities
and competitively priced product offerings, the Company believes it has created
an innovative online sales channel with low customer acquisition costs. The key
elements of Xoom.com's approach are to: (i) utilize the cost-effective direct
marketing

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capabilities of the Web to sell products to the Xoom.com customer base; (ii)
rapidly formulate effective direct marketing campaigns utilizing proprietary
campaign management software, allowing the Company to maximize response rates
and minimize inventory costs; (iii) provide free services to attract a growing
membership base; (iv) develop a detailed member database; (v) continue to grow
online reach and membership to create an attractive advertising platform; and
(vi) provide customer convenience to encourage purchasing.

The Company's objective is to be a leading community-based direct selling
channel on the Internet. In order to accomplish this objective, the Company
intends to continue to focus on growing its membership base and building strong
brand recognition of the Xoom.com name. The Company believes that promoting
repeat usage and member loyalty through free services will help establish
Xoom.com as a preferred destination among Web users. The Company intends to
make acquisitions and enter into strategic alliances in order to increase its
reach and membership. In addition, the Company intends to increase its
advertising revenue as a result of its growth in online reach.

"XOOM," "XOOM.com" and the "X-in-circle" logo are trademarks of the Company.
This Prospectus contains other product names, trade names and trademarks of the
Company and of other organizations, which are the property of their respective
owners. The Company was incorporated in Delaware on April 16, 1996 under the
name Atomsoft, Inc., changed its name to XOOM, Inc. in February of 1998 and
changed its name to XOOM.com, Inc. in October of 1998. The principal executive
offices of the Company are located at 300 Montgomery Street, Suite 300, San
Francisco, California 94104, and its telephone number at this address is (415)
288-2500.

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

This Prospectus includes statistical data regarding the Internet industry.
Such data is taken or derived from information published by sources including
Media Metrix, Inc. ("Media Metrix") and Relevant Knowledge, Inc., ("Relevant
Knowledge") media research firms specializing in market and technology
measurement on the Internet, Jupiter Communications, LLC, a media research firm
focusing on the Internet industry ("Jupiter Communications"), and International
Data Corporation, a provider of market information and strategic information
for the information technology industry ("IDC"). Although the Company believes
that such data are generally indicative of the matters reflected therein, such
data are inherently imprecise and investors are cautioned not to place undue
reliance on such data.

4
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THE OFFERING

<TABLE>
<C> <S>
Common Stock offered............................. 3,000,000 shares
Common Stock to be outstanding after the 12,098,024 shares
Offering(1).....................................
Use of proceeds.................................. For repayment of certain
indebtedness, and for
general corporate purposes,
including working capital,
capital expenditures,
potential acquisitions and
promotional campaigns. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol........... XMCM
</TABLE>
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(1) Based on the number of shares outstanding as of September 30, 1998.
Excludes (i) 1,901,198 shares of Common Stock issuable upon the exercise of
options then outstanding with a weighted average exercise price of
$1.11 per share as of such date; (ii) 1,326,135 shares of Common Stock
reserved for issuance under the Company's 1998 Stock Incentive Plan (the
"1998 Plan"), giving effect to the increase in the aggregate number of
shares reserved for issuance from 1,166,667 to 2,000,000 approved as of
November 16, 1998; (iii) 300,000 shares of Common Stock reserved for
issuance under the Company's 1998 Employee Stock Purchase Plan (the "Stock
Purchase Plan"); and (iv) warrants to purchase 183,333 shares of Common
Stock. Assumes (i) the exercise of outstanding warrants to purchase 306,427
shares of Common Stock prior to the closing of the Offering; (ii) the sale
of the 3,000,000 shares of Common Stock offered hereby; and (iii) the
issuance of 60,000 shares of Common Stock pursuant to modifications of
earn-outs in connection with certain of the Company's acquisitions. See
"Capitalization," "Management--Benefit Plans" and Notes 4 and 9 of Notes to
the Company's Consolidated Financial Statements.

5
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table sets forth summary consolidated financial data for the
Company. This information should be read in conjunction with the Consolidated
Financial Statements and Notes related thereto and the Selected Unaudited Pro
Forma Condensed Consolidated Financial Information and Notes related thereto
appearing elsewhere in this Prospectus. See "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

<TABLE>
<CAPTION>
PERIOD FROM PRO FORMA
APRIL 16 NINE MONTHS ENDED NINE MONTHS
(INCEPTION) TO YEAR ENDED SEPTEMBER 30, ENDED
DECEMBER 31, DECEMBER 31, ------------------- SEPTEMBER 30,
1996 1997 1997 1998 1998(2)
-------------- ------------ ----------- ------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net revenue:
Electronic commerce... $ -- $ 327 $ 59 $ 3,366 $ 3,575
Advertising........... -- 60 21 953 1,004
License fees and
other................ -- 454 341 546 575
------ ------- ------- ------- -------
Total net revenue...... -- 841 421 4,865 5,154
Gross profit........... -- 522 213 2,865 3,108
Loss from operations... (440) (3,132) (2,668) (6,409) (6,886)
Net loss............... $ (440) $(3,132) $(2,668) $(6,392) $(6,905)
====== ======= ======= ======= =======
Net loss per share--
basic and diluted(1).. $(0.89) $ (0.64) $ (0.57) $ (0.89) $ (0.92)
====== ======= ======= ======= =======
Number of shares used
in per share
calculation--
basic and diluted(1).. 497 4,874 4,688 7,172 7,483
<CAPTION>
SEPTEMBER 30, 1998
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................................... $ 967 $26,209
Working capital (deficit)...................................... (3,215) 23,415
Total assets................................................... 10,415 36,647
Acquisition notes payable, less current portion................ 990 990
Capital lease obligations, less current portion................ 126 126
Total stockholders' equity..................................... 3,782 31,402
</TABLE>
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(1) See Note 1 of Notes to the Company's Consolidated Financial Statements for
an explanation of the determination of the number of shares used to compute
basic and diluted net loss per share and Note D of Notes to the Company's
Selected Unaudited Pro Forma Condensed Consolidated Statements of
Operations for an explanation of the determination of the number of pro
forma shares used to compute pro forma net loss per share--basic and
diluted.

(2) Pro Forma Condensed Consolidated Statement of Operations data for the nine
months ended September 30, 1998 reflects certain adjustments to reflect the
acquisition of Paralogic Corporation, Global Bridges Technologies, Inc. and
Pagecount, Inc. as if the acquisitions had occurred on January 1, 1998. See
Selected Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the nine months ended September 30, 1998. The pro forma condensed
consolidated statement of operations data does not include amortization of
$521,000 related to the purchase of assets of Revolutionary Software, Inc.
and ArcaMax, Inc. that would have been incurred if these assets were
purchased on January 1, 1998.

(3) Adjusted to reflect (i) the assumed exercise of outstanding warrants for
306,427 shares of Common Stock prior to the closing of the Offering for net
proceeds of $920,000; (ii) the repayment of approximately $1.3 million of
notes payable related to an acquisition and a license agreement; (iii) the
sale of the 3,000,000 shares of Common Stock offered hereby, after
deducting the underwriting discount and estimated offering expenses; and
(iv) the issuance of 60,000 shares of Common Stock with an aggregate fair
value of $600,000 and the payment of $390,000 in cash, upon the completion
of the Offering, pursuant to modifications of earn-outs in connection with
certain of the Company's acquisitions. See "Use of Proceeds" and
"Capitalization."

6
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RISK FACTORS

The Offering involves a high degree of risk. In addition to the other
information set forth in this Prospectus, the following risk factors should be
considered carefully in evaluating the Company and its business before
purchasing any of the shares of Common Stock of the Company. This Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all forward-looking statements wherever
they appear in this Prospectus. The Company's actual results could differ
materially from the results discussed in this Prospectus. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere in this Prospectus.

LIMITED OPERATING HISTORY; NO ASSURANCE OF PROFITABILITY; ANTICIPATED LOSSES

The Company was incorporated in April 1996, and began generating revenue in
the first quarter of 1997. Accordingly, the Company has a limited operating
history upon which to evaluate the Company, its current business and
prospects. In addition, the Company's revenue model is evolving and relies
substantially upon electronic commerce, primarily through the use of direct e-
mail marketing, licensing and the sale of advertising on its Web site. The
Company's business must be considered in light of the risks, expenses and
problems frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets such
as online commerce and the Internet. Specifically, such risks include, without
limitation, the inability of the Company to maintain and increase levels of
traffic on the Xoom.com site, the lack of acceptance by consumers of e-mail
direct marketing as a medium of electronic commerce, the failure by the
Company to continue to develop and extend the Xoom.com brand, the lack of
broad acceptance of the community model on the Internet, the inability of the
Company to attract or retain members, the inability of the Company to generate
significant Web-based commerce revenue or premium service revenue from its
members, the inability of the Company to meet minimum guaranteed impressions
under advertising agreements, the failure of the Company to anticipate and
adapt to a developing market, the level of use of the Internet and online
services and consumer acceptance of the Internet and other online services for
the purchase of consumer products such as those offered by the Company, the
Company's ability to upgrade and develop its systems and infrastructure and
attract new personnel in a timely and effective manner, the inability to
effectively manage rapidly expanding operations, the level of traffic on the
Company's Web site, the failure of its server and networking systems to
efficiently handle the Company's Web traffic, technical difficulties, system
downtime or Internet brownouts, the amount and timing of operating costs and
capital expenditures relating to expansion of the Company's business,
operations and infrastructure, the level of merchandise returns experienced by
the Company, competition, dependence on the Internet, the introduction and
development of different or more extensive communities by direct and indirect
competitors, particularly in light of the fact that many of such competitors
are much larger and have greater financial, technical and marketing resources
than the Company, reductions in market prices for Web-based advertising as a
result of competition or otherwise, the inability of the Company to maintain
or achieve higher rates for advertising, governmental regulation and general
economic conditions and economic conditions specific to the Internet and the
online commerce industry. To address these risks, the Company must, among
other things, maintain and increase its membership base and rates of growth,
implement and successfully execute its business and marketing strategies,
continue to develop and upgrade its technology and transaction-processing
systems, improve its Web site, provide superior customer service and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will
be successful in addressing such risks, and any failure to do so could have a
material adverse effect on the Company's business, results of operations and
financial condition.

As of September 30, 1998, the Company had an accumulated deficit of $10.0
million. Although the Company has experienced growth in net revenue, members,
customers and reach in recent periods, such growth rates are not sustainable,
will decrease in the future and are not indicative of actual growth rates the
Company may experience. The Company has not achieved profitability on a
quarterly or annual basis to date, and the Company anticipates that it will
incur net losses for the foreseeable future. The extent of these losses will
be

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dependent, in part, on the amount and rates of growth in the Company's net
revenue from electronic commerce and advertising. The Company expects its
operating expenses to increase significantly, especially in the areas of sales
and marketing and brand promotion, and, as a result, it will need to generate
increased quarterly net revenue if profitability is to be achieved. The
Company believes that period-to-period comparisons of its operating results
are not meaningful and that the results for any period should not be relied
upon as an indication of future performance. To the extent that net revenue
does not grow at anticipated rates or that increases in its operating expenses
precede or are not subsequently followed by commensurate increases in net
revenue, or that the Company is unable to adjust operating expense levels
accordingly, the Company's business, results of operations and financial
condition will be materially and adversely affected. There can be no assurance
that the Company's operating losses will not increase in the future or that
the Company will ever achieve or sustain profitability.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY; UNPREDICTABILITY OF
FUTURE NET REVENUE

The Company expects operating results to fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of the
Company's control. These factors include demand for the products the Company
sells through its Web site, consumers' acceptance of electronic commerce and,
in particular, direct e-mail marketing as a medium for the purchase of goods
and services, demand for Web-based advertising, advertisers' market acceptance
of the Web as an advertising medium, the level of traffic on the Xoom.com
site, the budgeting cycles of advertisers, the amount and timing of capital
expenditures and other costs relating to the expansion of the Company's
operations, the introduction of new or enhanced services by the Company or its
competitors, the timing and number of new hires, the availability of desirable
products and services for sale through the Company's Web site, the accuracy of
the Company's predictions regarding optimal inventory levels for products,
pricing changes for Web-based advertising as a result of competition or
otherwise, the loss of a key advertising contract or relationship by the
Company, changes in the Company's pricing policy or those of its competitors,
the mix of products, services and advertisements sold by the Company,
engineering or development fees that may be paid in connection with adding new
Web site development and publishing tools, technical difficulties with the
Xoom.com site, incurrence of costs relating to future acquisitions, general
economic conditions, and economic conditions specific to the Internet or all
or a portion of the technology market. As a strategic response to changes in
the competitive environment, the Company may from time to time make certain
pricing, service or marketing decisions or business combinations that could
have a material adverse effect on the Company's business, results of
operations and financial condition. In order to accelerate the promotion of
the Xoom.com brand, the Company intends to significantly increase its
marketing budget, which could materially and adversely affect the Company's
business, results of operations and financial condition. The Company expects
to experience seasonality in its business, with user traffic on the Xoom.com
site potentially being lower during the summer and year-end vacation and
holiday periods when overall usage of the Web is lower. Additionally,
seasonality may significantly affect the Company's advertising revenue during
the first and third calendar quarters, as advertisers historically spend less
during these periods. Because Web-based commerce and advertising is an
emerging market, additional seasonal and other patterns may develop in the
future as the market matures. Any seasonality is likely to cause quarterly
fluctuations in the Company's operating results, and there can be no assurance
that such patterns will not have a material adverse effect on the Company's
business, results of operations and financial condition.

As a result of the Company's limited operating history, the Company has
limited meaningful historical financial data upon which to base planned
operating expenses. Accordingly, the Company's expense levels are based in
part on its expectations as to future revenue from sales of products and
services, commerce revenue-sharing arrangements, advertising, and anticipated
growth in membership and are, to a large extent, fixed. Sales and operating
results from product sales generally depend on the volume of, timing of and
ability to fulfill orders received, which are difficult to forecast. In
addition, there can be no assurance that the Company will be able to
accurately predict its net revenue, particularly in light of the intense
competition for the sale of products and services on the Web, sales of Web-
based advertisements, revenue-sharing opportunities, the Company's limited
operating history and the uncertainty as to the broad acceptance of the Web as
a commerce and advertising medium. The Company may be unable to adjust
spending in a timely manner to compensate for any unexpected

8
<PAGE>

revenue shortfall. Any failure by the Company to accurately make such
predictions would have a material adverse effect on the Company's business,
results of operations and financial condition.

The Company derives a material portion of its net revenue from the sale of
advertising under short-term contracts, averaging one to two months in length.
As a result, the Company's quarterly net revenue and operating results are, to
a significant extent, dependent on advertising revenue from contracts entered
into within the quarter, as well as on the Company's ability to adjust
spending in a timely manner to compensate for any unexpected net revenue
shortfall. To date, a significant portion of the Company's advertising revenue
in any given period has been attributable to a small group of customers, the
composition of which generally changes from period to period. During the nine
months ended September 30, 1998, the Company's five largest advertising
customers accounted for approximately 28% of advertising revenue
(approximately 5% of total net revenue). The Company expects this situation to
continue in the future. The cancellation or deferral of existing advertising
or commerce contracts or the failure to obtain new contracts in any quarter
could materially and adversely affect the Company's business, results of
operations and financial condition for that quarter and future periods.
Furthermore, the Company's advertising revenue is based in part on the amount
of traffic on the Xoom.com site. Accordingly, any significant shortfall in
traffic on the Xoom.com site in relation to the Company's expectations or the
expectations of existing or potential advertisers would have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, substantially all of the Company's advertising
contracts require the Company to guarantee a minimum number of impressions. In
the event that these minimum impressions are not met, the Company could be
required to provide credit for additional impressions and the ability of the
Company to sell advertising to new or existing advertisers could be adversely
affected, and the Company could be forced to reduce advertising rates.

Due to the foregoing factors, the Company's quarterly net revenue and
operating results are difficult to forecast. Consequently, the Company
believes that period to period comparisons of its operating results will not
necessarily be meaningful and should not be relied upon as an indication of
future performance. It is likely that in some future quarter or quarters the
Company's operating results may fall below the expectations of securities
analysts and investors. In such event, the trading price of the Company's
Common Stock would likely be materially and adversely affected.

UNPROVEN BUSINESS MODEL; DEPENDENCE ON MEMBERS

The Company's business model depends upon its ability to leverage its
community platform and generate multiple revenue streams. The potential
profitability of this business model is unproven, and, to be successful, the
Company must, among other things, develop and market solutions that achieve
broad market acceptance by its members, Internet advertisers, commerce vendors
and Internet users. The Company's business model is substantially dependent
upon its member-generated content, the "grass-roots" promotional efforts of
its members and the voluntary involvement of its members in the maintenance of
communities to attract Web users to its site and to reduce the demands on
Company personnel. There can be no assurance that the Company's member-
generated content or the promotional efforts of its members will continue to
attract users to the Company's Web site. There can also be no assurance that
the Company's community members will continue to devote their time voluntarily
to improving its communities. Moreover, there can be no assurance that
communities on the Internet, direct marketing of products on the Internet or
the Company's services and brand will achieve broad market acceptance.
Accordingly, no assurance can be given that the Company's business model will
be successful or that it can sustain net revenue growth or achieve or sustain
profitability.

RISKS OF CAPACITY CONSTRAINTS; SYSTEM FAILURES; TECHNOLOGICAL RISKS

The performance of the Company's server and networking hardware and software
infrastructure is critical to the Company's business and reputation and its
ability to attract Web users, advertisers, new members and commerce partners
to the Company's Web site. Any system failure that causes an interruption in
service or a decrease in responsiveness of the Company's Web site could result
in less traffic on the Company's Web site

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and, if sustained or repeated, could impair the Company's reputation and the
attractiveness of its brand. The Company entered into one-year Web hosting
agreements with Exodus Communications, Inc. ("Exodus") and Frontier Global
Center ("Frontier") in October 1998 and May 1998, respectively. The Exodus
agreement is automatically renewed for subsequent one-year terms unless either
party provides notice at least 30 days prior to the expiration of any term.
The Frontier agreement terminates at the end of the term of each service order
entered into under the agreement. The Company's current service order with
Frontier terminates in May 1999. Pursuant to these agreements, Exodus and
Frontier provide and manage power and environmentals for the Company's
networking and server equipment. Exodus and Frontier also provide site
connectivity to the Internet via multiple DS-3 and OC-3 links on a 24 hours-a-
day, seven days per week basis. The agreement with Exodus provides that in the
event that the Company's Internet connectivity is interrupted due to reasons
within Exodus' reasonable control, Exodus must in general provide the Company
with additional access at no charge. Under the Frontier agreement, if such
service interruptions occur for more than specified numbers of hours during a
month, the Company will receive graduated discounts up to 100% on its fees.
Neither of the agreements, however, guarantee that the Company's Internet
access will be uninterrupted, error-free or completely secure. Both Exodus and
Frontier have instituted several policies and procedures to minimize
interruptions in service and maximize connectivity and reliability. Such
policies and procedures include maintaining multiple routes of Internet
connectivity via major telecommunications providers; maintaining
uninterrruptible power supplies that are backed by diesel power generators;
locating computer systems and servers in raised floor centers with fire
protection features; limiting access to the computer systems to authorized
personnel; maintaining an inventory of spare parts for the computer systems
on-site; and requiring all vendors of computer hardware and software to
provide support services 24 hours-a-day, seven days per week. In addition,
most services of the Company are accessed through redundant load balanced
server systems. Redundant copies of the contents of the Company's database and
member data are maintained to protect against disk failures. In addition,
certain databases that are critical to the Company's operations are backed-up
on magnetic tape daily. Currently, the Company is also deploying a magnetic
tape back-up system for member data. Although the Company maintains loss of
income insurance, the Company's insurance may not cover all instances of
systems or access failures to which the Company is exposed or it may not be
adequate to indemnify the Company for all losses arising from such an event.
Any disruption in Internet access or any failure of the Company's server and
networking systems to handle current or higher volumes of traffic would have a
material adverse effect on the Company's business, results of operations and
financial condition.

The Company has in the past experienced system failures related to capacity
constraints, which have been of a short duration and have had a minimal effect
on the Company's operations. An increase in the use of the Company's Web site
could strain the capacity of its systems, which could lead to slower response
time or system failures. System failures or slowdowns adversely affect the
speed and responsiveness of the Company's Web site and would diminish the
experience for the Company's members and visitors and reduce the number of
impressions received by advertisers, and, thus, could reduce the Company's
commerce and advertising revenue. The ability of the Company to provide
effective Internet connections or of its systems to manage substantially
larger numbers of customers at higher transmission speed is as yet unknown,
and, as a result, the Company faces risks related to its ability to scale up
to its expected customer levels while maintaining superior performance. If
Xoom.com's usage of bandwidth increases, Xoom.com will need to purchase
additional servers and networking equipment and rely more heavily on its
equipment and on Exodus and Frontier and their services to maintain adequate
data transmission speeds, the availability of which may be limited or the cost
of which may be significant.

The successful delivery of the Company's services is also dependent in
substantial part upon the ability of Exodus, Frontier and the Company to
protect Xoom.com's server and network infrastructure against damage from human
error, fire, flood, power loss, telecommunications failure, sabotage,
intentional acts of vandalism and similar events. In addition, substantially
all of the Company's server and network infrastructure is located in Northern
California, an area susceptible to earthquakes, which also could cause system
outages or failures if one should occur. Despite precautions taken by the
Company, Exodus and Frontier, the occurrence of other natural disasters or
other unanticipated problems at their respective facilities could result in
interruption in the services provided by the Company or significant damage to
Xoom.com's equipment. Despite the implementation of network

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security measures by the Company, its servers are vulnerable to computer
viruses, break-ins, and similar disruptions from unauthorized tampering. The
Company has experienced attempts by experienced programmers or "hackers" to
penetrate the Company's network security, some of which have succeeded, and
expects these attempts to continue to occur from time to time. Although the
Company maintains loss of income insurance in an aggregate amount of $1.0
million, plus additional coverage in the amount of $2.0 million for loss of
income caused by earthquakes, the occurrence of any of these events could
result in interruptions, delays or cessations in service, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company's reputation and the Xoom.com
brand could be materially and adversely affected.

RISK OF RELIANCE ON INTERNALLY DEVELOPED SYSTEMS

The Company uses an internally developed system for its Web site and
substantially all aspects of its transaction processing and order management
systems. The Company's inability to modify this system as necessary to
accommodate increased traffic on its Web site or increased volume through its
transaction processing and order management systems may cause unanticipated
system disruptions, slower response times, impaired quality and speed of order
fulfillment, degradation in customer service, and delays in reporting accurate
financial information. Any of these events could have a material adverse
effect on the Company's business, results of operations and financial
condition.

DEPENDENCE ON CONTINUED GROWTH OF ONLINE COMMERCE; DEPENDENCE ON DIRECT SALES

The Company's future success is substantially dependent upon continued
growth in the use of the Internet and the Web. Use of the Internet as a means
of effecting retail transactions is at an early stage of development, and
demand and market acceptance for recently introduced services and products
over the Internet is uncertain. For the year ended December 31, 1997 and the
nine months ended September 30, 1998, respectively, electronic commerce
revenue represented approximately 39% and 69% of the Company's total net
revenue. The Company cannot predict the extent to which consumers will be
willing to shift their purchasing habits from traditional retailers to online
retailers. The Internet may not prove to be a viable commercial marketplace
for a number of reasons, including lack of acceptable security technologies,
lack of access and ease of use, congestion of traffic, inconsistent quality of
service and lack of availability of cost-effective, high-speed service,
potentially inadequate development of the necessary infrastructure, excessive
governmental regulation, uncertainty regarding intellectual property ownership
or timely development and commercialization of performance improvements,
including high speed modems. In addition, adverse publicity and consumer
concern about the security of transactions conducted on the Internet and the
privacy of users may also inhibit the growth of commerce on the Internet. If
the use of the Internet does not continue to grow or grows more slowly than
expected, the Company's business, financial condition and results of
operations may be adversely affected.

RELIANCE ON CERTAIN VENDORS

The Company's primary provider of warehousing and order fulfillment is Banta
Corporation ("Banta"). Substantially all of the Company's electronic commerce
revenues are derived from sales fulfilled through Banta. The Company has no
fulfillment operation or facility of its own and, accordingly, is dependent
upon maintaining its existing relationship with Banta or establishing a new
fulfillment relationship with one of the few other fulfillment operations. The
Company does not have a written agreement with Banta, and there can be no
assurance that the Company will maintain its relationship with Banta, or that
it will be able to find an alternative, comparable vendor capable of providing
fulfillment services on terms satisfactory to the Company should its
relationship with Banta terminate. An unanticipated termination of the
Company's relationship with Banta, particularly during the fourth quarter of
the calendar year in which typically a high percentage of sales are made,
could materially adversely affect the Company's results of operations even if
the Company was able to establish a relationship with an alternative vendor.
To date, Banta has satisfied the Company's requirements on a timely basis.
However, to the extent that Banta does not have sufficient capacity and is
unable to satisfy on a timely basis increasing requirements of the Company,
the Company would be materially adversely affected. Moreover,

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despite precautions taken by the Company and Banta, the occurrence of natural
disasters or other unanticipated problems at its facilities to which it is
susceptible, such as damage from human error, fire, flood, power loss,
telecommunications failure, sabotage, intentional acts of vandalism and
similar events could result in interruption in the services provided by the
Company. In addition, the success of the Company's e-mail direct marketing
campaigns is dependent upon the ability of suppliers of the products and
services that are the subject of such campaigns to supply adequate amounts of
inventory on a timely basis. In particular, the Company relies upon Nimbus CD
Manufacturing, Inc. ("Nimbus") to procure substantially all of the CD-ROMs,
Digital Versatile Discs ("DVDs") and DVD-ROMs that contain software, clip art
and classic movies. The failure of Nimbus or such other suppliers to meet
their commitments would have a material adverse effect on the Company's
business, results of operations and financial condition.

SALES TAX COLLECTION

The Company does not currently collect sales or other similar taxes in
respect to shipments of goods into states other than California and New York.
However, one or more states or foreign countries may seek to impose sales tax
collection obligations on out-of-state or foreign companies such as the
Company which engage in online commerce. In addition, any new operation in
states outside California and New York could subject shipments into such
states to state or foreign sales taxes. A successful assertion by one or more
states or any foreign country that the Company should collect sales or other
similar taxes on the sale of merchandise could have a material adverse effect
on the Company's business, prospects, financial condition and results of
operations. See "--Government Regulation" and "--Legal Uncertainties."

MANAGEMENT OF GROWTH AND RELATIONSHIPS

The Company has experienced and may continue to experience rapid growth,
which has placed, and could continue to place, a significant strain on the
Company's managerial, financial and operational resources. The Company is
required to manage multiple relationships with various strategic partners,
technology licensors, members, advertisers and other third parties. These
requirements will be strained in the event of further growth of the Company or
in the number of third party relationships, and there can be no assurance that
the Company's systems, procedures or controls will be adequate to support the
Company's operations or that Company management will be able to manage any
growth effectively. To effectively manage its potential growth, the Company
must continue to implement and improve its operational, financial and
management information systems and to expand, train and manage its employee
base. As of September 30, 1998, the Company's headcount had grown to
64 full-time employees from 4 as of March 31, 1997, and the Company
anticipates that the number of its employees will increase significantly in
the next 12 months. The Company has experienced difficulty from time to time
in hiring and retaining the personnel necessary to support the growth of its
business, and there can be no assurance that the Company will not experience
similar difficulty in the future.

BRIEF TENURE OF MANAGEMENT; DEPENDENCE ON KEY PERSONNEL

The Company's performance is substantially dependent on the performance of
its executive officers and other key employees, most of whom have worked
together only a short period of time. In particular, the Company's Chief
Financial Officer joined the Company in August 1998. In addition, the majority
of the Company's sales personnel have recently joined the Company, and there
can be no assurance that they will be successful in increasing the Company's
level of sales. The Company does not currently have "key person" life
insurance policies on any of its employees. The loss of the services of any of
its executive officers or other key employees could have a material adverse
effect on the business, results of operations and financial condition of the
Company. Competition for senior management, experienced media sales and
marketing personnel, qualified Web engineers and other employees is intense,
and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. The failure of the Company to
successfully manage its personnel requirements would have a material adverse
effect on the Company's business, results of operations and financial
condition.

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DEPENDENCE ON WEB INFRASTRUCTURE

The success of the Xoom.com site will depend in large part upon the
continued development of a Web infrastructure, such as a reliable network
backbone with the necessary speed, data capacity and security, and timely
development of complementary products such as high speed modems for providing
reliable Web access and services. Because global commerce and online exchange
of information on the Web and other similar open wide area networks are new
and evolving, it is difficult to predict with any assurance whether the Web
will support increasing use or will prove to be a viable commercial
marketplace. The Web has experienced, and is expected to continue to
experience, significant growth in the number of users and the amount of
content. To the extent that the Web continues to experience increased numbers
of users, frequency of use or increased bandwidth requirements of users, there
can be no assurance that the Web infrastructure will continue to be able to
support the demands placed on it by this continued growth or that the
performance or reliability of the Web will not be adversely affected by this
continued growth. In addition, the Web could lose its viability or
effectiveness due to delays and the development or adoption of new standards
and protocols to handle increased levels of activities or due to increased
government regulation. There can be no assurance that the infrastructure or
complementary products or services necessary to make the Web a viable
commercial marketplace will be developed, or, if they are developed, that the
Web will achieve broad acceptance. If the necessary infrastructure standards,
protocols or complementary products, services or facilities are not developed,
the Company's business, results of operations and financial condition will be
materially and adversely affected. Even if such infrastructure, standards or
protocols or complementary products, services or facilities are developed and
the Web becomes a viable commercial marketplace, there can be no assurance
that the Company will not be required to incur substantial expenditures in
order to adapt its services to changing Web technologies, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.

RISKS ASSOCIATED WITH BRAND DEVELOPMENT

The Company believes that establishing and maintaining the Xoom.com brand is
critical to attracting and expanding its member base and Web traffic and
advertising and commerce relationships. The Company believes that the
importance of brand recognition will increase due to the growing number of
Internet sites and the low barriers to entry. In order to attract and retain
members, Internet users, advertisers and commerce partners, and to promote and
maintain the Xoom.com brand in response to competitive pressures, the Company
intends to increase substantially its financial commitment to creating and
maintaining distinct brand loyalty among these groups, including Web
advertising and marketing and traditional media advertising campaigns in
print, radio, billboards and television. Promotion and enhancement of the
Xoom.com brand will also depend, in part, on the Company's success in
providing a high-quality community experience, which success cannot be
ensured. The Company has recently changed its name from "XOOM, Inc." to
"XOOM.com, Inc." There can be no assurance that such name change will not
result in confusion to current or potential customers or will not disrupt the
Company's business, either of which could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, the Company may need to expend additional resources to build the
Xoom.com brand. If the Company does not generate a corresponding increase in
net revenue as a result of its branding efforts or otherwise fails to promote
its brand successfully, or if the Company incurs excessive expenses in an
attempt to promote and maintain its brand, the Company's business, results of
operations and financial condition, will be materially and adversely affected.
If members, visitors to the Xoom.com site, advertisers or businesses do not
perceive the Company's existing services to be of high quality or are not
aware of the Company's name change, or if the Company alters or modifies its
brand image, introduces new services or enters into new business ventures that
are not favorably received by such parties, the value of the Company's brand
could be diluted, thereby decreasing the attractiveness of its Web site to
such parties. See "--Risks Of Infringement Of Intellectual Property."

RAPID TECHNOLOGICAL CHANGE

To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of its site and develop new
features to meet customer needs. Introducing new technology into the

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Company's systems involves numerous technical challenges and substantial
amounts of personnel resources, and often times takes many months to complete.
There can be no assurance that the Company will be successful at integrating
such technology into its Web site on a timely basis or without degrading the
responsiveness and speed of its Web site or that, once integrated, such
technology will function as expected. In addition, the Internet is
characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
and the emergence of new industry standards and practices that could render
the Company's existing Web site, technology and systems obsolete. The
Company's success will depend, in part, on its ability to license leading
technologies useful in its business, enhance its existing services, develop
new services and technology that address the needs of its customers, and
respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. If the Company is unable to
use new technologies effectively or adapt its Web site, proprietary technology
and transaction-processing systems to customer requirements or emerging
industry standards, it would be materially adversely affected.

SECURITY RISKS

The Company has experienced attempts by experienced programmers or "hackers"
to penetrate the Company's network security, some of which have succeeded, and
expects these attempts to continue to occur from time to time. If successful,
such actions could have a material adverse effect on the Company's business,
results of operations and financial condition. A party who is able to
penetrate the Company's network security could misappropriate proprietary
information or cause interruptions in the Company's Web site. The Company may
be required to expend significant capital and resources to protect against the
threat of such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of Internet transactions and the privacy
of users may also inhibit the growth of the Internet generally, particularly
as a means of conducting commercial transactions. Security breaches or the
inadvertent transmission of computer viruses could expose the Company to a
risk of loss or litigation and possible liability. There can be no assurance
that contractual provisions attempting to limit the Company's liability in
such areas will be successful or enforceable, or that other parties will
accept such contractual provisions as part of the Company's agreements which
could have a material adverse effect on the Company's business, results of
operations and financial condition.

The Company relies on encryption and authentication technology licensed from
third parties to provide the security and authentication necessary to effect
secure transmission of confidential information, such as customer credit card
numbers. Advances in computer capabilities, discoveries in the field of
cryptography and other discoveries, events or developments could lead to a
compromise or breach of the algorithms that the Company's licensed encryption
and authentication technology uses to protect such confidential information.
If such a compromise or breach of the Company's licensed encryption and
authentication technology occurs, it could have a material adverse effect on
the Company's business, results of operations and financial condition. The
Company may be required to expend significant capital and resources and engage
the services of third parties to protect against the threat of such security,
encryption and authentication technology breaches or to alleviate problems
caused by such breaches. Concerns over the reliability of encryption and
authentication technology may also inhibit the growth of the Internet
generally, particularly as a means of conducting commercial transactions.

PRIVACY CONCERNS

The Federal Trade Commission (the "FTC") is considering regulation regarding
the collection and use of personal identifying information obtained from
individuals, including children, when accessing Web sites, such as the
Company's. Such regulation may include a requirement that companies establish
certain procedures to, among other things: (i) give adequate notice to
consumers regarding information collection and disclosure practices, (ii)
provide consumers with the ability to have personal identifying information
deleted from a company's database, (iii) clearly identify affiliations or a
lack thereof with third parties which may collect information or sponsor
activities on a company's Web site, and (iv) obtain express parental consent
prior to collecting and using personal identifying information obtained from
children under 13 years of age. While the

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Company has implemented or intends to implement programs designed to enhance
the protection of the privacy of its members, including children, there can be
no assurance that such programs will conform with any regulation adopted by
the FTC. Moreover, even in the absence of such regulation, the FTC has begun
investigations into the privacy practices of companies that collect
information on the Internet. One such investigation has resulted in a consent
decree pursuant to which the Internet company has agreed to establish programs
to implement the four principles noted above. There can be no assurance that
the Company will not become subject to such an investigation, or that the
FTC's regulatory and enforcement efforts will not adversely affect the ability
to collect demographic and personal information from members, which could have
an adverse effect on its ability to target product offerings and attract
advertisers. Any such developments would have a material adverse effect on the
Company's business, results of operations and financial condition.

In addition, at the international level, the European Union (the "EU") has
adopted a directive (the "Directive") that will impose restrictions on the
collection and use of personal data, effective October 1998. Under the
Directive, EU citizens are guaranteed certain rights, including the right of
access to their data, the right to know where the data originated, the right
to have inaccurate data rectified, the right of recourse in the event of
unlawful processing, and the right to withhold permission to use their data
for direct marketing. The Directive could, among other things, affect U.S.
companies that collect information over the Internet from individuals in EU
member countries, and may impose restrictions that are more stringent than
current Internet privacy standards in the United States. In particular, EU
countries will not be allowed to send personal information to countries that
do not maintain adequate standards of privacy. The Directive does not,
however, define what standards of privacy are adequate. As a result, there can
be no assurance that the Directive will not adversely affect the activities of
entities such as the Company that engage in data collection from users in EU
member countries.

RELIANCE ON ADVERTISING REVENUE

The Company has derived a material portion of its net revenue to date from
the sale of advertisements, including banner advertising revenue. For 1997 and
the nine months ended September 30, 1998, advertising revenue represented 7%
and 20%, respectively, of the Company's total net revenue. During the nine
months ended September 30, 1998, the Company's five largest advertising
customers accounted for approximately 28% of advertising revenue
(approximately 5% of total net revenue). The Company's strategy is to continue
to emphasize advertising as a method of generating net revenue. The Company's
ability to generate significant net revenue from advertising will depend on,
among other things, the adoption of the Web as an advertising medium, the
development of a large base of users of the Company's services, the
formulation of effective direct marketing campaigns, the responsiveness of
members to such campaigns, the acquisition of members possessing demographic
characteristics attractive to advertisers and the ability of the Company to
develop or acquire effective marketing and advertising delivery and
measurement systems.

There can be no assurance that current advertisers will continue to purchase
advertising space and services from the Company at current levels or at all,
or that the Company will be able to successfully attract additional
advertisers. Furthermore, with the rapid growth of available advertising space
on the Internet and the intense competition among sellers of such space, it is
difficult to project pricing models that will be adopted by the industry or
individual companies. The Company's ability to generate significant
advertising revenue will depend, in part, on the ability of the Company to
leverage additional platforms within its community for new advertising
programs without diluting the perceived value of its existing programs.

UNCERTAIN ADOPTION OF THE WEB AS AN ADVERTISING MEDIUM

The Internet as a marketing and advertising medium has not been available
for a sufficient period of time to gauge its effectiveness as compared with
traditional media. Many of the Company's suppliers and advertisers have only
limited experience with the Web as a sales and advertising medium, and
advertisers have not yet devoted a significant portion of their advertising
budgets to Web-based advertising and may not find such

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advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. For 1997, advertising on the Web
represented less than 0.5% of overall advertising revenue in the United
States, according to industry sources.

The adoption of Web-based advertising, particularly by those entities that
have historically relied upon traditional media for advertising, requires the
acceptance of a new way of conducting business and exchanging information.
Entities that already have invested substantial resources in other methods of
conducting business may be reluctant to adopt a new strategy that may limit or
compete with their existing efforts. There can be no assurance that the market
for Web advertising will continue to emerge or become sustainable. If the
market develops more slowly than expected, the Company's business, results of
operations and financial condition could be materially and adversely affected.
No standards have been widely accepted for the measurement of the
effectiveness of Web-based advertising, and there can be no assurance that
such standards will develop sufficiently to support the Web as an effective
advertising medium. There can be no assurance that advertisers will accept the
Company's or other third-party measurements of impressions, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, there is intense competition in the sale of
advertising on the Web resulting in a wide variety of pricing models, rate
quotes and advertising services, making it difficult to project future levels
of advertising revenue and rates. It is also difficult to predict which
pricing models, if any, will achieve broad acceptance among advertisers. The
Company has traditionally based its advertising rates on providing advertisers
with a guaranteed number of impressions, and any failure of the Company's
advertising model to achieve broad market acceptance would have a material
adverse effect on the Company's business, results of operations and financial
condition.

It is possible that in the future certain Internet access providers will act
to block or limit the use of e-mail direct marketing solicitations, whether at
their own behest or at the request of users. Members may also choose not to
receive e-mail offerings from the Company or may fail to respond to such
offerings. Either of these developments would have a material adverse effect
on the Company's ability to generate electronic commerce revenue. Moreover,
"filter" software programs that limit or remove advertising from a Web user's
desktop are available; and widespread adoption or increased use of such
software by users could have a material adverse effect upon the viability of
advertising on the Web and on the Company's business, results of operations
and financial condition. There can be no assurance that the Company will be
successful in generating significant future direct marketing or advertising
revenue or other sources of net revenue, and any failure to do so would have a
material adverse effect on the Company's business, results of operations and
financial condition.

INTENSE COMPETITION

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institutions. These competitors include free information, search and content
sites or services, such as America Online, Inc. ("AOL"), CNET, Inc. ("CNET"),
CNN/Time Warner, Inc. ("CNN/Time Warner"), Excite, Inc. ("Excite"), Infoseek
Corporation ("Infoseek"), Lycos, Inc. ("Lycos"), Netscape Communications
Corporation ("Netscape"), Microsoft Corporation ("Microsoft") and Yahoo! Inc.
("Yahoo!"). The Company also competes with many companies for advertisers,
including those companies with whom the Company competes for visitors as well
as traditional forms of media such as newspapers, magazines, radio and
television. The Company believes that the principal competitive factors in
attracting advertisers include the amount of traffic on its Web site, brand
recognition, customer service, the demographics of the Company's members and
viewers, the Company's ability to offer targeted audiences and the overall
cost-effectiveness of the advertising medium offered by the Company. The
Company believes that the number of Internet companies that obtain revenue
from Web-based advertising will increase substantially in the future.
Accordingly, the Company will likely face increased competition, resulting in
increased pricing pressures on its advertising rates which could in turn have
a material adverse effect on the Company's business, results of operations and
financial condition.

The Company also expects to encounter intense competition in the online
commerce market. The Company currently or potentially competes with a variety
of other companies. These competitors include various traditional computer
retailers including CompUSA, Inc. ("CompUSA") and Micro Electronics, Inc.'s
MicroCenter ("MicroCenter"), various mail-order retailers including CDW
Computer Centers, Inc. ("CDW"), Micro Warehouse, Inc. ("MicroWarehouse"),
Insight Enterprises, Inc. ("Insight"), PC Connection, Inc. ("PC Connection")
and Creative Computers, Inc. ("Creative Computers"), various Internet-focused
retailers including Amazon.com, Inc. ("Amazon.com"), Egghead, Inc.'s
Egghead.com ("Egghead.com"), software.net Corporation ("software.net"), and
New England Circuit Sales, Inc.'s NECX Direct ("NECX Direct"), various
manufacturers that sell directly over the Internet including Dell Computer
Corporation ("Dell"), Gateway 2000, Inc. ("Gateway"), Apple Computer, Inc.
("Apple") and many software companies, a number of online service providers
including AOL and the Microsoft Network that offer computer products directly
or in partnership with other retailers, some non-computer retailers such as
Wal-Mart Stores, Inc. ("Wal-Mart") that sell a limited selection of computer
products in their stores and computer products distributors which may develop
direct channels to the consumer market. Increased competition from these and
other sources could require the Company to respond to competitive pressures by
establishing pricing, marketing and other programs or seeking out additional
strategic alliances or acquisitions which may be less favorable to the Company
than would otherwise be established or obtained, and thus could have a
material adverse effect on the business, prospects, financial condition and
results of operations of the Company.

Many of the Company's existing and potential competitors, including Web
directories and search engines and large traditional media companies, have
longer operating histories in the Web market, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than the Company. Such competitors are able to undertake more
extensive marketing campaigns for their brands and services, adopt more
aggressive advertising pricing policies and make more attractive offers to
potential employees, distribution partners, commerce companies, advertisers
and third-party content providers. There can be no assurance that Internet
content providers and ISPs, including Web directories, search engines,
shareware archives, sites that offer professional editorial content,
commercial online services and sites maintained by ISPs will not be perceived
by advertisers as having more desirable Web sites for placement of
advertisements. In addition, substantially all of the Company's current
advertising customers and strategic partners also have established
collaborative relationships with certain of the Company's competitors or
potential competitors, and other high-traffic Web sites. Accordingly, there
can be no assurance that the Company will be able to grow its membership base,
traffic levels and advertiser customer base at historical levels or retain its
current members, traffic levels or advertiser customers, or that competitors
will not experience greater growth in traffic than the Company as a result of
such relationships which could have the effect of making their Web sites more
attractive to advertisers, or that the Company's strategic partners will not
sever or elect not to renew their agreements with the Company. There can also
be no assurance that the Company will be able to compete successfully against
its current or future competitors or that competition will not have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Business--Competition."

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RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION

For the nine months ended September 30, 1998, approximately 29% of the
Company's total net revenue was derived from sales outside the United States.
A part of the Company's strategy is to continue to grow the Xoom.com community
model in international markets. There can be no assurance that acceptance of
the Internet or the Company's community model will continue to expand
significantly in any international markets. If net revenue from international
operations is not adequate to cover the investments in such activities, the
Company's business, results of operations and financial condition could be
materially and adversely affected. The Company may experience difficulty in
managing international operations as a result of difficulty in locating an
effective foreign partner, competition, technical problems, distance and
language and cultural differences, and there can be no assurance that the
Company or its international partners will be able to successfully market and
operate the Company's community model in foreign markets. The Company also
believes that in light of substantial anticipated competition, it will be
necessary to move quickly into international markets in order to effectively
obtain market share, and there can be no assurance that the Company will be
able to do so. There are certain risks inherent in doing business on an
international level, such as unexpected changes in regulatory requirements,
trade barriers, difficulties in staffing and managing foreign operations,
fluctuations in currency exchange rates, longer payment cycles in general,
problems in collecting accounts receivable, difficulty in enforcing contracts,
political and economic instability, seasonal reductions in business activity
in certain other parts of the world and potentially adverse tax consequences.
There can be no assurance that one or more of such factors will not have a
material adverse effect on the Company's future international operations and,
consequently, on the Company's business, results of operations and financial
condition.

DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS

The Company regards its technology as proprietary and attempts to protect it
by relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. The
Company currently has no patents or patents pending and does not anticipate
that patents will become a significant part of the Company's intellectual
property in the foreseeable future. The Company also generally enters into
confidentiality or license agreements with its employees and consultants, and
generally controls access to and distribution of its documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization or to develop similar technology
independently. The Company pursues the registration of its trademarks and
service marks in the United States and internationally, and has applied for
registration in the United States and certain other countries for a number of
its trademarks and service marks, including "Xoom," "Xoom.com" and the "X-in-
circle" logo. Effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which the Company's
services are distributed or made available through the Internet, and policing
unauthorized use of the Company's proprietary information is difficult.

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will continue to be available to the Company on commercially reasonable terms,
if at all. The inability of the Company to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or could adversely affect the performance of its existing services
until equivalent technology is identified, licensed and integrated.

The Company has licensed in the past, and expects that it may license in the
future, certain of its proprietary rights, such as trademarks or copyrighted
material, to third parties. While the Company attempts to ensure that the
quality of its brand is maintained by such licensees, there can be no
assurance that such licensees will not take actions that might materially
adversely affect the value of the Company's proprietary rights or reputation,
which could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. There can be no
assurance that the steps taken by the Company to protect its proprietary
rights will be adequate, or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks and similar proprietary
rights.

RISKS OF INFRINGEMENT OF INTELLECTUAL PROPERTY

There can be no assurance that the Company's business activities will not or
have not infringed upon the proprietary rights of others, or that other
parties will not assert infringement claims against the Company. From time to
time, the Company has been, and expects to continue to be, subject to claims
in the ordinary course of its business including claims of alleged
infringement of the trademarks, service marks and other intellectual property
rights of third parties by the Company and the content generated by its
members. Such claims and any resultant litigation, should it occur, might
subject the Company to significant liability for damages and might result in
invalidation of the Company's proprietary rights and even if not meritorious,
could be time consuming and expensive to defend and could result in the
diversion of management time and attention, any of which might have a material
adverse effect on the Company's business, results of operations and financial
condition. In September 1998, Zoom Telephonics, Inc. ("Zoom") contacted the
Company, asserting, among other things, that the "XOOM" trademark was
confusingly similar to Zoom's own "ZOOM" registered trademark, and requesting
that the Company cease using the "XOOM" trademark and the "xoom.com" domain
name, and change its name. The Company has responded to Zoom's correspondence
by denying any confusion between trademarks, and is in preliminary discussions
with Zoom to resolve the points Zoom raised in such correspondence. Although
the Company believes that Zoom's claims are without merit, it is possible that
the two companies will not resolve such points. A failure to do so could
result in litigation, which could have a material adverse effect on the
Company's business, results of operations and financial condition,
particularly if such litigation forces the Company to make substantial changes
to its name and trademark usage. Any name change effected after the Offering
could result in confusion to investors, which could adversely affect the
market price of the Common Stock. In addition, in January 1998, Xoom.com
became aware that Imageline, Inc. ("Imageline"), a Virginia corporation,
claimed to own the copyright in certain images that an unrelated third party
had licensed to Xoom.com. See "--Legal Proceedings" and "Business--Legal
Proceedings."

LIABILITY FOR ONLINE CONTENT

The Company believes that its success to date and its future success will
depend in part upon its ability to provide reviews and other information about
the products that it sells, along with other materials of interest to members.
Because materials may be downloaded by members and other users of the
Company's Web site and subsequently distributed to others, there is a
potential that claims will be made against the Company for defamation,
negligence, copyright or trademark infringement, personal injury or other
theories based on the nature, content, publication and distribution of such
materials. Such claims have been brought, sometimes successfully, against OSPs
in the past. The Company has received inquiries on a regular basis from third
parties regarding such matters, including the claim made by Imageline. See "--
Dependence On Intellectual Property Rights," "--Risks Of Infringement Of
Intellectual Property" and "--Legal Proceedings." In addition, the increased
attention focused upon liability issues as a result of these lawsuits and
legislative proposals could impact the overall growth of Internet use. The
Company could also be exposed to liability

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with respect to the offering of third party content that may be accessible
through the Company's Web site, or through content and materials that may be
posted by members on their personal Web sites or chat rooms, or bulletin
boards offered by the Company. Such claims might include, among others, that
by directly or indirectly providing hyperlink text links to Web sites operated
by third parties, the Company is liable for copyright or trademark
infringement or other wrongful actions by such third parties through such Web
sites. It is also possible that if any third-party content information
provided on the Company's Web site contains errors, third parties could make
claims against the Company for losses incurred in reliance on such
information. The Company also offers e-mail services, which exposes the
Company to potential risk, such as liabilities or claims resulting from
unsolicited e-mail (spamming), lost or misdirected messages, illegal or
fraudulent use of e-mail or interruptions or delays in e-mail service. Even to
the extent such claims do not result in liability to the Company, the Company
could incur significant costs in investigating and defending against such
claims. The imposition on the Company of potential liability for information
carried on or disseminated through its systems could require the Company to
implement measures to reduce its exposure to such liability, which may require
the expenditure of substantial resources and limit the attractiveness of the
Company's services to members and users. Although the Company carries general
liability insurance in an aggregate amount of $2.0 million, plus umbrella
coverage in an aggregate amount of $5.0 million, the Company's insurance may
not cover all potential claims to which it is exposed or may not be adequate
to indemnify the Company for all costs of defending claims or all liability
that may be imposed. Any costs or imposition of liability not covered by
insurance or in excess of insurance coverage could have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition, the increased attention focused upon liability issues
as a result of these lawsuits could impact the overall growth of Internet use.
See "Business--Intellectual Property and Proprietary Rights."

LEGAL PROCEEDINGS

Xoom.com acquires rights to license and distribute software clips, including
clip art, and movies from third parties. In June 1997, Sprint Software Pty Ltd
("Sprint"), an Australian company, licensed to Xoom.com certain clip art. From
inception to September 30, 1998, the Company received less than 1.0% of its
total net revenue under the Sprint license and, since September 30, 1998, the
Company has not received any net revenue from any of the clip art under the
Sprint license. In January 1998, Xoom.com became aware that Imageline claimed
to own the copyright in certain images that Sprint had licensed to Xoom.com.
Some clip art images that Imageline alleged infringed Imageline's copyright
were included by Xoom.com in versions of Xoom.com's Web Clip Empire product
and licensed by Xoom.com to third parties, including other software clip
publishers. Xoom.com's contracts with such publishers require the Company to
indemnify the publisher if copyrighted material licensed from the Company
infringes a copyright. Imageline claims that the Company's infringement of
Imageline's copyrights is ongoing. Xoom.com and Imageline have engaged in
discussions, but were unable to reach any agreement regarding a resolution of
this matter. On August 27, 1998 Xoom.com filed a lawsuit in the United States
District Court for the Eastern District of Virginia against Imageline, certain
parties affiliated with Imageline, and Sprint regarding Xoom.com's and its
licensees' alleged infringement on Imageline's copyright in certain clip art
that Xoom.com licensed from Sprint. The lawsuit seeks, among other relief,
disclosure of information from Imageline concerning the alleged copyright
infringement, a declaratory judgement concerning the validity and
enforceability of Imageline's copyrights and copyright registrations, a
declaratory judgement regarding damages, if any, owed by the Company to
Imageline, and indemnification from Sprint for damages, if any, owed by
Xoom.com to Imageline. On September 17, 1998, Imageline filed an answer and
counterclaim, denying the Company's allegations and requesting injunctive
relief and damages for the Company's alleged infringements of Imageline's clip
art properties. While the Company is seeking indemnification from Sprint for
damages, there can be no assurance that Sprint will be able to fulfill the
indemnity obligations under its license agreement with the Company. There can
be no assurance as to the outcome of the claims asserted by Imageline and the
related litigation. In addition, the Company may be subject to claims by third
parties seeking indemnification from the Company in connection with the
alleged infringement of the Imageline copyrights. Any such claims or
litigation could result in a decision adverse to the Company. A decision
adverse to the Company in any of these matters could have a material adverse
effect on the Company's business, results of operations

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and financial condition. In addition, litigation, regardless of its merits,
could result in substantial costs to the Company and divert management's
attention from the Company's operations. In light of the Imageline claim and
the resulting litigation, the Company is evaluating its policies and
procedures regarding its licensing and distribution of software clips. There
can be no assurance that third parties will not assert infringement claims
against the Company. Any misappropriation or infringement could result in
litigation which could have a material adverse effect on the Company's
business, results of operations and financial condition. See "--Dependence On
Intellectual Property Rights," "--Risks Of Infringement Of Intellectual
Property" and Note 6 of Notes to Consolidated Financial Statements.

RISKS ASSOCIATED WITH ACQUISITIONS

Since March 1998, the Company has acquired three businesses: Paralogic
Corporation ("Paralogic"), Global Bridges Technologies, Inc. ("Global
Bridges") and Pagecount, Inc. ("Pagecount"). The Company has also entered into
an exclusive perpetual license with ArcaMax, Inc. ("ArcaMax") for Greetings
Online, a free online greeting card service and purchased certain assets of
Revolutionary Software, Inc. ("Revolutionary Software"). The Company's future
performance will in part depend on its ability to integrate these acquisitions
and leverage them into additional traffic, members or sources of revenue.
Acquisitions involve numerous risks and uncertainties, including adverse
effects on the Company's reported results of operations from acquisition-
related charges and amortization of goodwill and purchased technology, the
inability of the Company to maintain customers or goodwill of an acquired
business, difficulties in the integration of operations, personnel,
technologies, products and the information systems of the acquired companies,
diversion of management's attention from other business concerns, risks of
entering geographic and business markets in which the Company has no or
limited prior experience and potential loss of key employees of acquired
organizations. The Company is currently facing all of these challenges with
respect to its acquisitions and its ability to meet them over the long term
has not been established. As a result, there can be no assurance that the
Company will be able to integrate the acquired businesses or otherwise
successfully leverage the acquisitions into additional traffic, members or
sources of revenue. Such failure would have a material adverse effect on the
Company's business, results of operations and financial condition.

The Company's past business and technology acquisitions have been accounted
for using the purchase method of accounting. Because most Internet business
acquisitions involve the purchase of significant amounts of intangible assets,
acquisitions of such businesses also result in goodwill and purchased
technology and significant charges for purchased in-process research and
development. For example, as a result of the acquisitions of Paralogic and
Pagecount, as well as the purchase of certain assets of Revolutionary
Software, as of September 30, 1998, the Company had incurred charges relating
to purchased in-process research and development of $790,000 for 1998 and has
recorded an aggregate of $4.8 million in goodwill and purchased technology. In
addition, certain of the Company's acquisition agreements contain provisions
that allow for the issuance of additional shares of Common Stock or cash. In
connection with the acquisition of Global Bridges, upon the completion of the
Offering, the Company is required to issue Common Stock at the Offering price
with an aggregate value of $200,000, together with $130,000 in cash. In
connection with the Company's purchase of certain assets of Revolutionary
Software, upon the completion of the Offering, the Company is required to
issue Common Stock at the Offering price with an aggregate value of $400,000,
together with an additional cash consideration of $260,000. As part of the
license agreement entered into with ArcaMax, a payment for the remaining note
payable balance of approximately $135,000 will be payable within ten days of
the completion of the Offering. See "Use of Proceeds." Generally, amounts
allocable to goodwill and other intangible assets are amortized over a two
year period. As of September 30, 1998, net intangibles were approximately 50%
of the Company's total assets. If the Company were to incur additional charges
for purchased in-process research and development and amortization of goodwill
and other intangible assets with respect to future acquisitions, the Company's
business, results of operations and financial condition would be materially
adversely affected.

As part of its business strategy, the Company may make acquisitions of
complementary businesses, products or technologies. The successful
implementation of this strategy depends on the Company's ability to identify
suitable acquisition candidates, acquire such companies on acceptable terms,
integrate their operations or

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technologies successfully, and retain customers and maintain the goodwill of
the acquired business. There can be no assurance that the Company will be able
to identify additional suitable acquisition candidates, acquire any such
candidates on acceptable terms, integrate their operations or technologies
successfully, or retain customers or maintain the goodwill of the acquired
business, particularly in light of the Company's own limited operating
experience. Moreover, the Company may compete for acquisition targets with
other companies with similar growth strategies. Some of these competitors may
be larger and have greater financial and other resources than the Company.
Competition for these acquisition targets likely could also result in
increased prices of acquisition targets and a diminished pool of companies
available for acquisition. If the Company chooses to use a material amount of
cash for acquisition consideration, the Company may be required to obtain
additional financing, and there can be no assurance that such financing will
be available on favorable terms, if at all. In addition, if the Company issues
equity securities as consideration for any future acquisitions, stockholders
will experience further ownership dilution and such equity securities could
have preferences, privileges or other rights superior to those of the Common
Stock. In addition, the Company would likely face the same integration issues
described above with respect to the Paralogic, Global Bridges and Pagecount.
Due to all of the foregoing, the Company's execution of an acquisition
strategy or any individual completed or future acquisition may have a material
adverse effect on the Company's business, results of operations and financial
condition.

RELIANCE ON STRATEGIC RELATIONSHIPS

Although the Company views its strategic relationships as a key factor in
its overall business strategy, there can be no assurance that its strategic
partners will view their relationships with the Company as significant to
their own business or that they will not reassess their commitment to the
Company in the future. There can be no assurance that any party to a strategic
alliance agreement with the Company will perform its obligations as agreed or
that any strategic agreement would be specifically enforceable by the Company.
The Company's arrangements with its strategic partners generally do not
establish minimum performance requirements for the Company's strategic
partners but instead rely on their voluntary efforts. In addition, most of the
Company's agreements with its strategic partners may be terminated by either
party with little notice. Therefore, there can be no assurance that these
relationships will be successful. In the event that a strategic relationship
is discontinued for any reason, the Company's business, results of operations
and financial condition may be materially adversely affected.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations. The Company is currently engaged in a two-phase process to
evaluate its internal status with respect to the Year 2000 issue. In the first
phase, which the Company expects to complete in the first quarter of 1999, the
Company is conducting an evaluation of its systems, including both information
technology ("IT") systems and non-IT systems such as hardware containing
embedded technology, for Year 2000 compliance. The Company has completed a
significant portion of this phase to date, and systems that have been
evaluated are either Year 2000 compliant or are expected to be made compliant
at an immaterial cost to the Company. Although the Company does not expect
that the impact of the Year 2000 issue will be material in systems still under
evaluation, there can be no assurance that the Company will not discover Year
2000 issues in the course of its evaluation process that would have a material
adverse effect on the business, results of operations or financial condition
of the Company.

Phase two of the process, which is expected to be completed during the
second quarter of 1999, will involve taking any needed corrective action to
bring systems into compliance and to develop a contingency plan in the event
any non-compliant critical systems remain by January 1, 2000. As part of this
phase, the Company will attempt to quantify the impact, if any, of the failure
to complete any necessary corrective action. Although the Company cannot
currently estimate the magnitude of such impact, if systems material to the
Company's operations have not been made Year 2000 compliant upon completion of
this phase, the Year 2000 issue could have a material adverse effect on the
Company's business, results of operations and financial condition.

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To date, the costs incurred by the Company with respect to this process have
not been material. Future costs will remain difficult to estimate until the
completion of phase one; however, the Company does not currently anticipate
that such costs will be material.

Concurrently with the two-phase analysis of its internal systems, the
Company will survey third-party entities with which the Company transacts
business, including critical vendors and financial institutions, for Year 2000
compliance. The Company expects to commence this survey in the fourth quarter
of 1998 and complete this survey in the second quarter of 1999. At this time
the Company cannot estimate the effect, if any, that non-compliant systems at
these entities could have on the business, results of operations or financial
condition of the Company, and there can be no assurance that the impact, if
any, would not be material. See "Management's Discussion And Analysis Of
Financial Condition And Results Of Operations--Year 2000 Compliance."

GOVERNMENT REGULATION

The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there
are currently few laws or regulations directly applicable to access to or
commerce on the Internet. However, due to the increasing popularity and use of
the Internet, a number of legislative and regulatory proposals are under
consideration by federal, state, local and foreign governmental organizations,
and it is possible that a number of laws or regulations may be adopted with
respect to the Internet relating to such issues as user privacy, taxation,
infringement, pricing, quality of products and services and intellectual
property ownership. The adoption of any such laws or regulations may decrease
the growth in the use of the Internet, which could in turn decrease the demand
for the Company's community, increase the Company's cost of doing business, or
otherwise have a material adverse effect on the Company's business, results of
operations and financial condition. Moreover, the applicability to the
Internet of existing laws governing issues such as property ownership,
copyright, trademark, trade secret, obscenity, libel and personal privacy is
uncertain and developing. Any new legislation or regulation, or application or
interpretation of existing laws, could have a material adverse effect on the
Company's business, results of operations and financial condition. Legislation
like the recently enacted Communications Decency Act could hamper the growth
in use of the Web generally and decrease the acceptance of the Web as a
communications and commercial medium, and could, thereby, have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, a number of proposals have been made at the federal,
state and local level that would impose additional taxes on the sale of goods
and services over the Internet and certain states have taken measures to tax
Internet-related activities. Currently, Congress is considering various
legislative proposals the enactment of which would place a moratorium of a
number of years on any new taxation of Internet commerce. There can be no
assurance that any such legislation will be adopted by Congress or that new
taxes will not be imposed upon Internet commerce after any moratorium adopted
by Congress expires or that current attempts at taxing or regulating commerce
over the Internet would not substantially impair the growth of commerce and as
a result adversely affect the Company's opportunity to derive financial
benefit from such activities. Even if a moratorium is in place with respect to
the United States, there can be no assurance that foreign countries will not
also seek to tax Internet transactions. Particularly because a substantial
portion of the Company's net revenues is derived from international sales, any
such taxes would have a material adverse effect on the Company's business,
results of operations and financial condition.

Several telecommunications carriers are seeking to have telecommunications
over the Web regulated by the Federal Communications Commission (the "FCC") in
the same manner as other telecommunications services. In addition, because the
growing popularity and use of the Web has burdened the existing
telecommunications infrastructure and many areas with high Web use have begun
to experience interruptions in phone service, local telephone carriers, such
as Pacific Bell, have petitioned the FCC to regulate ISPs and OSPs in a manner
similar to long distance telephone carriers and to impose access fees on the
ISPs and OSPs. If either of these petitions is granted, or the relief sought
therein is otherwise granted, the costs of communicating on the Web could
increase substantially, potentially slowing the growth in use of the Web,
which could in turn decrease demand for the Company's community or increase
the Company's cost of doing business.

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LEGAL UNCERTAINTIES

Due to the global nature of the Web, it is also possible that, although
transmissions by the Company over the Internet originate primarily in the
State of California, the governments of other states and foreign countries
might attempt to regulate the Company's transmissions or prosecute the Company
for violations of their laws. There can be no assurance that violations of
local laws will not be alleged or charged by state or foreign governments,
that the Company might not unintentionally violate such laws or that such laws
will not be modified, or new laws enacted, in the future. Any of the foregoing
developments could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, as the Company's
products and services are available over the Internet in multiple states and
foreign countries, such jurisdictions may claim that the Company is required
to qualify to do business as a foreign corporation in each such state or
foreign country. The Company is qualified to do business only in California
and New York, and failure by the Company to qualify as a foreign corporation
in a jurisdiction where it is required to do so could subject the Company to
taxes and penalties and could result in the inability of the Company to
enforce contracts in such jurisdictions. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and other online services could
have a material adverse effect on the Company's business, results of
operations and financial condition.

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock.
There can be no assurance that an active trading market for the Common Stock
will develop or be sustained following the closing of the Offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price, which may bear no
relationship to the price at which the Common Stock will trade upon completion
of the Offering, will be determined by negotiations between the Company and
the representatives of the Underwriters based upon factors that may not be
indicative of future market performance. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public
offering price.

The trading price of the Company's Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly results of
operations, the gain or loss of significant advertisers, changes in earnings
estimates by analysts, announcements of technological innovations or new
solutions by the Company or its competitors, general conditions in the
technology and Internet sectors and in Internet-related industries, other
matters discussed elsewhere in this section of the Prospectus and other events
or factors, many of which are beyond the Company's control. In addition, the
stock market in general and the technology and Internet sectors in particular
have experienced extreme price and volume fluctuations which have affected the
market price for many companies in industries similar or related to that of
the Company and which have been unrelated to the operating performance of
these companies. These market fluctuations, as well as general economic,
political and market conditions, may have a material adverse effect on the
market price of the Company's Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such companies. Such
litigation, if instituted, and irrespective of the outcome of such litigation,
could result in substantial costs and a diversion of management's attention
and resources and have a material adverse effect on the Company's business,
results of operations and financial condition.

CONTROL BY DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL STOCKHOLDERS

Upon completion of the Offering, the directors, executive officers and
principal stockholders of the Company and their respective affiliates will, in
the aggregate, beneficially own approximately 46.1% of the outstanding Common
Stock (44.5% if the Underwriters' over-allotment option is exercised in full).
As a result, these stockholders will possess significant influence over the
Company, giving them the ability, among other things, to elect a majority of
the Company's Board of Directors and approve significant corporate
transactions. Such share ownership and control may also have the effect of
delaying or preventing a change in control of the Company, impeding a merger,
consolidation, takeover or other business combination involving the Company or

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discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of the Company which could have a material
adverse effect on the market price of the Company's Common Stock.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING

The Company has received a report from its independent auditors on their
audit of the Company's financial statements as of September 30, 1998,
containing an explanatory paragraph that describes the uncertainty as to the
ability of the Company to continue as a going concern due to the Company's
lack of sufficient cash to meet its projected operating needs for the next 12
months. The Company believes, however, that the net proceeds from the
Offering, together with available funds, will be sufficient to meet its
anticipated cash needs for working capital, capital expenditures and business
expansion for at least the next 12 months. The Company may need to raise
additional funds in the future in order to fund more aggressive brand
promotions and more rapid expansion, to develop newer or enhanced services, to
respond to competitive pressures or to acquire complementary businesses,
technologies or services. If additional funds are raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
stockholders of the Company will be reduced, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the rights of the Company's Common Stock. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available or
not available on acceptable terms, the Company may not be able to fund its
expansion, promote its brand as the Company desires, take advantage of
unanticipated acquisition opportunities, develop or enhance services or
respond to competitive pressures. Any such inability could have a material
adverse effect on the Company's business, results of operations and financial
condition.

INTRODUCTION OF EURO

Beginning in January 1999, a new currency called the "euro" is scheduled to
be introduced in certain European countries that are part of the Economic and
Monetary Union ("EMU"). During 2002, all EMU countries are expected to be
operating with the euro as their single currency. A significant amount of
uncertainty exists as to the effect the euro will have on the marketplace.
Additionally, all of the final rules and regulations have not yet been defined
and finalized by the European Commission with regard to the euro currency. The
Company is assessing the effect the euro introduction will have on its
internal systems and the sale of its products. The Company expects to take
appropriate actions based on the results of such assessment. The Company has
not yet determined the costs of addressing this issue and there can be no
assurance that this issue and its related costs will not have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Management's Discussion And Analysis Of Financial Condition
And Results Of Operations--Impact Of Euro Introduction."

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAWS; POSSIBLE ISSUANCE OF
PREFERRED STOCK

Following the closing of the Offering, the Company's Board of Directors will
have the authority to issue up to 5,000,000 shares of Preferred Stock without
any further vote or action by the stockholders, and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
such shares. The rights of the holders of Common Stock would be subject to,
and may be adversely affected by, the rights of the holders of any such
Preferred Stock. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids of the Company's Common Stock at a premium over the market
price of the Common Stock, and may adversely affect the market price of, and
the voting and other rights of, the Common Stock. The Company has no current
plans to issue shares of Preferred Stock. In addition, certain provisions of
the Company's Certificate of Incorporation and Bylaws will have the effect of
delaying, deferring or preventing a change of control of the Company. These
provisions provide, among other things, that stockholders may not take actions
by written consent and that the ability of stockholders to call special
meetings will be restricted. In addition, the Company will be subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which will prohibit the Company from engaging in a

25
<PAGE>

"business combination" with an "interested stockholder" for a period of three
years after the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed
manner. The Company's indemnification agreements, Certificate of Incorporation
and Bylaws provide that the Company will indemnify officers and directors
against losses that they may incur in investigations and legal proceedings
resulting from their services to the Company, which may be broad enough to
include services in connection with takeover defense measures. Such provisions
may have the effect of preventing changes in the management of the Company.
See "Description Of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of significant amounts of Common Stock in the public market after the
Offering or the perception that such sales will occur could materially and
adversely affect the market price of the Common Stock or the future ability of
the Company to raise capital through an offering of its equity securities. Of
the 12,098,024 shares of Common Stock to be outstanding upon the closing of
the Offering (assuming no exercise of the Underwriters' over-allotment
option), the 3,000,000 shares offered hereby will be eligible for immediate
sale in the public market without restriction, unless the shares are purchased
by "affiliates" of the Company within the meaning of Rule 144 promulgated
under the Securities Act. The remaining 9,098,024 shares of Common Stock held
by existing stockholders upon the closing of the Offering (based on the number
of shares of Common Stock outstanding as of September 30, 1998) will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act. The Company's
directors, officers, stockholders and holders of options to purchase Common
Stock have agreed that they will not sell, directly or indirectly, any Common
Stock without the prior written consent of Bear, Stearns & Co. Inc. for a
period of 180 days from the date of this Prospectus. Bear, Stearns & Co. Inc.
may however, in its sole discretion and at any time without notice, release
all or any portion of the shares subject to lock-up agreements. Subject to the
provisions of Rules 144, 144(k) and 701, 9,098,024 shares will be eligible for
sale 180 days after the date of this Prospectus upon the expiration of the
lock-up agreements.

The Company intends to file, as of the date of this Prospectus, Form S-8
registration statements under the Securities Act to register all shares of
Common Stock issuable pursuant to outstanding options and all shares of Common
Stock reserved for issuance under the Company's 1998 Plan and Stock Purchase
Plan. Such registration statements are expected to become effective
immediately upon filing, and shares covered by those registration statements
will thereupon be eligible for sale in the public markets, subject to the
lock-up agreements described above and Rule 144 limitations applicable to
affiliates. As of September 30, 1998, there were outstanding options to
purchase up to 1,901,198 shares of Common Stock which will be eligible for
sale in the public market following the Offering from time to time subject to
becoming exercisable and the expiration of the lock-up agreements, and, giving
effect to the increase in the aggregate number of shares reserved for issuance
pursuant to the 1998 Plan from 1,166,667 to 2,000,000 approved as of November
16, 1998, an additional 1,626,135 shares of Common Stock were reserved for
issuance under the 1998 Plan and the Stock Purchase Plan. See "Shares Eligible
For Future Sale."

BROAD DISCRETION IN USE OF PROCEEDS

The Company intends to use a portion of the net proceeds of the Offering to
repay a note issued in connection with the Pagecount acquisition in the
principal amount of $1.2 million and to pay the remaining balance of
approximately $135,000 due under the license agreement with ArcaMax, which
payment is due and payable within ten days of the completion of the Offering.
In addition, in connection with the acquisition of Global Bridges and the
purchase of certain assets of Revolutionary Software, the Company is required
to pay a cash consideration of $130,000 and $260,000, respectively, upon
completion of the Offering. The remaining net proceeds of the Offering will be
used for general corporate purposes, including working capital, capital
expenditures, potential acquisitions and promotional campaigns. As of the date
of this Prospectus, the Company cannot specify with certainty the particular
uses for the majority of the net proceeds to be received upon

26
<PAGE>

completion of the Offering. Accordingly, the Company's management will have
broad discretion in the application of the net proceeds. The failure of
management to apply such funds effectively could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Use Of Proceeds."

IMMEDIATE AND SUBSTANTIAL DILUTION

Investors purchasing shares of Common Stock in the Offering will incur
immediate and substantial dilution in net tangible book value per share of the
Common Stock from the initial public offering price in the amount of $7.92 per
share (based upon an assumed initial offering price of $10.00 per share). To
the extent outstanding options or warrants to purchase Common Stock are
exercised, there will be further dilution. See "Dilution."

ABSENCE OF DIVIDENDS

The Company has never declared or paid any cash dividends on its capital
stock to date and does not anticipate paying any cash dividends on its capital
stock in the foreseeable future. See "Dividend Policy."

27
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby are estimated to be approximately $26,000,000
(approximately $30,185,000 if the Underwriters' over-allotment option is
exercised in full) at an assumed initial public offering price of $10.00 per
share, and after deducting the estimated underwriting discount and offering
expenses. The primary purposes of the Offering are to obtain additional
capital, create a public market for the Company's Common Stock and facilitate
future access by the Company to public equity markets.

The Company intends to use a portion of the net proceeds to repay a note
payable issued in connection with the Pagecount acquisition in the principal
amount of $1.2 million, which bears interest at a rate of seven percent (7%)
per annum compounded monthly, and which is payable in full upon the Closing of
the Offering, and to pay the remaining balance of approximately $135,000 due
under the license agreement with ArcaMax, which payment is due and payable
within ten days of the completion of the Offering. In addition, in connection
with the acquisition of Global Bridges and the purchase of certain assets of
Revolutionary Software, the Company is required to pay a cash consideration of
$130,000 and $260,000, respectively, upon completion of the Offering. The
remainder of the net proceeds shall be used for general corporate purposes,
including working capital, capital expenditures, potential acquisitions and
promotional campaigns. The amounts actually expended by the Company for such
purposes may vary significantly and will depend on a number of factors,
including the amount of the Company's future revenue and cash generated by
operations and the other factors described under "Risk Factors." Accordingly,
the Company's management will retain broad discretion in the allocation of the
net proceeds of the Offering. A portion of the net proceeds may also be used
to acquire or invest in complementary businesses, technologies or product
offerings. In the ordinary course of business, the Company evaluates potential
acquisitions of such businesses, technologies and product offerings. However,
the Company has no current agreements or commitments with respect to any such
acquisitions. Pending such uses, the net proceeds of the Offering will be
invested in short-term, interest-bearing, investment grade securities. See
"Risk Factors--Risks Associated With Potential Acquisitions" and "Broad
Discretion In Use Of Proceeds."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock to date and does not anticipate paying any cash dividends on its capital
stock in the foreseeable future.

28
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1998 (i) on an actual basis; and (ii) on an as adjusted basis to
give effect to the assumed exercise of outstanding warrants to purchase
306,427 shares of Common Stock prior to the closing of the Offering for net
proceeds of $920,000, the issuance of 60,000 shares of Common Stock with an
aggregate fair value of $600,000 and the payment of $390,000 in cash, upon
completion of the Offering, pursuant to modifications of earn-outs in
connection with certain of the Company's acquisitions, the repayment of
approximately $1.3 million of notes payable related to an acquisition and a
license agreement and the sale of the 3,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $10.00 per share, after
deducting the underwriting discount and estimated offering expenses and the
application of the net proceeds therefrom.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Current portion of acquisition notes payable.............. $ 1,826 $ 537
Current portion of capital lease obligation............... 36 36
------- -------
$ 1,862 $ 573
======= =======
Acquisition notes payable, less current portion........... $ 990 $ 990
Capital lease obligations, less current portion........... 126 126
------- -------
1,116 1,116
Stockholders' equity:
Convertible preferred stock, $0.0001 par value; 1,000,000
shares authorized, actual; 5,000,000 shares authorized,
as adjusted; no shares issued and outstanding, actual
and as adjusted......................................... -- --
Common Stock, $0.0001 par value; 20,000,000 shares
authorized, actual and pro forma; 40,000,000 shares
authorized, as adjusted; 8,731,597 shares issued and
outstanding, actual; 12,098,024 shares issued and
outstanding, as adjusted(1)............................. 14,940 42,560
Deferred compensation.................................... (1,194) (1,194)
Accumulated deficit...................................... (9,964) (9,964)
------- -------
Total stockholders' equity.............................. 3,782 31,402
------- -------
Total capitalization................................... $ 4,898 $32,518
======= =======
</TABLE>
- --------

(1) Based on the number of shares outstanding as of September 30, 1998.
Excludes (i) 1,901,198 shares of Common Stock issuable upon the exercise
of options then outstanding with a weighted average exercise price of
$1.11 per share; (ii) 1,326,135 shares of Common Stock reserved for
issuance under the 1998 Plan, giving effect to the increase in the
aggregate number of shares reserved for issuance from 1,166,667 to
2,000,000 approved as of November 16, 1998; (iii) 300,000 shares of Common
Stock reserved for issuance under the Stock Purchase Plan; and
(iv) warrants to purchase 183,333 shares of Common Stock at an exercise
price of $10.00 per share. Shares issued and outstanding, as adjusted,
assumes (i) the exercise of outstanding warrants to purchase
306,427 shares of Common Stock prior to the closing of the Offering for
net proceeds of $920,000; (ii) the sale of the 3,000,000 shares of Common
Stock offered hereby, after deducting the underwriting discount and
estimated Offering expenses; and (iii) the issuance of 60,000 shares of
Common Stock with an aggregate fair value of $600,000 pursuant to
modifications of earn-outs in connection with certain of the Company's
acquisitions. See "Management--Benefit Plans" and Notes 4 and 9 of Notes
to the Company's Consolidated Financial Statements.

29
<PAGE>

DILUTION

The actual net tangible book value of the Company as of September 30, 1998
was approximately $(1.5 million) or $(0.17) per share of Common Stock. Actual
net tangible book value per share represents the amount of total actual
tangible assets less total actual liabilities, divided by the shares of Common
Stock outstanding as of September 30, 1998. After giving effect to the assumed
exercise of outstanding warrants to purchase 306,427 shares of Common Stock
prior to the closing of the Offering, the issuance and sale of the 3,000,000
shares of Common Stock offered hereby (after deducting the underwriting
discount and estimated offering expenses), the repayment of $1.3 million of
certain indebtedness associated with a certain acquisition and a license
agreement, the issuance of 60,000 shares of Common Stock with an aggregate
fair value of $600,000 and the payment of $390,000 in cash, upon completion of
the Offering, pursuant to modifications of earn-outs in connection with
certain of the Company's acquisitions, the Company's as adjusted net tangible
book value as of September 30, 1998 would have been $25.1 million, or $2.08
per share. This represents an immediate increase in as adjusted net tangible
book value of $2.25 per share to existing stockholders and an immediate
dilution of $7.92 per share to new investors. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $10.00
Actual net tangible book value per share as of September
30, 1998.................................................. $(0.17)
Increase per share attributable to new investors........... 2.25
------
As adjusted net tangible book value per share after the
Offering.................................................... 2.08
------
Dilution per share to new investors.......................... $ 7.92
======
</TABLE>

The following table sets forth, on a pro forma basis as of September 30,
1998, the difference between existing stockholders and the purchasers of
shares in the Offering (at an assumed initial public offering price of $10.00
per share and before deducting the underwriting discount and estimated
offering expenses) with respect to the number of shares purchased from the
Company, the total consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 9,098,024 75.20% $ 9,396,276 23.9% $ 1.03
New investors.......... 3,000,000 24.80% 30,000,000 76.1% $10.00
---------- ----- ----------- -----
Total................ 12,098,024 100.0% $39,396,276 100.0%
========== ===========
</TABLE>

The foregoing discussion and tables assume (i) no exercise of any stock
options outstanding as of September 30, 1998; (ii) the exercise of outstanding
warrants to purchase 306,427 shares of Common Stock for gross proceeds of
$1,020,000; (iii) the sale of the 3,000,000 shares of Common Stock offered
hereby; and (iv) the issuance of 60,000 shares of Common Stock with an
aggregate fair value of $600,000 pursuant to modifications of earn-outs in
connection with certain of the Company's acquisitions. As of September 30,
1998, there were (i) options outstanding to purchase a total of 1,901,198
shares of Common Stock with a weighted average exercise price of $1.11 per
share; (ii) 1,326,135 shares of Common Stock reserved for issuance under the
1998 Plan, giving effect to the increase in the aggregate number of shares
reserved for issuance pursuant to the 1998 Plan from 1,166,667 to 2,000,000
approved as of November 16, 1998; and (iii) 300,000 shares of Common Stock
reserved for issuance under the Stock Purchase Plan. Assuming the exercise of
these outstanding options, the as adjusted net tangible book value per share
after the Offering would be $1.95, and the dilution per share to new investors
would be $8.05. See "Risk Factors--Immediate and Substantial Dilution,"
"Capitalization," "Management--Benefit Plans" and Notes 4 and 9 of Notes to
the Company's Consolidated Financial Statements.

30
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data is qualified by reference
to, and should be read in conjunction with, the Company's Consolidated
Financial Statements and the Notes thereto and "Management's Discussion And
Analysis Of Financial Condition And Results Of Operations" appearing elsewhere
in this Prospectus. The selected historical consolidated statements of
operations data presented below for the period from April 16, 1996 (the
Company's inception) through December 31, 1996, for the year ended December
31, 1997 and for the nine months ended September 30, 1998 and the selected
historical consolidated balance sheet data at December 31, 1996 and 1997 and
at September 30, 1998 are derived from consolidated financial statements of
the Company that have been audited by Ernst & Young LLP, independent auditors,
included elsewhere in this Prospectus. The selected historical consolidated
statement of operations data for the nine months ended September 30, 1997 are
derived from unaudited consolidated financial statements of the Company
included elsewhere in this Prospectus. The unaudited consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Company's financial
position and results of operations for this period. The selected consolidated
pro forma statement of operations data for the nine months ended September 30,
1998, are derived from selected unaudited pro forma condensed consolidated
financial statements included elsewhere in this Prospectus. The consolidated
financial data for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998 or any other future period.

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1996 NINE MONTHS PRO FORMA
(INCEPTION) ENDED NINE MONTHS
THROUGH YEAR ENDED SEPTEMBER 30, ENDED
DECEMBER 31, DECEMBER 31, ---------------- SEPTEMBER 30,
1996 1997 1997 1998 1998
-------------- ------------ ------- ------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net revenue:
Electronic commerce.... $ -- $ 327 $ 59 $ 3,366 $ 3,575
Advertising............ -- 60 21 953 1,004
License fees and other. -- 454 341 546 575
------ ------- ------- ------- -------
Total net revenue..... -- 841 421 4,865 5,154
Cost of net revenue:
Cost of electronic
commerce.............. -- 171 72 1,966 1,966
Cost of license fees
and other............. -- 148 136 34 80
------ ------- ------- ------- -------
Total cost of net
revenue.............. -- 319 208 2,000 2,046
------ ------- ------- ------- -------
Gross profit........... -- 522 213 2,865 3,108
Operating expenses:
Operating and
development........... 266 1,150 879 2,558 2,581
Sales and marketing.... 24 292 171 1,570 1,575
General and
administrative........ 150 721 477 2,158 2,358
Purchased in-process
research and
development(1)........ -- -- -- 790 330
Amortization of
deferred compensation. -- 248 111 1,111 1,111
Amortization of
intangible assets..... -- -- -- 1,087 2,039
Non-recurring charges.. -- 1,243 1,243 -- --
------ ------- ------- ------- -------
Total operating
expenses............. 440 3,654 2,881 9,274 9,994
------ ------- ------- ------- -------
Loss from operations... (440) (3,132) (2,668) (6,409) (6,886)
Other income (expense),
net................... -- -- -- 17 (19)
------ ------- ------- ------- -------
Net loss............... $ (440) $(3,132) $(2,668) $(6,392) $(6,905)
====== ======= ======= ======= =======
Basic and diluted net
loss per share(2)..... $(0.89) $ (0.64) $ (0.57) $ (0.89) $ (0.92)
====== ======= ======= ======= =======
Number of shares used
in per share
calculation--basic and
diluted(2)............ 497 4,874 4,688 7,172 7,483
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 30,
1996 1997 1998
------ ------- -------------
CONSOLIDATED BALANCE
SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C>
Cash.................... $ 1 $ 6 $ 967
Working capital
(deficit).............. 156 (1,400) (3,215)
Total assets............ 705 782 10,415
Acquisition notes
payable, less current
portion................ -- -- 990
Capital lease
obligation, less
current portion........ -- -- 126
Total stockholders'
equity (deficit)....... 560 (873) 3,782
</TABLE>

(footnotes appear on the following page)

31
<PAGE>

- --------

(1) Purchased in-process research and development relates to the costs of in-
process research and development acquired by the Company in connection
with the acquisitions of Paralogic and Pagecount (pro forma only) as well
as the purchase of certain assets of Revolutionary Software. See Note 9
of Notes to the Company's Consolidated Financial Statements.

(2) See Note 1 of Notes to the Company's Consolidated Financial Statements for
an explanation of the determination of the number of shares used to compute
net loss per share and Note D of Notes to the Selected Unaudited Pro Forma
Condensed Consolidated Statements of Operation for an explanation of the
determination of the number of pro forma shares used to compute pro forma
net loss per share--basic and diluted.

32
<PAGE>

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

The following discussion and analysis of the financial condition and results
of operations of the Company should be read in conjunction with, and is
qualified in its entirety by, the more detailed information including the
"Selected Consolidated Financial Data" and the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from the results discussed in the forward-looking statements. Factors that may
cause or contribute to such differences include those discussed in "Risk
Factors," as well as those discussed elsewhere in this Prospectus.

OVERVIEW

Xoom.com is one of the fastest growing direct marketing companies on the
Internet. The Company attracts members to its community site with a variety of
free services, including homepages, e-mail, chat rooms, clip art and software
libraries and online greeting cards. Xoom.com members can also join topical
communities where they can exchange ideas and information. Upon registration,
members agree to receive periodic offers of products and services via e-mail.
These offerings are competitively priced and continuously updated, and include
computer software, computer accessories and peripherals, consumer electronics
and clip art on CD-ROM. New product offerings during the fourth quarter of
1998 will include a DVD movie club, gift items, health-related products and a
travel club. The Company does not expect such product offerings to have a
material effect on total net revenue until after the second quarter of 1999.
Xoom.com believes that its rapidly growing base of self-qualified members
provides the Company with highly attractive and effective electronic commerce
opportunities. In addition, the Company believes that its high levels of
traffic and online reach present an attractive platform for advertising.

The Company was incorporated in April 1996 and commenced offering products
for sale on its Web site in March 1997. From inception through December 1996,
the Company had no sales and its operating activities related primarily to
developing necessary computer infrastructure, recruiting personnel, raising
capital and initial planning and developing the Xoom.com site and operations.
For the period beginning with the operation of the Xoom.com site through
December 31, 1997, the Company continued these activities and focused on
building sales momentum, establishing relationships with manufacturers,
marketing the Xoom.com brand and establishing customer service and fulfillment
operations.

The Company generates net revenue from electronic commerce, primarily
through the use of direct e-mail marketing, licensing and the sale of
advertising on its Web site. Total net revenue was $841,000, $849,000,
$1.7 million and $2.3 million for the year ended December 31, 1997 and the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998,
respectively. The increase in total net revenue was primarily due to expansion
in Xoom.com's membership base, which resulted in increases in electronic
commerce revenue, Web-based advertising revenue and, to a lesser extent, an
increase in license fees and other. Cost of net revenue increased
substantially in absolute dollars and as a percentage of total net revenue
during the same period, reflecting the Company's increased sales volume. As
the Company has grown, its operating expenses have increased, and the Company
expects that its operating expenses will continue to increase as a result of
its acquisitions and in connection with its sales and marketing efforts, its
increased funding of site development, technology and operating
infrastructure, and the increased general and administrative staff needed to
support the Company's growth.

From inception through September 30, 1998, Xoom.com has generated total net
revenue of approximately $5.7 million. Over the past twelve months, quarterly
net revenue has increased from approximately $222,000 to $2.3 million. Since
January 1998, the number of members has grown from 100,000 to approximately
4.5 million as of November 13, 1998.

33
<PAGE>

experience. The Company has not achieved profitability on a quarterly or
annual basis to date, and the Company anticipates that it will incur net
losses for the foreseeable future. The extent of these losses will be
contingent, in part, on the amount and rates of growth in the Company's net
revenue from electronic commerce and advertising. The Company expects its
operating expenses to increase significantly, especially in the areas of sales
and marketing and brand promotion, and, as a result, it will need to generate
increased quarterly net revenue if profitability is to be achieved. The
Company believes that period-to-period comparisons of its operating results
are not meaningful and that the results for any period should not be relied
upon as an indication of future performance. To the extent that net revenue
does not grow at anticipated rates or that increases in its operating expenses
precede or are not subsequently followed by commensurate increases in net
revenue, or that the Company is unable to adjust operating expense levels
accordingly, the Company's business, results of operations and financial
condition will be materially and adversely affected. There can be no assurance
that the Company's operating losses will not increase in the future or that
the Company will ever achieve or sustain profitability. See "Risk Factors--
Limited Operating History; No Assurance Of Profitability; Anticipated Losses."

To date, the Company has entered into a number of business and technology
acquisitions, license arrangements and strategic alliances in order to build
its communities, provide community-specific content, generate additional
traffic, increase membership and establish additional sources of net revenue.
In March 1998, the Company acquired Paralogic, a chat service, for a purchase
price of approximately $3.0 million (consisting of 682,410 shares of Common
Stock with a fair value of $2.31 per share, $1.4 million of debt, and $61,000
of acquisition costs). Through its purchases of Global Bridges and certain
assets of Revolutionary Software in June 1998, the Company acquired Sitemail,
an HTML-based e-mail product. Global Bridges, which the Company purchased for
approximately $709,000 (consisting of 183,427 shares of Common Stock with a
fair value of $3.33 per share, $12,500 in cash, a note payable for $62,500 and
approximately $23,000 of acquisition costs), owned the exclusive selling
rights to Sitemail. Revolutionary Software, from which the Company purchased
certain assets for approximately $701,000 (consisting of 128,052 shares of
Common Stock with a fair value of $3.33 per share, $12,500 in cash and a note
payable for $262,500, along with certain earnout provisions), developed
Sitemail and had licensed it to Global Bridges. Also in June 1998, the Company
purchased an exclusive, perpetual license to use Greetings Online, an online
greeting card service, from ArcaMax for approximately $644,000 (consisting of
133,334 shares of Common Stock with a fair value of $3.33 per share, $20,000
in cash and a note payable for $180,000). Additionally, in July 1998, the
Company acquired Pagecount, a Web page counter and guestbook service, for
approximately $1.5 million (consisting of $200,000 in cash, a note payable for
$1.2 million and $60,000 of acquisition costs). In addition, certain of the
Company's acquisition agreements contain provisions that allow for the
issuance of additional shares of Common Stock or cash. Specifically, in
connection with the acquisition of Global Bridges, the Company has issued
17,304 shares of Common Stock. In addition, upon the completion of the
Offering, the Company is required to issue Common Stock at the Offering price
with an aggregate value of $200,000, together with $130,000 in cash. In
connection with the Company's purchase of certain assets of Revolutionary
Software, the Company has issued 34,608 shares of Common Stock. In addition,
upon the completion of the Offering, the Company is required to issue Common
Stock at the Offering price with an aggregate value of $400,000, together with
an additional cash consideration of $260,000. As part of the license agreement
entered into with ArcaMax, the note payable for $180,000 will be due within
ten days of the completion of the Offering. During the first nine months of
1998, the Company expensed $790,000 for purchased in-process research and
development and approximately $1.1 million for the amortization of goodwill
and purchased technology. Because most Internet business acquisitions involve
the purchase of significant amounts of intangible assets, acquisitions of such
businesses also result in goodwill and purchased technology and significant
charges for purchased in-process research and development. See "Business--
Acquisitions And Strategic Alliances."

The Company intends to continue making acquisitions to increase reach and
membership and to seek additional strategic alliances with content and
distribution partners, including alliances that create co-branded sites
through which Xoom.com markets its services. Acquisitions carry numerous risks
and uncertainties, including difficulties in the integration of operations,
personnel, technologies, products and the information systems of the acquired
companies, diversion of management's attention from other business concerns,
risks of entering geographic and business markets in which the Company has no
or limited prior experience and potential

34
<PAGE>

loss of key employees of acquired organizations. No assurance can be given as
to the ability of the Company to successfully integrate any businesses,
products, technologies or personnel that might be acquired in the future, and
the failure of the Company to do so could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, there can be no assurance that the Company will be successful in
identifying potential acquisition candidates. See "Risk Factors--Risks
Associated With Acquisitions."

International sales comprised approximately 30% and 29% of total net revenue
for the year ended December 31, 1997, and the nine months ended September 30,
1998, respectively. This consisted of $252,000 and $1.4 million in net
revenues, respectively, during such periods. As of September 30, 1998, the
Company had approximately 2.3 million members outside of the United States.
The Company intends to enter into partnerships with companies in local markets
in order to increase its international presence and sales. There can be no
assurance, however, that acceptance of the Internet or the Company's community
model will continue to expand significantly in any international markets. If
net revenue from international operations is not adequate to cover the
investments in such activities, the Company's business, results of operations
and financial condition could be materially and adversely affected. There are
also certain risks inherent in doing business on an international level, such
as unexpected changes in regulatory requirements, trade barriers, difficulties
in staffing and managing foreign operations, fluctuations in currency exchange
rates, longer payment cycles in general, problems in collecting accounts
receivable, difficulty in enforcing contracts, political and economic
instability, seasonal reductions in business activity in certain other parts
of the world and potentially adverse tax consequences. There can be no
assurance that one or more of such factors will not have a material adverse
effect on the Company's future international operations and, consequently, on
the Company's business, results of operations and financial condition. See
"Risk Factors--Risks Associated With International Operations And Expansion."

The Company has recorded deferred stock compensation charges of $0, $551,000
and $2.0 million during the period from April 16, 1996 through December 31,
1996 (the "Inception Period"), the year ended December 31, 1997, and for the
nine months ended September 30, 1998, respectively, for the difference between
the exercise price and the deemed fair value of certain stock options granted
by the Company to its employees. Amortization of deferred stock compensation
expense of $248,000 and $1.1 million was recorded in the year ended December
31, 1997, and the nine months ended September 30, 1998, respectively. The
Company expects to record amortization expenses related to these deferred
stock compensation charges of approximately $295,000, $580,000, $225,000,
$80,000 and $20,000 in the fourth quarter ended December 31, 1998 and the
years ended December 31, 1999, 2000, 2001 and 2002, respectively. There can be
no assurance, however, that additional charges will not accrue for other
reasons or that the Company's current estimates of such charges will prove
accurate, either of which events could have a material adverse effect on the
Company's business, results of operations and financial condition.

The Company will need to increase its inventory levels in the future to
support a wider base of electronic commerce products and to take advantage of
volume purchase discounts. The Company contracts with a third party
warehousing and order fulfillment company to stock inventory and ship products
directly to customers. The Company takes title to this inventory, has
responsibility for this inventory, and records inventory on its balance sheet
until the final shipment to customers or other disposition of the inventory.
There are inherent risks and costs in stocking inventory and coordinating with
a third party warehousing and order fulfillment company, including but not
limited to, product obsolescence, excess inventory, inventory shortages
resulting in unfulfilled orders, which could materially adversely affect
operating results in the future. See "Risk Factors--Risk Of Reliance On
Internally Developed Systems" and "--Reliance On Certain Vendors."

RESULTS OF OPERATIONS

From inception through the first quarter of 1997, the Company's operations
were limited and consisted primarily of start-up activities. Accordingly, the
Company believes that year-to-year comparisons of 1996 against 1997, and
period-to-period comparisons of the nine months ended September 30, 1998
against the comparable period in 1997, are not meaningful.

35
<PAGE>

The following table presents certain consolidated statement of operations
data for the periods indicated as a percentage of total net revenue. From
inception through December 31, 1996, the Company had no net revenue as
operations were limited and consisted primarily of start-up activities.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ------------------
1997 1997 1998
------------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C>
Net revenue:
Electronic commerce......................... 38.9 % 14.1 % 69.2 %
Advertising................................. 7.1 5.0 19.6
License fees and other...................... 54.0 80.9 11.2
------ ------ ------
Total net revenue............................ 100.0 100.0 100.0
Cost of net revenue(1):
Cost of electronic commerce................. 20.3 17.2 40.4
Cost of license fees and other.............. 17.6 32.3 0.7
------ ------ ------
Cost of net revenue.......................... 37.9 49.5 41.1
------ ------ ------
Gross profit................................. 62.1 50.5 58.9
Operating expenses:
Operating and development................... 136.8 208.7 52.6
Sales and marketing......................... 34.7 40.6 32.3
General and administrative.................. 85.7 113.4 44.4
Purchased in-process research and
development................................ -- -- 16.2
Amortization of deferred compensation....... 29.5 26.3 22.8
Amortization of intangible assets........... -- -- 22.3
Non-recurring charges....................... 147.8 295.2 --
------ ------ ------
Total operating expenses..................... 434.5 684.2 190.6
------ ------ ------
Loss from operations......................... (372.4) (633.7) (131.7)
Other income, net............................ -- -- 0.3
------ ------ ------
Net loss..................................... (372.4)% (633.7)% (131.4)%
====== ====== ======
</TABLE>
- --------
(1) There are no material costs of advertising revenue.

Net Revenue

The Company began generating net revenue in the first quarter of 1997. The
Company's total net revenue increased from $421,000 in the nine months ended
September 30, 1997 to $4.9 million in the nine months ended
September 30, 1998, and was $841,000 for the year ended December 31, 1997. Net
revenue is composed of electronic commerce product sales (which includes
outbound shipping and handling fees) advertising revenue and licensing fees
and other. The increase in net revenue was primarily due to the expansion of
the Company's membership base, increased frequency of e-mail offerings and
broader product offerings, which resulted in an increase in product sales
through electronic commerce, an increase in web-based advertising as the
Company was able to leverage its Web site traffic, and to a lesser extent an
increase in license fees. One licensing customer accounted for 12% of total
net revenue for the year ended December 31, 1997 and no customer accounted for
more than 10% of total net revenue for the nine months ended September 30,
1998.

Electronic Commerce. Electronic commerce revenue increased from $59,000 in
the nine months ended September 30, 1997 to $3.4 million in the nine months
ended September 30, 1998, and was $327,000 for the year ended December 31,
1997. The increase in net revenue was primarily due to the expansion of the
Company's membership base, which resulted in an increase in product sales, as
well as expansion of the breadth

36
<PAGE>

of products offered. The percentage of the Company's total net revenue
attributable to electronic commerce revenue increased from 14.1% in the nine
months ended September 30, 1997 to 69.2% in the nine months September 30,
1998, and was 38.9% of total net revenue for the year ended December 31, 1997.
The Company expects electronic commerce revenue to continue to account for a
large percentage of net revenue as it expands its product offerings and
increases its direct marketing response rates through better member
demographic information and targeting of product offers.

Advertising. Advertising revenue increased from $21,000 in the nine months
ended September 30, 1997 to $953,000 in the nine months ended September 30,
1998, and was $60,000 for the year ended December 31, 1997. The increase in
advertising revenue is primarily a result of the increase in the Company's
membership, site traffic and expansion of its advertising sales force. The
percentage of the Company's total net revenue attributable to advertising
revenue increased from 5.0% in the nine months ended September 30, 1997 to
19.6% in the nine months ended September 30, 1998, and was 7.1% of total net
revenue for the year ended December 31, 1997.

License Fees and Other. License fees and other revenue increased from
$341,000 in the nine months ended September 30, 1997 to $546,000 in the nine
months ended September 30, 1998, and was $454,000 for the year ended
December 31, 1997. The increase in license fees and other revenue is primarily
a result of additional clip art and other utilities the Company was able to
license to third parties. The percentage of the Company's total net revenue
attributable to license fees decreased from 80.9% in the nine months ended
September 30, 1997 to 11.2% in the nine months ended September 30, 1998, and
was 54.0% of total net revenue for the year ended December 31, 1997. As the
Company expands its electronic commerce and advertising revenue, license fees
and other revenue will continue to represent a smaller percentage of net
revenue.

Cost of Net Revenue

Gross margins increased from 50.5% in the nine months ended September 30,
1997 to 58.9% in the nine months ended September 30, 1998, as a result of the
increase in advertising and electronic commerce revenue as a percentage of
total net revenue. Gross margins were 62.1% for the year ended December 31,
1997. There are no material costs of net revenue associated with advertising.

Electronic Commerce. Cost of electronic commerce consists primarily of the
costs of merchandise sold to customers, credit card commissions, product
fulfillment, and outbound shipping and handling costs. Cost of electronic
commerce was $171,000, $72,000 and $2.0 million for the year ended December
31, 1997, and the nine months ended September 30, 1997 and 1998, respectively.
As a percentage of electronic commerce revenue, cost of electronic commerce
was 52.3%, 122.0% and 58.4% for the year ended December 31, 1997, and the nine
months ended September 30, 1997 and 1998, respectively. Cost of electronic
commerce as a percentage of net revenue was higher in the first nine months of
1997 when compared to the full year ended December 31, 1997 and the nine
months ended September 30, 1998 due to the fact amortization of prepaid
royalties was recorded in the first and second quarters of 1997 on a product
that was discontinued late in the second quarter of 1997; at the time the
product was discontinued, the Company wrote off the remaining prepaid royalty
balance and accordingly, no amortization was recorded in the second half of
1997 or during the nine months ended September 30, 1998.

License Fees and Other. Cost of license fees and other consists primarily of
royalties on net revenue of license fees. Cost of license fees were $148,000,
$136,000 and $34,000 for the year ended December 31, 1997, and the nine months
ended September 30, 1997 and 1998, respectively. As a percentage of license
fees and other, cost of license fees and other were 32.6%, 39.9% and 6.2% for
the year ended December 31, 1997, and the nine months ended September 30, 1997
and 1998, respectively. Cost of license fees and other for the nine months
ended September 30, 1997 included $81,000 in amortization of prepaid royalties
related to a product which was subsequently discontinued in 1997.

The Company believes that offering its customers attractive prices is an
essential component of its business strategy. The Company may in the future
increase the discounts it offers its customers and may otherwise alter

37
<PAGE>

its pricing structures and policies. The Company anticipates that any increase
in discounts or price reductions will reduce gross margins below those
experienced for the year ended December 31, 1997 and the nine months ended
September 30, 1998.

Gross margins will be impacted by the mix of products sold by the Company,
and the overall mix of electronic commerce revenue, advertising revenue and
license fees. The Company typically recognizes higher gross margins on
advertising revenue and license fees and other which are expected to comprise
a lower percentage of total net revenue in the future. Therefore, the Company
expects shifts in the mix of sales will adversely impact the Company's overall
gross margin and could materially adversely impact the Company's business,
results of operations and financial condition.

Operating and Development Expenses. Operating and development expenses
consist principally of payroll and related expenses for development,
editorial, and network operations personnel and consultants, costs related to
systems infrastructure including Web site hosting, and costs of acquired
content to enhance the Company's Web site. Operating and development expenses
increased from $879,000 in the nine months ended September 30, 1997 to $2.6
million in the nine months ended September 30, 1998, and increased from
$266,000 in the Inception Period in 1996 to $1.2 million in 1997. From
inception to the quarter ended September 30, 1997 the Company incurred
approximately $300,000 in costs relating to the development of a home office
software product, apart from its Web site, which was subsequently abandoned
due to low sales volume. From June 30, 1997 the absolute dollar increases from
quarter to quarter in operating and development expenses were primarily
attributable to increases in the number of personnel and associated costs
related to enhancing the functionality and content of the Company's Web site.
Operating and development costs decreased as a percentage of total net revenue
from 208.7% in the nine months ended September 30, 1997 to 52.6% in the nine
months ended September 30, 1998, and represented 136.8% for the year ended
December 31, 1997. The Company believes operating costs will increase
significantly in the future, especially in regards to Web site hosting costs,
as its membership grows thus requiring additional bandwidth to support the
many free services offered to members. The Company believes that significant
investments in its Web site are required to remain competitive. Therefore, the
Company expects that its operating and development expenses will continue to
increase in absolute dollars for the foreseeable future.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of payroll and related expenses for personnel engaged in marketing, selling,
licensing and order support, advertising and promotional expenditures. Sales
and marketing expenses increased from $171,000 in the nine months ended
September 30, 1997 to $1.6 million in the nine months ended September 30,
1998, and increased from $24,000 in the Inception Period in 1996 to $292,000
in 1997. The absolute dollar increases from period to period in sales and
marketing expenses were primarily attributable to increased personnel and
related expenses required to implement the Company's marketing strategy and
increased public relations, advertising and other promotional expenses. Sales
and marketing costs decreased as a percentage of total net revenue from 40.6%
in the nine months ended September 30, 1997 to 32.3% in the nine months ended
September 30, 1998, and represented 34.7% for the year ended December 31,
1997. Sales and marketing expenses as a percentage of net revenues have
decreased because of the growth in net revenue. The Company expects to
continue hiring additional personnel and to pursue a branding and marketing
campaign. Therefore, it expects marketing and sales expenses to increase
significantly in absolute dollars.

General and Administrative Expenses. General and administrative expenses
consist primarily of payroll and related costs for general corporate
functions, including finance, accounting, business development, facilities and
administration, legal, and fees for professional services and directors.
General and administrative expenses increased from $477,000 in the nine months
ended September 30, 1997 to $2.2 million in the nine months ended September
30, 1998, and increased from $150,000 in the Inception Period in 1996 to
$721,000 in 1997. The absolute dollar increases from period to period in
general and administrative expenses were primarily due to increases in the
number of general and administrative personnel, professional services,
directors fees and facility expenses to support the growth of the Company's
operations. General and administrative expenses decreased as a percentage of
total net revenue from 113.4% in the nine months ended September 30, 1997 to
44.4% in the nine months ended September 30, 1998, and represented 85.7% for
the year ended December 31, 1997. General

38
<PAGE>

and administrative expenses as a percentage of net revenues have decreased
because of the growth in net revenue. The Company expects general and
administrative expenses to increase in absolute dollars in future periods as
the Company expands its staff, incurs additional costs related to its
operations, and is subject to the requirements of being a publicly traded
company.

Purchased In-Process Research and Development. For the nine months ended
September 30, 1998, the Company recognized the cost of purchased in-process
research and development of $330,000 in connection with the acquisition of
Paralogic, $330,000 in connection with the purchase of certain assets of
Revolutionary Software and $130,000 in connection with the acquisition of
Pagecount. The Company did not recognize such charges for the Inception Period
or the year ended December 31, 1997. See Note 9 of Notes to Consolidated
Financial Statements.

In connection with the Paralogic acquisition, the Company acquired
Paralogic's technology, ParaChat. ParaChat is designed to provide Web sites
with an option to offer chat technology without requiring Web site hosts to
buy the software, maintain or upgrade the software, or learn any additional
skills beyond what is necessary to construct a Web site. The chat software is
maintained on ParaChat's server and the Web site host is provided bits of
source code or "tags" that are incorporated into the Web site. The tags
interface via the Internet with the ParaChat server, and thus provide the Web
site with chat capabilities. In exchange for the free service, the Web site
host allows banner advertising on its site.

As of the time of acquisition, the ParaChat technology was not completely
functional as a commercially viable product. The nature, amount and timing of
the remaining estimated efforts necessary to develop the acquired incomplete
ParaChat technology into a commercially viable product included:

(i) Remote Database Authentication: The chat server used a very simple
flat-file database to maintain authentication information. In order to
allow users to control their own password and user information, it was
necessary to design a protocol using the Java programming language wherein
the chat server could remotely interrogate an external Oracle database
through the Internet to retrieve and modify information relating to the
user and the chat room (e.g., the topic of discussion).

(ii) Creation of New Chat Client: The chat software is comprised of two
parts: the client and the server. Although the server claimed compatibility
with Internet Standard RFC1459 (a standard message format for Internet
relay chat, allowing usage on multiple platforms), this feature was not
usable on a commercial basis, because the server functioned only with the
limited ParaChat client, which did not allow for configuration or
reconfiguration by the end-user to match the look and feel of an existing
Web site. In order to allow deployment on an existing site, it was
necessary to create an entirely new client that consisted of various
building blocks which could be composed by the end-user using HTML. These
building blocks would then use a Java-based communication protocol known as
Inter-Applet-Communication (IAC) to communicate with each other and
coordinate communication with the chat server. Since IAC is not well
defined, and differs between browser implementations, a substantial amount
of additional software development was required, particularly because no
comparable client exists in the market today.

(iii) Control Interface: The acquired ParaChat network did not allow users
to control or administer their chat room in any way (e.g., eject abusive
users, close the chat room or even specify a discussion topic). The
enhancements necessary to make these features available, and to allow them
to be maintained and administered via the central authentication database
(also still under development), were complex and required significant
additional development.

(iv) Advances in Browser Technology: In addition to the above modifications
and other maintenance modifications and bug fixes, the rapid advances in
Web browser technology implied continuous implementation of new features to
exploit new browser technologies.

As of the date of the technology's valuation, the Company estimated that 55%
of the research and development effort had been completed at the date of
acquisition and expected the remaining research and development efforts
relating to the completion of the ParaChat technology to require approximately
six months

39
<PAGE>

of effort from the date of valuation through its anticipated release date of
September 1, 1998. It was estimated by Company management that three full-time
engineers would be required to complete the in-process projects (one full time
engineer for six months to work on the external database connectivity efforts,
one full time engineer for six months to work on the client layout efforts,
and one full time engineer for six months to work on the management and
control interface efforts). Accordingly, it was determined that total
estimated research and development costs-to-complete for the ParaChat in-
process project were $112,500. The Company completed the project by the
scheduled date and the actual costs of completion were not materially
different than estimated.

As of the date of valuation, the Company expected the benefit of the
acquired project to begin immediately after the estimated completion date. The
Company expected that the in-process project would be developed to
technological feasibility concurrent with the expected September 1998 release
date. The Company has demonstrated the ability to implement the on-going
research and development on time and on budget. If the in-process projects
were not successfully completed, the impact on operations would have been
lower revenue than projected. Revenue would be lower than anticipated due to
(i) a reduction in the number of new members and e-commerce customers as a
result of not offering a chat service, and (ii) not generating additional
advertising inventory as a result of not generating the planned chat
advertising impressions.

The technology that the Company acquired from Revolutionary Software was a
web-based e-mail technology known as SiteMail. This in-process Web-based e-
mail technology (similar to Microsoft Corporation's HotMail) is designed to
allow users to receive and send e-mail through the Internet using a web
browser. Since SiteMail is Web-based, it will allow for the integration of e-
mail functionality into Web sites and will be accessible by any Web-connected
device anywhere in the world. Furthermore, by integrating e-mail into a
specific site, it forces the subscriber to visit that site to access e-mail,
thereby increasing traffic. In addition, when users apply for e-mail accounts
at Web sites offering SiteMail, they are given the domain name of that Web
site or company. The personalization of the domain name in an e-mail address
has become an innovative way of promoting a company's name or web site.

As of the date of acquisition, SiteMail was in the alpha testing stage of
development and required the resolution of certain scalability technological
hurdles in order to complete the technology. In addition to the scalability
issues, the following functionality requirements also needed to be addressed
by on-going research and development efforts: (i) improving the user
interface; (ii) connecting the e-mail server with external databases; (iii)
completing spam detection and filtering functions; and (iv) completing
security enhancements for Unix Internet applications.

The Company estimated that approximately 50% of the research and development
effort had been completed at the date of acquisition and expected the
remaining research and development efforts relating to the completion of the
SiteMail technology to continue from the date of acquisition through an
anticipated release date of November 1998. The remaining development effort
was estimated to require approximately 4.5 months of engineering effort.
Company management estimated that 3.5 full-time developers would be required
to complete this project. The total cost of remaining development was
estimated to be approximately $98,000. To date, the Company does not expect
the cost to complete the in-process SiteMail project to be materially
different than what was estimated, and expects the project to be completed
within the estimated timeframe.

As of the date of valuation, the Company expected the benefit of the
acquired in-process project to begin immediately after the estimated
completion date. If the in-process project is not successfully completed, the
impact on operations would be lower revenue than projected. Revenue would be
lower than anticipated due to (i) a reduction in the number of new members and
e-commerce customers as a result of not offering an e-mail service, and (ii)
not generating additional advertising inventory as a result of not generating
planned e-mail advertising impressions.

Pagecount, Inc.

In connection with the Pagecount acquisition, the Company acquired a web
page counter product, titled Pagecount. This product is a banner page counter
that tracks the number of visitors that view a member's site. It

40
<PAGE>

further breaks down impression statistics, or page views by day, date, and
time. Other statistics include a list of locations from where the requests
originated and the host names of up to 100 visitors. The software is
maintained on the Pagecount server and tags are integrated into the web site
which interface with the Pagecount server. In exchange for the use of the
Pagecount service, a banner advertisement may be placed on each counter image.

Specifically, the nature, amount and timing of the remaining estimated
efforts necessary to develop the acquired incomplete Pagecount technology into
a commercially viable product include:

As of the date of the transaction, Pagecount was in the market research and
coding stage of development and required the completion of certain engineering
technological hurdles in order to complete the technology. Specifically,
Pagecount was not yet able to handle large volumes and was only able to
maintain statistical information for small members experiencing low levels of
traffic. In addition, Pagecount did not have an advertising delivery
capability and, historically, advertisements had to be superimposed onto the
web site by a human operator. This is a very inefficient method of placing
advertisements onto web sites and as volume increases it would be impossible
to maintain the advertising inventory. At the date of valuation, Pagecount was
in development on an advertising delivery system which would maximize the
advertising inventory being generated. Furthermore, additional development
will be required to integrate the Pagecount technology into the Company's
infrastructure in order for it to be compatible with the Company's network.

Ultimately the most significant research and development efforts related to
the remaining engineering of the Pagecount server to permit (i) advertisers in
the network access to industry-standard reports, (ii) ads to be placed into
the network using industry standard delivery software, and (iii) users to
attain enhanced reporting and possibly, credit for having displayed a large
number of banners (perhaps as a banner exchange offering).

The Company estimated that approximately 55% of the research and development
effort had been completed at the date of acquisition and expects the remaining
research and development efforts relating to the completion of the Pagecount
technology to continue from the date of acquisition through its anticipated
release date of mid-December 1998. The remaining development effort at the
date of acquisition was estimated to require approximately five months of
engineering effort. It was estimated by Company management that 2.5 full-time
developers would be required to complete this project. The total estimated
remaining development effort equates to a total cost to complete of
approximately $78,000. Additionally, to date, the Company does not expect the
cost to complete the in-process Pagecount project to be materially different
than what was estimated.

As of the date of valuation, the Company expects the benefit of the acquired
in-process project to begin immediately after the estimated completion date.
The Company expects the in-process project will be developed to technological
feasibility concurrent with the expected mid-December 1998 release date. If
the in-process projects were not successfully completed, the impact on
operations would be lower revenue than projected. Revenue would be lower than
anticipated due to (i) not obtaining new Company members and e-commerce
customers as a result of not offering a page counter service, and (ii) not
generating additional advertising inventory as a result of not generating the
planned page counter advertising impressions.

Amortization of Deferred Compensation. Deferred compensation expense
reflects the amortization of stock compensation charges resulting from stock
options and restricted stock purchase agreements. Stock compensation charges
were $248,000, $79,000, $728,000 and $304,000 for the year ended December 31,
1997, and the quarters ended March 31, 1998, June 30, 1998 and September 30,
1998, respectively. The increase in the quarter ended June 30, 1998 is
primarily due to the modification of certain options which required the
Company to accelerate the amortization of the related deferred compensation.

Amortization of Intangible Assets. Amortization of intangible assets totaled
$1.1 million for the nine months ended September 30, 1998. This amount
represents amortization of intangible assets and goodwill resulting from the
Company's acquisitions of Paralogic, Global Bridges and Pagecount and the
purchase of certain assets of Revolutionary Software, amortized over 24
months.

41
<PAGE>

The Company has determined the appropriateness of two-year estimated useful
lives related to the intangible assets based on general and specific analysis.
In general, the Internet is characterized by rapid technological change,
changes in users and customer requirements and preferences, frequent new
product and service introductions and the emergence of new industry standards
and practices.

The market for community-based direct selling channels on the Internet is
new and rapidly evolving and competition for members, consumers, visitors and
advertisers is intense. In addition, the Company attracts members to its web
site with a variety of free services, including home pages, e-mail, chat
rooms, clip art and software libraries, online greeting cards and page
counters. In order to continue attracting members using these various methods,
the free services must be constantly updated and improved.

With respect to the purchased technology associated with all business and
technology acquisitions, the Company considered the effects of obsolescence,
demand, competition, and other economic factors. Due to the rapid
technological change involved in the Internet, the Company estimated that the
intangible assets relating to the purchased technology would be replaced by
new technologies within a two-year period.

With respect to the goodwill associated with all of the acquisitions, the
Company considered the effects of obsolescence, demand, competition, other
economic factors and expected actions of competitors and others. Based on
these considerations, the Company determined the positive effect of the
acquisitions, and therefore the life of the goodwill, to be two years. See
"Risk Factors--Rapid Technological Change," "--Intense Competition" and "--
Risks Associated With Acquisitions."

With respect to the intangible assets associated with Global Bridges,
Pagecount, Revolutionary Software, and ArcaMax, the Company considered the
competition for users of electronic mail, web page counters, online greeting
card services and the fact that the electronic mail and online greeting card
services are provided free by the Company to all members. The Company expects
to generate revenue from advertising and direct marketing to such users. In
addition, the competition for these users is intense and the Company expects
that within two years new technologies will be developed by the Company or its
competitors that will render the existing products obsolete. The obsolescence
of the Company's existing technologies, without the introduction of new
products, could result in a loss of members. As a result, the Company
determined the positive effect of the Global Bridges, Pagecount, Revolutionary
Software and ArcaMax transactions, and therefore the life of intangible
assets, to be two years. See "Risk Factors--Rapid Technological Change," "--
Intense Competition" and "--Risks Associated With Acquisitions."

Non-recurring Charges. Non-recurring charges totaled approximately $1.2
million in the year ended December 31, 1997, consisting of a $243,000 write-
off of costs associated with a discontinued product, and a $1.0 million
provision for a legal dispute for a copyright infringement claim from
Imageline relating to certain clip art images which the Company had licensed
from an unrelated third party. This litigation might subject the Company to
significant liability for damages and might result in invalidation of the
Company's proprietary rights and even if not meritorious, could be time
consuming and expensive to defend and could result in the diversion of
management time and attention, any of which might have a material adverse
impact on the Company's business, results of operations, cash flows and
financial condition. See "Risk Factors--Legal Proceedings," "Business--Legal
Proceedings" and Note 6 of Notes to Consolidated Financial Statements.

Income Taxes. There was no provision for federal or state income taxes for
any period as the Company has incurred operating losses. As of September 30,
1998, the Company had net operating loss carryforwards for federal income tax
purposes of approximately $3.5 million. There can be no assurance that the
Company will realize the benefit of the net operating loss carryforwards. The
federal net operating loss carryforwards will expire at various dates
beginning in the fiscal year 2011 through 2012 if not utilized. Due to the
"change of ownership" provisions of the Internal Revenue Code, the
availability of the Company's net operating loss and credit carryforwards may
be subject to an annual limitation against taxable income in future periods if
a change in ownership of more than 50% of the value of the Company's stock
should occur over a three year period, which could substantially limit the
eventual tax utilization of these carryforwards. See Note 3 of Notes to
Consolidated Financial Statements.

42
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following tables present certain consolidated statements of operations
data for the Company's seven most recent quarters ended September 30, 1998 in
dollars and as a percentage of net revenue. In management's opinion, this
unaudited information has been prepared on the same basis as the audited
annual financial statements and includes all adjustments (consisting only of
normal recurring adjustments) necessary for fair presentation of the unaudited
information for the quarters presented. This information should be read in
conjunction with the consolidated financial statements, including the notes
thereto, included elsewhere herein. The results of operations for any quarter
are not necessarily indicative of results that may be expected for any
subsequent periods.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1997 1997 1997 1997 1998 1998 1998
-------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue:
Electronic commerce.... $ 9 $ 12 $ 38 $ 268 $ 677 $ 1,157 $ 1,532
Advertising............ -- 7 14 39 83 272 598
License fees and other. 20 151 170 113 89 287 170
----- ----- ------- ----- ------- ------- -------
Total net revenue...... 29 170 222 420 849 1,716 2,300
----- ----- ------- ----- ------- ------- -------
Cost of net revenue(1):
Cost of electronic
commerce.............. 4 49 19 99 278 621 1,067
Cost of license fees
and other............. 82 23 31 12 8 19 7
----- ----- ------- ----- ------- ------- -------
Total cost of net
revenue............... 86 72 50 111 286 640 1,074
----- ----- ------- ----- ------- ------- -------
Gross profit............ (57) 98 172 309 563 1,076 1,226
Operating expenses:
Operating and
development........... 397 350 132 271 576 773 1,209
Sales and marketing.... 37 83 51 121 262 455 853
General and
administrative........ 152 130 195 244 316 783 1,059
Purchased in-process
research and
development........... -- -- -- -- 330 330 130
Amortization of
deferred compensation. 5 6 100 137 79 728 304
Amortization of
intangible assets..... -- -- -- -- -- 346 741
Non-recurring charges.. -- 243 1,000 -- -- -- --
----- ----- ------- ----- ------- ------- -------
Total operating
expenses.............. 591 812 1,478 773 1,563 3,415 4,296
----- ----- ------- ----- ------- ------- -------
Loss from operations... (648) (714) (1,306) (464) (1,000) (2,339) (3,070)
Other income, net...... -- -- -- -- -- -- 17
----- ----- ------- ----- ------- ------- -------
Net loss................ $(648) $(714) $(1,306) $(464) $(1,000) $(2,339) $(3,053)
===== ===== ======= ===== ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENT OF NET REVENUE THREE MONTHS ENDED
-----------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1997 1997 1997 1997 1998 1998 1998
-------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue:
Electronic commerce.... 31.0 % 7.1 % 17.1 % 63.8 % 79.7 % 67.4 % 66.6 %
Advertising............ -- 4.1 6.3 9.3 9.8 15.9 26.0
License fees and other. 69.0 88.8 76.6 26.9 10.5 16.7 7.4
-------- ------ ------ ------ ------ ------ ------
Total net revenue...... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
-------- ------ ------ ------ ------ ------ ------
Cost of net revenue(1):
Cost of electronic
commerce.............. 13.8 28.9 8.6 23.5 32.8 36.2 46.4
Cost of license fees
and other............. 282.8 13.5 13.9 2.9 0.9 1.1 0.3
-------- ------ ------ ------ ------ ------ ------
Total cost of net
revenue............... 296.6 42.4 22.5 26.4 33.7 37.3 46.7
-------- ------ ------ ------ ------ ------ ------
Gross profit............ (196.6) 57.6 77.5 73.6 66.3 62.7 53.3
Operating expenses:
Operating and
development........... 1,369.0 205.9 59.5 64.6 67.8 45.0 52.6
Sales and marketing.... 127.6 48.8 23.0 28.8 30.9 26.5 37.1
General and
administrative........ 524.1 76.5 87.8 58.1 37.2 45.7 46.0
Purchased in-process
research and
development........... -- -- -- -- 38.9 19.2 5.7
Amortization of
deferred compensation. 17.2 3.5 45.0 32.6 9.3 42.4 13.2
Amortization of
intangible assets..... -- -- -- -- -- 20.2 32.2
Non-recurring charges.. -- 142.9 450.5 -- -- -- --
-------- ------ ------ ------ ------ ------ ------
Total operating
expenses.............. 2,037.9 477.6 665.8 184.1 184.1 199.0 186.8
-------- ------ ------ ------ ------ ------ ------
Loss from operations... (2,234.5) (420.0) (588.3) (110.5) (117.8) (136.3) (133.5)
Other income, net...... -- -- -- -- -- -- 0.7
-------- ------ ------ ------ ------ ------ ------
Net loss................ (2,234.5)% (420.0)% (588.3)% (110.5)% (117.8)% (136.3)% (132.8)%
======== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
(1) There are no material costs of advertising revenue.

43
<PAGE>

The Company's operating expenses have increased significantly in absolute
dollar amounts in each quarter during 1996 and 1997 and in the first three
quarters of 1998 as the Company has transitioned from the development stage to
the commercialization of its services and products and expansion of its
business. The Company expects operating expenses will continue to increase in
the future as the Company continues to seek to expand its business. To the
extent that these expenses are not accompanied by an increase in net revenue,
the Company's business, results of operations and financial condition could be
materially adversely affected.

The Company expects operating results to fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of the
Company's control. These factors include demand for the products the Company
sells through its Web site, consumers' acceptance of electronic commerce and,
in particular, direct e-mail marketing as a medium for the purchase of goods
and services, demand for Web-based advertising, advertisers' market acceptance
of the Web as an advertising medium, the level of traffic on the Xoom.com
site, the budgeting cycles of advertisers, the amount and timing of capital
expenditures and other costs relating to the expansion of the Company's
operations, the introduction of new or enhanced services by the Company or its
competitors, the timing and number of new hires, the availability of desirable
products and services for sale through the Company's Web site, the accuracy of
the Company's predictions regarding optimal inventory levels for products,
pricing changes for Web-based advertising as a result of competition or
otherwise, the loss of a key advertising contract or relationship by the
Company, changes in the Company's pricing policy or those of its competitors,
the mix of products, services and advertisements sold by the Company,
engineering or development fees that may be paid in connection with adding new
Web site development and publishing tools, technical difficulties with the
Xoom.com site, incurrence of costs relating to future acquisitions, general
economic conditions, and economic conditions specific to the Internet or all
or a portion of the technology market. As a strategic response to changes in
the competitive environment, the Company may from time to time make certain
pricing, service or marketing decisions or pursue business combinations that
could have a material adverse effect on the Company's business, results of
operations and financial condition. In order to accelerate the promotion of
the Xoom.com brand, the Company intends to significantly increase its
marketing budget, which could materially and adversely affect the Company's
business, results of operations and financial condition. The Company expects
to experience seasonality in its business, with user traffic on the Xoom.com
site potentially being lower during the summer and year-end vacation and
holiday periods when overall usage of the Web is lower. Additionally,
seasonality may significantly affect the Company's advertising revenue during
the first and third calendar quarters, as advertisers historically spend less
during these periods. Because Web-based commerce and advertising is an
emerging market, additional seasonal and other patterns may develop in the
future as the market matures. Any seasonality is likely to cause quarterly
fluctuations in the Company's operating results, and there can be no assurance
that such patterns will not have a material adverse effect on the Company's
business, results of operations and financial condition.

Due to the foregoing factors, the Company's quarterly net revenues and
operating results are difficult to forecast. Consequently, the Company
believes that period to period comparisons of its operating results will not
necessarily be meaningful and should not be relied upon as an indication of
future performance. It is likely that in some future quarter or quarters the
Company's operating results may fall below the expectations of securities
analysts and investors. In such event, the trading price of the Company's
Common Stock would likely be materially and adversely affected. See "Risk
Factors--Potential Fluctuations In Quarterly Results; Seasonality;
Unpredictability Of Future Net Revenue."

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations primarily
through the private placement of Common Stock. As of September 30, 1998, the
Company had approximately $1.0 million in cash.

Net cash used in operating activities for the Inception Period, the year
ended December 31, 1997 and the nine months ended September 30, 1997 and 1998
was $635,000, $1.4 million, $1.3 million and $3.1 million, respectively. Cash
used in operating activities in each of these periods was primarily the result
of net losses.

Net cash used in investing activities for the Inception Period, the year
ended December 31, 1997 and the nine months ended September 30, 1997 and 1998
was $64,000, $393,000, $44,000 and $1.4 million, respectively. Cash

44
<PAGE>

used in investing activities in each period was primarily related to purchases
of fixed assets, except for the nine months ended September 30, 1998, in which
cash used in investing activities also included $329,000 of net cash for
business acquisitions. From time to time the Company expects to evaluate the
acquisition of products, businesses and technologies that complement the
Company's business, for which a portion of the net proceeds from the offering
may be used.

Net cash provided by financing activities of $700,000, $1.8 million, $1.3
million, and $5.6 million for the Inception Period, the year ended December
31, 1997 and the nine months ended September 30, 1997 and 1998, respectively,
was primarily attributable to net proceeds from the issuance of Common Stock
and the issuance of notes payable to stockholders.

As of September 30, 1998, the Company's principal commitments consisted of
obligations outstanding under operating leases and payments due under a
software distribution agreement. Although the Company has no material
commitments for capital expenditures, it anticipates a substantial increase in
its capital expenditures and lease commitments consistent with anticipated
growth in operations, infrastructure and personnel. Also, in the future, the
Company may require a larger merchandise inventory in order to provide better
availability to customers and achieve purchasing efficiencies.

As of September 30, 1998, the Company had a total of $2.8 million in notes
payable relating to its acquisitions, $1.8 million of which is due within one
year. This includes a non-interest bearing note payable in the amount of $1.2
million payable to the shareholders of Paralogic in minimum monthly
installments of $30,000 through September 1999 including additional payments
up to $860,000 based on performance measurements, notes payable of $55,000 and
$231,000 which bear an interest rate of 5% and are due in equal monthly
payments of $2,500 and $10,500 between July 1998 and August 2000 to the
shareholders of Global Bridges and Revolutionary Software, respectively, and a
$135,000 interest free note payable to ArcaMax, which is due in equal monthly
installments of $15,000 from July 1998 to June 1999 unless the Company
successfully executes an initial public offering or completes a sale of
substantially all of its assets, in which case the entire unpaid balance at
that time shall become due and payable. In addition, a promissory note in the
amount of $1.2 million is payable to the shareholders of Pagecount under a
recourse promissory note bearing interest at an annual rate of 7% amortized
over a 24-month schedule, with all amounts due and payable nine months after
the closing of the agreement, provided that if the Company completes an
initial public offering or a sale of substantially all of its assets prior to
such date, the entire unpaid balance at that time shall become immediately due
and payable. See Note 9 of Notes to Consolidated Financial Statements.

The Company intends to use a portion of the net proceeds to repay the note
payable issued in connection with the Pagecount acquisition, and to pay the
remaining balance due under the license agreement with ArcaMax. In addition,
in connection with the acquisition of Global Bridges and the purchase of
certain assets of Revolutionary Software, the Company is required to pay a
cash consideration of $130,000 and $260,000, respectively, upon completion of
the Offering.

In the nine months ended September 30, 1998, the Company issued warrants to
purchase a total of 306,427 shares of Common Stock at a price of $3.33 per
share. These warrants are immediately exercisable and expire on the earlier of
the successful completion of an initial public offering or the year 2003. See
Note 4 of Notes to Consolidated Financial Statements.

On October 1, 1998, the Company entered into a secured financing agreement
with a leasing company. The agreement provides for borrowings of up to a
cumulative amount of $1,000,000 through July 31, 1999.

On November 3, 1998, the Company entered into a secured loan agreement which
provides for borrowings up to $2,750,000. The Company is eligible to borrow up
to $1,250,000 and will be eligible to borrow the remaining $1,500,000 after
reaching 4.8 million members. Pursuant of the terms of the loan agreement, the
Company is required to issue the lender a warrant to purchase 183,333 shares
of Common Stock at an exercise price equal to the initial public offering
price. The Company anticipates taking a non-cash charge classifiable as a non-
operating expense of approximately $1.0 million during the fourth quarter of
1998 in connection with the issuance of this warrant.

45
<PAGE>

The Company's capital requirements depend on numerous factors, including
market acceptance of the Company's services, the amount of resources the
Company devotes to investments in the Xoom.com communities, the resources the
Company devotes to marketing and selling its services and its brand
promotions, the amount of inventory the Company must carry to support
electronic commerce sales, and other factors. The Company has experienced a
substantial increase in its capital expenditures since its inception
consistent with the growth in the Company's operations and staffing, and
anticipates that this will continue for the foreseeable future particularly
relating to the Company's Web site and systems infrastructure. The Company has
received a report from its independent auditors on their audit of the
Company's financial statements as of September 30, 1998, containing an
explanatory paragraph that describes the uncertainty as to the ability of the
Company to continue as a going concern due to the Company's lack of sufficient
cash to meet its projected operating needs for the next 12 months. The Company
believes, however, that the net proceeds from the Offering, together with
current cash and cash equivalents and amounts available for borrowing under
existing arrangements, will be sufficient to meet its anticipated cash needs
for working capital, capital expenditures and business expansion for at least
the next 12 months. Thereafter if cash generated from operations is
insufficient to satisfy the Company's liquidity requirements, the Company may
seek to sell additional equity or debt securities or to obtain a credit
facility. The sale of additional equity or convertible debt securities could
result in additional dilution to the Company's stockholders. There can be no
assurance that financing will be available in amounts or on terms acceptable
to the Company, if at all. See "Risk Factors--Future Capital Needs;
Uncertainty Of Additional Financing."

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations. The Company is currently engaged in a two-phase process to
evaluate its internal status with respect to the Year 2000 issue. In the first
phase, which the Company expects to complete in the first quarter of 1999, the
Company is conducting an evaluation of its systems, including both IT systems
and non-IT systems such as hardware containing embedded technology, for Year
2000 compliance. The Company has completed a significant portion of this phase
to date, and systems that have been evaluated are either Year 2000 compliant
or are expected to be made compliant at an immaterial cost to the Company.
Although the Company does not expect that the impact of the Year 2000 issue
will be material in systems still under evaluation, there can be no assurance
that the Company will not discover Year 2000 issues in the course of its
evaluation process that would have a material adverse effect on the business,
results of operations or financial condition of the Company.

Concurrently with the two-phase analysis of its internal systems, the
Company has begun to survey third-party entities with which the Company
transacts business, including critical vendors and financial institutions, for
Year 2000 compliance. The Company expects to complete this survey in the
second quarter of 1999. At this time the Company cannot estimate the effect,
if any, that non-compliant systems at these entities could have on the
business, results of operations or financial condition of the Company, and
there can be no assurance that the impact, if any, would not be material. See
"Risk Factors--Year 2000 Compliance."

46
<PAGE>

IMPACT OF EURO INTRODUCTION

RECENT ACCOUNTING PRONOUNCEMENTS

As of January 1, 1998, the Company adopted, SFAS 130, "Reporting
Comprehensive Income" which establishes standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. The adoption of this standard has had no impact on the
Company's consolidated financial position, stockholders' equity, results of
operations or cash flows.

Additionally, the Financial Accounting Standards Board issued SFAS 131,
"Disclosure about Segments of an Enterprise and Related Information," which
establishes standards for the way public business enterprises report
information in annual statements and interim financial reports regarding
operating segments, products and services, geographic areas, and major
customers. SFAS 131 was issued and will be effective for 1998. The Company is
evaluating additional disclosures, if any, which may result from this
pronouncement.

47
<PAGE>

BUSINESS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in these forward-looking statements. Factors that may cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."

OVERVIEW

Xoom.com is one of the fastest growing direct marketing companies on the
Internet. The Company attracts members to its community site with a variety of
free services, including homepages, e-mail, chat rooms, clip art and software
libraries and online greeting cards. Xoom.com members can also join topical
communities where they can exchange ideas and information. Upon registration,
members agree to receive periodic offers of products and services via e-mail.
These offerings are competitively priced and continuously updated, and include
computer software, computer accessories and peripherals, consumer electronics
and clip art on CD-ROM. New product offerings will include a DVD movie club,
gift items, health-related products and a travel club. Xoom.com believes that
its rapidly growing base of self-qualified members provides the Company with
highly attractive and effective electronic commerce opportunities. In
addition, the Company believes that its high levels of traffic and online
reach present an attractive platform for advertising.

Xoom.com was the second fastest growing site on the Web measured by online
reach in the first half of 1998 and the thirteenth most trafficked site in
September 1998, according to Media Metrix. Xoom.com's reach increased to over
11% in September 1998 from less than 2% in January 1998, according to Media
Metrix. Xoom.com had approximately 4.5 million members as of November 13,
1998, adding an average of approximately 20,000 new members per day for the
last thirty days. The current growth rates of Xoom.com's reach and new
customers are not necessarily indicative of growth rates the Company may
experience in the future. In the first nine months of 1998, 69% of the
Company's net revenue was derived from electronic commerce and approximately
29% of net revenue was derived from non-U.S. sales. See Note 1 of Notes to
Consolidated Financial Statements. Over the past twelve months, quarterly net
revenue has increased from approximately $221,000 to $2.3 million,
representing compound quarterly sales growth of approximately 80%. See "Risk
Factors--Limited Operating History; No Assurance Of Profitability; Anticipated
Losses."

INDUSTRY BACKGROUND

Growth of the Internet

The Internet has emerged as a global medium, enabling millions of people
worldwide to share information, communicate and conduct business
electronically. IDC estimates that the number of Web users will grow from
approximately 69 million worldwide in 1997 to approximately 320 million
worldwide by the end of 2002. This growth is expected to be driven by the
large and growing number of PCs installed in homes and offices, the decreasing
cost of PCs, easier, faster and cheaper access to the Internet, improvements
in network infrastructure, the proliferation of Internet content and the
increasing familiarity with and acceptance of the Internet by businesses and
consumers. The Internet possesses a number of unique characteristics that
differentiate it from traditional media: a lack of geographic or temporal
limitations; real-time access to dynamic and interactive content; and
instantaneous communication with a single individual or with groups of
individuals. As a result of these characteristics, Web usage is expected to
continue to grow rapidly. The proliferation of users, combined with the Web's
reach and lower cost of marketing, has created a powerful direct sales and
marketing channel.

Electronic Commerce and Advertising

The growing adoption of the Web represents a significant opportunity for
businesses to conduct commerce over the Internet. According to IDC,
transactions on the Internet are expected to increase from approximately $12
billion in 1997 to approximately $426 billion in 2002, with the number of
users that are buyers of products and services rising from 26% to 40% in the
same period. One factor in this projected growth is the increasing

48
<PAGE>

variety of transactions that take place on the Web. Initially, companies
focused on facilitating Internet transactions between businesses. More
recently, however, a number of companies have targeted business-to-consumer
transactions. These companies typically use the Internet to offer standard
products and services that can be easily described with graphics and text and
that do not necessarily require a physical presence for purchase, such as
software, books, music CDs, videocassettes, home loans, airline tickets and
online banking and stock trading. The Internet allows these companies to
develop one-to-one relationships with customers worldwide without making
significant investments in traditional infrastructure such as retail outlets,
distribution networks and sales personnel.

Growth in the Web has also created an important new advertising channel.
Tools not available in traditional advertising media, such as real-time
measurement of "click-through" on advertising banners, further increase the
attractiveness of Web advertising by giving advertisers real-time feedback on
campaigns. Jupiter Communications projects that the dollar value of
advertising on the Web is expected to increase from approximately $940 million
in 1997 to approximately $7.7 billion in 2002. To date, businesses and
advertisers have typically used traditional navigational sites and
professionally-created content sites for the sale and marketing of their
products and services online. In addition, online community sites provide more
detailed demographic data and self-selected groups of consumers with an
affinity for particular products. Advertisers can thus more easily deliver
targeted messages in cost-effective manner.

The Direct Marketing Opportunity on the Internet

The same advantages that facilitate the growth of electronic commerce and
advertising make the Internet a compelling medium for direct marketing
campaigns. Direct marketing over the Internet uses e-mail to reach potential
buyers worldwide, potentially offering them a significantly broader selection
of products and services than is available locally. Internet-based direct
marketing also allows marketers to rapidly collect meaningful demographic
information and feedback from consumers, and to use this information to tailor
new messages quickly. Registration information typically collected by Web
sites, and user involvement in topical communities of interest, provide
additional demographic information. This offers businesses the chance to
increase the effectiveness of their direct marketing campaigns, which may
translate into higher sales. Further, the costs of direct marketing via e-mail
are dramatically lower than those of traditional direct marketing techniques.
As a result, Internet-based direct marketing campaigns can be profitable at
response rates that are a fraction of the rates for traditional campaigns.

The Growth of Online Communities

Traditional use of the Web has consisted largely of one-way communications
in which users "surf" and view different Web sites containing professionally-
created content on topics of general interest such as news, sports and
weather. Internet search engines and navigational sites serve a valuable
function for users seeking to browse the Internet and locate Web sites of
interest. However, these services are not primarily focused on providing a
platform for publishing and aggregating the rapidly increasing volume of
personalized content created by users or enabling such users to interact with
each other.

In particular, users who publish Web sites have had limited means of
attracting visitors to their sites or interacting with such visitors, and, as
a result, there is a growing demand for online community sites where users can
publish content and engage in community activities. According to statistics
published by Media Metrix, online community sites have recently been one of
the fastest growing sectors of the Web. Additionally, Web users are
increasingly seeking access to unique, personalized content and interaction
with others who share similar interests. Online communities provide a medium
for such access and interaction.

THE XOOM.COM SOLUTION

Xoom.com uses the unique characteristics of the Web to cost-effectively
market products and services to its rapidly growing member base. By offering
its members a variety of compelling free services and communities

49
<PAGE>

and competitively priced product offerings, the Company believes it has
created an innovative online sales channel with low customer acquisition
costs. The key elements of Xoom.com's approach are:

Cost-Effective Direct Marketing Capability

Xoom.com applies a sophisticated direct marketing approach, modeled after
traditional direct mail campaigns, to generate product sales. Unlike
traditional direct marketing campaigns, which typically use paper-based
promotional materials delivered by mail, Xoom.com's campaigns use regular e-
mails to communicate offers to members, significantly reducing the cost of
reaching the consumer. The interactive nature of the Web and the ability to
display attractive graphics to users clicking through on product offerings
enable Xoom.com to present such offerings in a more complete and dynamic
manner than allowed by paper-based delivery systems.

Rapid Formulation of Effective Direct Marketing Campaigns

Prior to introducing new product offerings to its entire membership base,
Xoom.com selects a subset of members for the purpose of test-marketing a
campaign. The Company has developed campaign-management software that uses
statistical techniques to analyze a test campaign and to predict the expected
response rate to such a campaign if it is rolled out to a larger group of
members. The Company can also analyze the effects of variations in price,
graphics and copy. Results are usually available in less than one day. On the
basis of these tests, Xoom.com selects product offers for a larger audience
and modifies them to maximize response rates, sales, profitability and member
retention. Testing also increases the accuracy of the Company's forecasts of
product demand. As a result, the Company is typically able to carry small
amounts of inventory, thus lowering overhead and the risk of write-offs.

Provision of Free Services to Attract a Growing Membership Base

The Company offers its members a variety of free services, including Web
site creation and hosting, e-mail, chat rooms, online clip art and online
greeting cards. Xoom.com provides members with 11 megabytes of disk space on
its servers to develop personal Web sites or to use as personal Web storage
space. The Company also allows members to access proprietary software in order
to quickly create a Web page, as well as ready-made multimedia tools that can
be used to develop a fully-customized, content-rich site. Members can join one
or more of over 200 communities free of charge. Members also promote their Web
sites elsewhere on the Internet, using hyperlinks on other individual sites as
well as listings on directories and search engines, resulting in millions of
new visitors to the Xoom.com site. The Company believes that the provision of
free services is critical to maintaining membership growth.

Development of Detailed Member Database

To date, the Company has gathered a significant base of information about
its members through registration information, responses to promotional
campaigns and purchasing information obtained from third parties. As more
members join Xoom.com and participate in its topical communities, and as the
Company obtains additional purchasing history data, the level of information
regarding Xoom.com's members will continue to grow. Xoom.com intends to use
this growing database to target offers, increase its range of product
offerings and encourage future transactions and involvement with the Xoom.com
site.

Attractive Advertising Platform

Xoom.com's free services and extensive community offerings create high
volumes of traffic, enabling business advertisers to cost-effectively promote
their products and services on the Xoom.com site. The Company's community
structure also provides valuable demographic information and affinity-based
member segmentation that increase advertisers' ability to target campaigns.
Further, the diversity of interest groups among members creates potential
markets for a broad range of products and services, resulting in a
correspondingly broad range of advertising customers.

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Customer Convenience

Using e-mail technology as a direct marketing tool, the Company creates
attractive electronic commerce opportunities for potential purchasers.
Xoom.com's order processing services are available 24 hours a day, seven days
a week, which facilitates on-demand ordering. Purchasers can reach the
Xoom.com site from the home or office. The Company ships products directly to
the customer's address, without the need to travel to a store, thereby
enhancing convenience, particularly for customers in international or rural
locations where traditional retail distribution cannot be supported.

STRATEGY

The Company's objective is to be a leading community-based direct selling
channel on the Internet. Key strategies to achieve this objective include:

Focus on Membership Growth

The Company plans to increase membership by: (i) maintaining a large and
diverse range of active communities focused on special interest categories;
(ii) offering a broad and expanding array of free services; and (iii)
marketing its free services through the Internet. In addition, the Company
intends to continue to seek acquisitions and strategic alliances to increase
membership.

Build Strong Brand Recognition

The Company believes that establishing and leveraging the Xoom.com brand is
critical to its ultimate success. The Company has already benefited from word-
of-mouth marketing of its brand through interactions between existing and
prospective members. The Company intends to increase brand equity through
effective marketing and promotion, improved customer service and the
completion of strategic acquisitions and alliances.

Promote Repeat Usage and Member Loyalty

The Company believes that community-based Web sites have an inherent
potential for creating and retaining a loyal membership base, particularly
when combined with free service offerings such as those provided by the
Company. As members invest time and energy in Xoom.com's services, members may
become less inclined to switch to alternate services. The Company intends to
promote repeat usage and member loyalty by maintaining and improving its range
of communities and free services, expanding the breadth and depth of its
product offerings and remaining responsive to member suggestions.

Effectively Convert Traffic and Membership Into Commerce Revenue

Xoom.com intends to leverage its community structure and direct marketing
capabilities to increase revenue. The Company has developed a number of
community categories whose members potentially have common purchasing needs
(e.g., Web cameras for groups that wish to communicate by video conference).
The Company also believes that there are opportunities for cross-selling
complementary merchandise or upselling related products into existing
communities. In addition, the Company intends to make further product offers
via e-mail and to continue providing convenient access for purchasers in order
to induce immediate purchases.

Offer New Products and Services

The Company's primary product offerings currently include computer software,
computer accessories and peripherals, consumer electronics and clip art on CD-
ROM. In the fourth quarter of 1998, the Company intends to introduce a DVD
movie club, gift items, health-related products and a travel club. Future
offerings may include educational products, books, housewares, pet supplies,
office supplies and other items that appeal to members and are profitable to
the Company.

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Increase Advertising Revenue

The Company intends to increase its advertising revenue by focusing on a
number of key strategies, including expanding its advertising customer base,
increasing advertising rates, page views and the average size and length of
advertising contracts, hiring additional direct sales representatives and
continuing to invest in improving its ad serving and targeting technology. The
Company also intends to offer special sponsorship and events-driven
promotional advertising programs to build brand awareness, generate leads and
drive traffic to an advertiser's site and to sell sponsorships of special
interest pages where topically focused content is aggregated on a permanent
area within a community.

Expand Internationally

The Company believes that the anticipated international growth of Internet
usage has the potential to generate significant additional revenue for
Xoom.com. According to IDC, the number of Web users outside of the United
States is projected to increase from approximately 30 million in 1997 to
approximately 184 million in 2002. For the nine months ended September 30,
1998, international sales comprised 29% of the Company's total net revenue and
42% of electronic commerce revenue. See Note 1 of Notes to Consolidated
Financial Statements. The Company believes that it is particularly well-
positioned to benefit from international sales growth because, unlike
traditional retailers, the Company is not encumbered with an international
distribution infrastructure that can depress margins. In addition, the Company
believes that it has a distinct advantage over catalog and store-based
retailers located in the United States because such retailers are typically
prohibited from shipping products internationally due to restrictions in their
agreements with product manufacturers. The Company intends to enter into
partnerships with local companies in order to increase its international
presence and sales.

Pursue Strategic Acquisitions and Alliances

To date, the Company has entered into a number of acquisitions, license
arrangements and strategic alliances in order to build its membership base and
services, provide community-specific content, generate additional traffic and
establish additional sources of net revenue. These include the acquisition of
a chat service, an HTML-based e-mail product, a Web page counter and guestbook
service, as well as an exclusive license arrangement with an online greeting
card service. Xoom.com has also formed alliances with Phillips Publishing for
developing a co-branded investing community, ZDNET for clip-art marketing and
USA Today for Web-based community services, among others. In addition, the
Company has entered into a letter of intent with Hanover Direct, Inc.
("Hanover Direct") for developing a jointly-owned e-commerce shopping channel.
A typical alliance provides the partner with branding flexibility, incremental
traffic, potential increases in membership and revenue and integration of
service offerings at no extra cost to the partner. The Company intends to
continue making acquisitions to increase reach and membership and to seek
additional strategic alliances with content and distribution partners,
including alliances that create co-branded sites through which Xoom.com
markets its services.

Maintain and Improve Technological Focus and Expertise

The Company believes that highly advanced functionality and performance of
its Xoom.com site are critical to its ultimate success. The Company is
committed to site reliability and accessibility, and intends to make
continuous enhancements to its technology, such as upgrading and expanding
server and networking infrastructure, increasing fault tolerance and improving
Internet connections. In addition, the Company intends to increase the
efficiency of its transaction processing and fulfillment operations and the
sophistication of its direct marketing campaign management software.

XOOM.COM PRODUCTS AND SERVICES

By offering free services, Xoom.com creates a diverse range of communities
and a critical mass of members with whom to interact. Xoom.com provides each
member with 11 megabytes of disk space on its servers and the use of powerful
Web publishing tools for the rapid creation of a personalized Web site.
Additionally, the Company offers members free e-mail, chat, online clip art
and online greeting cards, while also providing excellent customer service and
high-quality site performance. Members can participate in one or more of over

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200 communities and link to their personal Web sites, allowing them to take
advantage of the Company's services without the need to access the Xoom.com
site directly.

How Visitors Become Members

To become a member, a visitor must give a valid e-mail address as well as
permission to be re-contacted with targeted news and product offers by e-mail.
A new member can then use one or more of Xoom.com's free services, such as
building a Web page, joining a community or sending an online greeting card,
or can purchase products at a discount. Xoom.com's services are designed so
that their use attracts new members. For example, online greeting cards
contain a message that informs the recipient of the card's origins and
provides information on how the recipient can learn more about Xoom.com and
become a member. The Company also encourages members to link their Web sites
and communities to users outside of Xoom.com, thereby increasing Xoom.com's
visibility among potential members.

Converting Membership Into Commerce Revenue

Following membership registration, Xoom.com sends the new member an e-mail
with password and membership confirmation, along with an initial product
offer. Thereafter, Xoom.com sends the member an e-mail approximately once a
week, containing product offerings or informational newsletters. Each e-mail
contains directions for removal from Xoom.com's address list, should the
member wish to stop receiving offers. Product offers are made to members
worldwide using direct marketing techniques. Currently, the Company typically
makes product offers to its entire membership base. In the future, as more
members join topical communities and the Company further develops its member
database, the Company believes it will be able to effectively target consumers
having an affinity for certain products and services. Frequent directed e-mail
offers, combined with ease of ordering, provide a context for on-demand
purchases of products and services. The Company procures substantially all of
its products from Nimbus on a purchase order basis. The following chart
details Xoom.com's major product offerings for the nine months ended September
30, 1998 and prices for each category:

PRODUCT CATEGORY PRICE RANGE PRODUCTS OFFERED
<S> <C> <C>

Computer Software $15-$50 Photo editing
software, Web
utilities

Computer Accessories $69-$99 Modems, computer video
and Peripherals cameras

Consumer Electronics $179-$299 Digital cameras, DVD
players

Clip Art $19-$79 CD-ROM clip art
collections

Gifts $7-$399 Beanie Babies
</TABLE>

ACQUISITIONS AND STRATEGIC ALLIANCES

The Company has entered into a number of acquisitions, license arrangements
and strategic alliances in order to increase its free service offerings,
provide community-specific content, generate additional traffic, increase
membership and establish additional sources of revenue. The Company intends to
evaluate acquisition opportunities and to seek additional strategic alliances
with content and distribution partners. The Company believes that alliances
will prove attractive to potential partners because they are designed to
provide them with branding flexibility, incremental traffic, potential
increases in membership and revenue and integration of service offerings at no
extra cost to the partner.

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Acquisitions and License Arrangements

. Paralogic Chat Network. In March 1998, the Company acquired Paralogic
and obtained a perpetual license to Paralogic's chat software. This
transaction provided Xoom.com with chat functionality and a ready-made
base of approximately 140,000 member chat rooms. Since this acquisition,
the total number of member chat rooms has increased to approximately
250,000, and chat rooms have generated over 2.5 million new Xoom.com
members.

. Sitemail. In June 1998, the Company acquired Sitemail, an HTML-based e-
mail product, through its acquisition of Global Bridges and the purchase
of certain technology from Revolutionary Software, thereby expanding the
Company's suite of member services. The Company believes that through
its ownership of the Sitemail technology and the hosting of member
mailboxes, it will gain an increased ability to e-mail customized offers
or offers with enhanced features, such as graphics, to members who use
the Sitemail service.

. Greetings Online. In June 1998, the Company entered into an exclusive,
perpetual license with ArcaMax that gave the Company the ability to
offer Greetings Online, a free online greeting card service, to members.
The Company believes that in the future the Greetings Online service
will allow it to bundle offers of gift items to users of the service.

. Pagecount. In July 1998, the Company acquired the assets of Pagecount, a
Web page counter and guestbook service, which provides Xoom.com with
promotional space on a network of approximately 250,000 Web sites. The
Company believes that this network has the potential to expand
Xoom.com's reach significantly.

Acquisitions carry numerous risks and uncertainties, including difficulties
in the integration of operations, personnel, technologies, products and the
information systems of the acquired companies, diversion of management's
attention from other business concerns, risks of entering geographic and
business markets in which the Company has no or limited prior experience and
potential loss of key employees of acquired organizations. No assurance can be
given as to the ability of the Company to successfully integrate any
businesses, products, technologies or personnel that might be acquired in the
future, and the failure of the Company to do so could have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition, there can be no assurance that the Company will be
successful in identifying potential acquisition candidates. See "Risk
Factors--Risks Associated With Acquisitions."

Strategic Alliances

The Company has entered into a number of strategic alliances, including the
following:

. Hanover Direct. Xoom.com has entered into a letter of intent to form a
joint venture with Hanover Direct, a leading catalog direct marketing
company, which would create a new Internet e-commerce shopping channel.
Pursuant to the proposed joint venture, Xoom.com and Hanover Direct
would combine their respective products and those of third parties for
sale via the channel, which would operate 24 hours-a-day, seven days per
week on the Xoom.com site. New merchandise in limited quantities would
be rotated on an hourly basis around the clock, so that consumers are
motivated toward immediate purchases. Xoom.com and Hanover Direct would
share revenue under the proposed exclusive agreement for this channel.

. Phillips Publishing. Xoom.com is developing a co-branded investing
community with Phillips Publishing, the largest publisher of newsletters
in the U.S. This co-branded site is expected to begin commercial
operations during the fourth quarter of 1998. The site will feature 15
investment advisers and their newsletter content, a ticker and portfolio
service and subscription, and other merchandise offerings. Xoom.com and
Phillips will share revenue from advertising and product and service
sales in this co-branded investing community.

. ZDNet. Xoom.com has created and will host a co-branded site, with the
look and feel of the ZDNet Web site, that will market Xoom.com's clip
art to ZDNet visitors. Xoom and ZDNet will share revenue from
advertising and product sales on the co-branded site.

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<PAGE>

. USA Today. Xoom.com has created and will host a co-branded site, with
the look and feel of the USA Today site, that will provide the USA Today
audience with the use of Xoom.com's services. The Company will have the
opportunity to sign up visitors to this site. Xoom.com and USA Today
will share revenue from advertising and product sales on the co-branded
site.

. Ulead Systems, Inc. Xoom.com has an agreement with Ulead Systems to use
its database of over 300,000 e-mail addresses and to market products to
persons on this list. The Company has licensed a number of Ulead
Systems' products for inclusion in bundled product offerings to Xoom
members, customers in Ulead Systems' e-mail database and other e-mail
lists owned or licensed by the Company. Additionally, Ulead Systems
markets Xoom.com products directly from its Web site and receives a
commission on any sales.

In addition to the above relationships, the Company also has relationships
with InfoSpace, Inc., Netopia, Inc. and Sausage Software Ltd. The Company's
strategic alliances are under agreements with a duration of one year or less.
Although the Company views its strategic relationships as a key factor in its
overall business strategy, there can be no assurance that its strategic
partners will view their relationships with the Company as significant to
their own business or that they will not reassess their commitment to the
Company in the future. There can be no assurance that any party to a strategic
alliance agreement with the Company will perform its obligations as agreed or
that any strategic agreement would be specifically enforceable by the Company.
The Company's arrangements with its strategic partners generally do not
establish minimum performance requirements for the Company's strategic
partners but instead rely on their voluntary efforts. In addition, most of the
Company's agreements with its strategic partners may be terminated by either
party with little notice. Therefore, there can be no assurance that these
relationships will be successful. In the event that a strategic relationship
is discontinued for any reason, the Company's business, results of operations
and financial condition may be materially adversely affected. In addition,
there can be no assurance that the Company will be successful in establishing
additional strategic relationships. See "Risk Factors--Reliance On Strategic
Relationships."

SALES AND MARKETING

The Company's sales and marketing strategy is designed to strengthen
awareness of the Xoom.com brand, increase online traffic, build member
loyalty, maximize repeat purchases, increase the size and frequency of
electronic commerce transactions and develop additional revenue opportunities.

Marketing the Xoom.com Site

Historically, the Company's marketing of its services has been primarily by
word-of-mouth and indirect promotions by members with links to the Xoom.com
site and through the use of its services. For example, each e-mail that a
member sends using Xoom.com's e-mail service contains a message from Xoom.com
that promotes Xoom.com's service offerings. The Company believes that such
relationship marketing will continue to generate a substantial amount of
additional traffic and new members. To augment these marketing efforts, the
Company intends to initiate a more formal, aggressive brand promotional
campaign to enhance membership growth and draw additional advertisers and
commerce partners. The Company may use a portion of the net proceeds from the
offering to launch a number of promotional campaigns, some of which may be in
traditional media, including print, radio, billboard and television and some
of which may be through the Web. All promotions will be designed to increase
traffic and brand awareness and an understanding of the Company's community
model. The Company also intends to introduce a number of other brand awareness
and membership retention programs on its own site to leverage its large and
growing member base and visitor traffic. See "Risk Factors--Reliance On
Strategic Relationships."

Product Marketing

Xoom.com applies a sophisticated direct marketing program, modeled after
traditional direct mail campaigns, to generate product sales. Regular e-mails
communicate targeted offers to members at an extremely low cost to the
Company. As Xoom.com gathers additional information about its members, it
intends to further

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<PAGE>

target its offers and increase its range of product offerings. The Company has
developed marketing campaign-management software that uses statistical
techniques to analyze a test campaign and to predict the expected response
rate to such campaign if it is rolled out to a larger group of members.
Results are usually available in less than one day. This allows the Company to
quickly and efficiently test-market potential product offerings. On the basis
of these tests, Xoom.com selects product offers for a larger audience and
tests price to maximize response, sales or profitability. Tests also allow the
Company to structure campaigns that maximize member retention.

Advertising

The Company has a direct sales organization, located in New York and San
Francisco, that is dedicated to developing and maintaining close relationships
with top advertisers and leading advertising agencies nationwide. As of
September 30, 1998, the Company had five employees in its direct sales
organization. From time to time the Company also enters into arrangements with
a number of third-party advertising sales representatives, although, as of
September 30, 1998, the Company had no such arrangements. The Company's sales
organization is focused solely on selling advertising on all Xoom.com
properties. The Company's sales organization consults regularly with
advertisers and agencies on design and placement of their Web-based
advertising, provides advertisers with advertising measurement analysis and
focuses on providing a high level of customer service and satisfaction.

Currently, advertisers and advertising agencies enter into short-term
agreements, on average one to two months, pursuant to which they receive a
guaranteed number of impressions for a fixed fee. The Company has experienced,
and expects to continue to experience, a variable renewal rate for its
advertising contracts. Advertising on Xoom.com currently consists primarily of
banner-style advertisements that are prominently displayed at the top of pages
on a rotating basis throughout the Xoom.com site. From each banner
advertisement, viewers can hyperlink directly to the advertiser's own Web
site, thus providing the advertiser an opportunity to directly interact with
an interested customer. The Company's standard rate card cost per thousand
impressions ("CPM") for banner advertisements currently ranges from $8 to $12,
depending upon location of the advertisement and the extent to which it is
targeted for a particular audience. Discounts from standard CPM rates may be
provided for higher volume, longer-term advertising contracts.

Advertising Customers

During the first nine months of 1998, Xoom.com had approximately 90
advertisers on its Web site. For the nine months ended September 30, 1998, the
Company's five largest advertising customers, namely Goto.com, Inc., Spree.com
Corporation, The Mining Co., Musicblvd Network and USA Net, Inc. accounted for
approximately 28% of advertising revenue (approximately 5% of total net
revenue). The following is a list of the Company's top 15 advertising
customers by net revenue for the nine months ended September 30, 1998:

<TABLE>
<CAPTION>
<S> <C> <C>
eBay, Inc. Media Synergy, Inc. The Mining Co.
E-Pub Inc. Musicblvd Network USA Net, Inc.
Goto.com, Inc. One & Only VisiCom, Inc.
Hotel Reservations Network Sportsline USA, Inc. Visual Properties L.L.C.
Maaznet Directory Services, Inc. Spree.com Corporation Yoyodyne Entertainment, Inc.
</TABLE>

CUSTOMER SERVICE AND SUPPORT

The Company believes that the strength of its customer service and technical
support operations is critical to its success in maintaining its membership
base, increasing membership and encouraging repeat usage and purchases. The
Company has established a team of customer service and technical support
professionals who process inquiries and monitor the status of orders,
shipments and payments, operating from 7 a.m. to 6 p.m. Pacific time Monday
through Friday. Members can access customer service by e-mail and customers
can access a toll-free telephone number. The Company intends to enhance and
automate the e-mail response portions of its customer service and technical
support operations in the near future.

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<PAGE>

WAREHOUSING AND FULFILLMENT

The Company has no fulfillment operation or warehouse facility of its own,
and currently relies solely on Banta for all warehousing and fulfillment
services. As a result of its product testing, the Company does not generally
carry large amounts of inventory of any given product. All shipments are made
from Banta's warehouse in Orem, Utah. In the event that the Company's product
sales increase substantially, particularly abroad, Banta has facilities within
and outside of the United States that can handle additional shipment and
warehousing needs. See "Risk Factors--Reliance On Certain Vendors."

The Company uses automated interfaces for accepting, sorting and processing
orders to enable it to achieve the most rapid and economical purchase and
delivery terms. Approximately 95% of orders are processed online, with the
remainder by telephone, fax or mail. Once the Company receives an order, it
sends a confirmation by e-mail to the customer. At the end of each day, the
Company sends all orders to Banta for processing. Banta then packs and ships
orders, providing confirmation to Xoom.com along with UPS shipping information
for all ground-shipped US orders. International orders are sent by
international air mail. Xoom.com forwards shipping information by e-mail to
customers, along with a link to UPS for package tracking.

TECHNOLOGY AND INFRASTRUCTURE

The Company has developed an open standard hardware and software system that
is designed for reliability. System architecture is based on a distributed
model that is highly scalable, flexible and modular, emphasizing extensive
automation and a high degree of redundancy that is designed to minimize single
points of failure. The system integrates site management, customer
interaction, inventory management, network monitoring, quality assurance,
transaction processing and fulfillment services. Currently, the system has 2.5
terabytes of unformatted disk space, supports over 25 million hits per day,
has a peak bandwidth of over 90 megabits per second and transfers 350
megabytes of data each day.

The Company uses network servers that are housed separately by application
at Exodus in Santa Clara, California and Frontier in Sunnyvale, California,
third-party and public domain server software optimized internally by the
Company and internally developed tools and utilities. Requests for files are
distributed to the appropriate servers using F5 Labs Big IP load distribution
and balancing hardware. The Company also employs in-house monitoring software
that includes automated diagnostic programs and intelligent agents, which test
and measure system response, create reports for evaluation by technical staff
and generate pager calls in the event of system failures. Additional software
monitors abuse of the site by members and potential hackers. Reporting and
tracking systems generate daily membership, order and campaign reports.
Membership and mailing engines allow for efficient deployment of member data
and targeting of e-mail campaigns.

Member-generated content is stored on a redundant array of independent
disks. Member profile information is stored on multiple disk arrays using
Oracle database software and backed up to long-term tape storage devices on a
daily basis. The Company will continue to upgrade and expand its server and
networking infrastructure in an effort to improve its fast and reliable access
to the Company's Web site and communities. Any system failure that causes an
interruption in service or a decrease in responsiveness of the Company's Web
site could result in less traffic on the Company's Web site and, if sustained
or repeated, could impair the Company's reputation and the attractiveness of
its brand.

Site connectivity to the Internet is provided via multiple DS-3 and OC-3
links on a 24 hour-a-day, seven days per week basis by Exodus and Frontier.
Exodus and Frontier also provide and manage power and environmentals for the
Company's networking and server equipment. The Company manages and monitors
its servers and network fremotely from its headquarters in San Francisco,
California. The Company strives to rapidly develop and deploy high-quality
tools and features into its system without interruption or degradation in
service. Any disruption in the Internet access provided by Exodus or Frontier,
or any interruption in the service that Exodus or Frontier receives from other
providers, or any failure of Exodus or Frontier to handle higher volumes of
Internet users to the Xoom.com site could have a material adverse effect on
the Company's business, results of operations and financial

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<PAGE>

condition. See "Risk Factors--Risks Of Capacity Constraints; System Failures;
Technological Risks" and "--Risk Of Reliance On Internally Developed Systems."

COMPETITION

The market for community-based direct selling channels on the Internet is
new and rapidly evolving, and competition for members, consumers, visitors and
advertisers is intense and is expected to increase significantly in the
future. Barriers to entry are relatively insubstantial. The Company believes
that the principal competitive factors for companies seeking to create
communities on the Internet are critical mass, functionality, brand
recognition, member affinity and loyalty, broad demographic focus and open
access for visitors. Other companies who are primarily focused on creating
Web-based communities on the Internet and with whom the Company competes are
Tripod, GeoCities, WhoWhere (through the WhoWhere and Angelfire Web sites) and
theglobe. The Company could also face competition in the future from Web
directories, search engines, shareware archives, content sites, commercial
OSPs, sites maintained by ISPs, traditional media companies and other entities
that attempt to or establish communities on the Internet by developing their
own community or acquiring one of the Company's competitors. Further, there
can be no assurance that the Company's competitors and potential competitors
will not develop communities that are equal or superior to those of the
Company or that achieve greater market acceptance than the Company's
communities. The Company also competes for visitors with many Internet content
providers and ISPs, including Web directories, search engines, shareware
archives, content sites, commercial online services and sites maintained by
ISPs, as well as thousands of Internet sites operated by individuals and
government and educational institutions. These competitors include free
information, search and content sites or services, such as AOL, CNET, CNN/Time
Warner, Excite, Infoseek, Lycos, Netscape, Microsoft and Yahoo!. The Company
also competes with many companies for advertisers, including those companies
with whom the Company competes for visitors as well as traditional forms of
media such as newspapers, magazines, radio and television. The Company
believes that the principal competitive factors in attracting advertisers
include the amount of traffic on its Web site, brand recognition, customer
service, the demographics of the Company's members and viewers, the Company's
ability to offer targeted audiences and the overall cost-effectiveness of the
advertising medium offered by the Company. The Company believes that the
number of Internet companies that obtain revenue from Web-based advertising
will increase substantially in the future. Accordingly, the Company will
likely face increased competition, resulting in increased pricing pressures on
its advertising rates which could in turn have a material adverse effect on
the Company's business, results of operations and financial condition.

The Company also expects to encounter intense competition in the online
commerce market. The Company currently or potentially competes with a variety
of other companies. These competitors include various traditional computer
retailers including CompUSA and MicroCenter, various mail-order retailers
including CDW, Micro Warehouse, Insight, PC Connection and Creative Computers,
various Internet-focused retailers including Amazon.com, Egghead.com,
software.net, NECX Direct, various manufacturers that sell directly over the
Internet including Dell, Gateway, Apple and many software companies, a number
of online service providers including AOL and the Microsoft Network that offer
computer products directly or in partnership with other retailers, some non-
computer retailers such as Wal-Mart that sell a limited selection of computer
products in their stores and computer products distributors which may develop
direct channels to the consumer market. Increased competition from these and
other sources could require the Company to respond to competitive pressures by
establishing pricing, marketing and other programs or seeking out additional
strategic alliances or acquisitions which may be less favorable to the Company
than would otherwise be established or obtained, and thus could have a
material adverse effect on the business, prospects, financial condition and
results of operations of the Company.

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<PAGE>

employees, distribution partners, commerce companies, advertisers and third-
party content providers. There can be no assurance that Internet content
providers and ISPs, including Web directories, search engines, shareware
archives, sites that offer professional editorial content, commercial online
services and sites maintained by ISPs will not be perceived by advertisers as
having more desirable Web sites for placement of advertisements. In addition,
substantially all of the Company's current advertising customers and strategic
partners also have established collaborative relationships with certain of the
Company's competitors or potential competitors, and other high-traffic Web
sites. Accordingly, there can be no assurance that the Company will be able to
grow its membership base, traffic levels and advertiser customer base at
historical levels or retain its current members, traffic levels or advertiser
customers, or that competitors will not experience greater growth in traffic
than the Company as a result of such relationships which could have the effect
of making their Web sites more attractive to advertisers, or that the
Company's strategic partners will not sever or elect not to renew their
agreements with the Company. There can also be no assurance that the Company
will be able to compete successfully against its current or future competitors
or that competition will not have a material adverse effect on the Company's
business, results of operations and financial condition. See "Risk Factors--
Competition."

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company regards its technology as proprietary and attempts to protect it
by relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. The
Company currently has no patents or patents pending and does not anticipate
that patents will become a significant part of the Company's intellectual
property in the foreseeable future. The Company also generally enters into
confidentiality or license agreements with its employees and consultants, and
generally controls access to and distribution of its documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization or to develop similar technology
independently. The Company pursues the registration of its service marks in
the United States and internationally, and has applied for and obtained the
registration in the United States and certain other countries for a number of
its service marks, including "Xoom," "Xoom.com" and the "X-in-circle" logo.
Effective trademark, service mark, copyright and trade secret protection may
not be available in every country in which the Company's services are
distributed or made available through the Internet, and policing unauthorized
use of the Company's proprietary information is difficult. See "Risk Factors--
Dependence On Intellectual Property Rights."

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any proprietary rights of the Company. There can be no
assurance that the steps taken by the Company will prevent misappropriation or
infringement of its proprietary information. Any such infringement or
misappropriation, should it occur, might have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation might result in substantial costs and diversion of resources and
management attention and could have a material adverse effect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company's business activities will not infringe upon the
proprietary rights of others, or that other parties will not assert
infringement claims against the Company. From time to time, the Company has
been, and expects to continue to be, subject to claims in the ordinary course
of its business including claims of alleged infringement of the trademarks,
service marks and other intellectual property rights of third parties by the
Company and the content generated by its members. Such claims and any
resultant litigation, should it occur, might subject the Company to
significant liability for damages and might result in invalidation of the
Company's proprietary rights and even if not meritorious, could be time
consuming and expensive to defend and could result in the diversion of
management time and attention, any of which might have a material adverse
effect on the Company's business, results of operations and financial
condition. In September 1998, Zoom Telephonics, Inc. ("Zoom") contacted the
Company and asserted, among other things, that the "XOOM" trademark was
confusingly similar to Zoom's

59
<PAGE>

own "ZOOM" registered trademark, and requesting that the Company cease using
the "XOOM" trademark and the "xoom.com" domain name, and change its name. The
Company has responded to Zoom's correspondence by denying any confusion
between trademarks, and is in preliminary discussions with Zoom to resolve the
points Zoom raised in such correspondence. Although the Company believes that
Zoom's claims are without merit, it is possible that the two companies will
not resolve such points. A failure to do so could result in litigation, which
could have a material adverse effect on the Company's business, results of
operations and financial condition, particularly if such litigation forces the
Company to make substantial changes to its name and trademark usage. Any name
change effected after the Offering could result in confusion to investors,
which could adversely affect the market price of the Common Stock. In
addition, in January 1998, Xoom.com became aware that Imageline claimed to own
the copyright in certain images that an unrelated third party had licensed to
Xoom.com. See "Risk Factors--Risks of Infringement of Intellectual Property"
and "--Legal Proceedings."

The Company currently licenses from third parties certain technologies
incorporated into the Company's Web site. As it continues to introduce new
services that incorporate new technologies, it may be required to license
additional technology from others. There can be no assurance that these third-
party technology licenses will continue to be available to the Company on
commercially reasonable terms, if at all. The inability of the Company to
obtain any of these technology licenses could result in delays or reductions
in the introduction of new services or could adversely affect the performance
of its existing services until equivalent technology is identified, licensed
and integrated.

In addition, the Company believes that its success to date and its future
success will depend in part upon its ability to provide reviews and other
information about the products that it sells. As an online publisher, the
Company may face potential liability for copyright, trademark or patent
infringement, defamation or other claims based on the nature and content of
materials that the Company publishes or distributes. Defending such claims, or
liability arising out of such claims, could have a material adverse effect on
the Company. Moreover, because of the interconnectivity currently provided on
the Company's Web site, and because the Company expects to greatly expand such
interconnectivity in the future, the Company could be exposed to liability
with respect to content that it does not control on member Web sites, in
member chat rooms and from other services available currently or in the
future. Insurance carried by the Company may not be sufficient to offset
liability arising from these types of liabilities, and any liability in excess
of such coverage could have a material adverse effect on the Company. See
"Risk Factors--Risks Of Infringement Of Intellectual Property" and "--
Liability For Online Content" and Note 6 of Notes to Consolidated Financial
Statements."

LEGAL PROCEEDINGS

Xoom.com acquires rights to license and distribute software clips, including
clip art, and movies from third parties. In June 1997, Sprint, an Australian
company, licensed to Xoom.com certain clip art. From inception to September
30, 1998, the Company received less than 1% of its total net revenue under the
Sprint license and, since September 30, 1998, the Company has not received any
net revenue under the Sprint license. In January 1998, Xoom.com became aware
that Imageline claimed to own the copyright in certain images that Sprint had
licensed to Xoom.com. Some clip art images that Imageline alleged infringed
Imageline's copyright were included by Xoom.com in versions of Xoom.com's Web
Clip Empire product and licensed by Xoom.com to third parties, including other
software clip publishers. Xoom.com's contracts with such publishers require
the

60
<PAGE>

Company to indemnify the publisher if copyrighted material licensed from the
Company infringes a copyright. Imageline claims that the Company's
infringement of Imageline's copyright is ongoing, Xoom.com and Imageline have
engaged in discussions, but were unable to reach any agreement regarding a
resolution of this matter. On August 27, 1998, Xoom.com filed a lawsuit in the
United States District Court for the Eastern District of Virginia against
Imageline, certain parties affiliated with Imageline, and Sprint regarding
Xoom.com's and its licensees' alleged infringement on Imageline's copyright in
certain clip art that Xoom.com licensed from Sprint. The lawsuit seeks, among
other relief, disclosure of information from Imageline concerning the alleged
copyright infringement, a declaratory judgement concerning the validity and
enforceability of Imageline's copyrights and copyright registrations, a
declaratory judgement regarding damages, if any, owed by Xoom.com to
Imageline, and indemnification from Sprint for damages, if any, owed by the
Company to Imageline. There is no contractual limitation on Sprint's
indemnification obligations. On September 17, 1998, Imageline filed an answer
and counterclaim, denying the Company's allegations and requesting injunctive
relief and damages for the Company's alleged infringements of Imageline's clip
art properties. While the Company is seeking indemnification from Sprint for
damages, there can be no assurance that Sprint will be able to fulfill the
indemnity obligations under its license agreement with the Company. There can
be no assurance as to the outcome of the claims asserted by Imageline and the
related litigation. In addition, the Company may be subject to claims by third
parties seeking indemnification from the Company in connection with the
alleged infringement of the Imageline copyrights. Any such claims or
litigation could result in a decision adverse to the Company. A decision
adverse to the Company in any of these matters could have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition, litigation, regardless of its merits, could result in
substantial costs to the Company and divert management's attention from the
Company's operations. In light of the Imageline claim and the resulting
litigation, the Company is evaluating its policies and procedures regarding
its licensing and distribution of software clips. There can be no assurance
that third parties will not assert infringement claims against the Company.
Any misappropriation or infringement could result in litigation which could
have a material adverse effect on the Company's business, results of
operations and financial condition. See "Risk Factors--Dependence On
Intellectual Property Rights," "--Risks Of Infringement Of Intellectual
Property" and Note 6 of Notes to Consolidated Financial Statements.

EMPLOYEES

As of September 30, 1998, the Company had 64 full-time employees, including
29 in sales and marketing, 19 in operating and development and 16 in finance
and administration. The Company's future success will depend, in part, on its
ability to continue to attract, retain and motivate highly qualified technical
and management personnel, for whom competition is intense. From time to time,
the Company also employs independent contractors to support its research and
development, marketing, sales and support and administrative organizations.
The Company's employees are not covered by any collective bargaining
agreement, and the Company has never experienced a work stoppage. The Company
believes its relations with its employees are good.

FACILITIES

The Company's headquarters are currently located in a leased facility in San
Francisco, California, consisting of approximately 18,700 square feet of
office space, which is under a lease that expires September 30, 2007. The
Company's former headquarters were located in a leased facility in San
Francisco, California, consisting of approximately 6,500 square feet of office
space, which is under a lease that expires January 31, 1999. The Company has
entered into a sublease with a third party for 2,800 square feet of this
space. The Company has also leased approximately 1,000 square feet of office
space in New York through May 31, 2001 for its East Coast sales offices.

61
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company and their
respective ages as of September 30, 1998, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Chris Kitze(1)......... 39 Chairman of the Board, Secretary and Director
Laurent Massa.......... 38 Chief Executive Officer, President and Director
John Harbottle......... 44 Vice President, Finance and Chief Financial Officer
Vijay Vaidyanathan..... 33 Chief Technology Officer and Director
Scott Duffy............ 28 Vice President, Sponsorships and Online Sales Development
Russell S. Hyzen....... 33 Vice President, Business Development
Alicia Marziali........ 33 Vice President, Advertising Sales
Janine Popick.......... 31 Vice President, Direct Marketing
Bob Ellis.............. 62 Publisher and Director
James Heffernan(1)(2).. 57 Director
Jeffrey Ballowe(1)..... 43 Director
Philip Schlein(2)...... 64 Director
Robert C. Harris, Jr... 52 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee

Chris Kitze co-founded the Company and has served as Chairman of the Board
and Secretary since that time. Since December 1996, Mr. Kitze has been an
independent investor. From April 1996 until December 1996, Mr. Kitze also
served as the Company's President and Chief Executive Officer. In June 1995,
Mr. Kitze co-founded Point Communications Corporation ("Point Communications"),
a Web directory company, which was acquired by Lycos in October 1995, after
which Mr. Kitze served as Lycos' Vice President of Marketing until June 1996.
From June 1994 until June 1995, Mr. Kitze served as Publisher at Softkey
International (now The Learning Company). In September 1991, Mr. Kitze co-
founded Aris Entertainment, a CD-ROM publishing company and served as its
President until June 1994. Mr. Kitze holds a B.S. in Chemical Engineering from
the University of Colorado.

Laurent Massa co-founded the Company and has served as its Chief Executive
Officer and President since December 1996. Mr. Massa has also served on the
Company's Board of Directors since February 1998. From September 1996 to June
1998, Mr. Massa also served as the Company's Chief Financial Officer. From May
1995 until September 1996, Mr. Massa served as Vice President of New Ventures
of Olivetti Telemedia, a telecommunications company based in Milan. Prior to
joining Olivetti, Mr. Massa joined WordStar International in March 1991 as
Director of Marketing, Europe, and became Vice President, International of
Softkey International (now The Learning Company), following Softkey's merger
with WordStar and Spinaker in February 1993. Mr. Massa holds an MBA from the
European Business School.

John Harbottle has served as the Company's Vice President, Finance and Chief
Financial Officer since August 5, 1998. From February 1996 to February 1998,
Mr. Harbottle was the Vice President of Finance and Chief Financial Officer of
Mastering Computers, Inc., an information technology training and CBT software
development and manufacturing company and then worked as an independent
consultant for Mastering Computers, Inc. from February to July 1998. From
October 1994 to February 1996, Mr. Harbottle was the Vice President of Finance
and Chief Financial Officer of Zenger-Miller, an international
management/leadership training, consulting and education company. From January
1992 to October 1994, Mr. Harbottle was the Vice President of Finance and Chief
Financial Officer of IFS, an international consumer products and direct
marketing company. Mr. Harbottle is a director of WebSoftware Corporation. Mr.
Harbottle holds a B.S. in Business Administration from the University of
California, Berkeley.

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<PAGE>

Vijay Vaidyanathan has served as the Company's Chief Technology Officer and
as a Director since March 1998. Prior to joining the Company, Mr. Vaidyanathan
co-founded Paralogic Corporation, an internet software company, and served as
its President and Chief Executive Officer from January 1995 until its
acquisition by the Company in March 1998. Prior to founding Paralogic
Corporation Mr. Vaidyanathan served as Engineering Manager at Frontline Design
Automation, an electronic design automation company from July 1994 until
December 1994 and as Engineering Manager at Zycad Corporation, an electronic
design automation company from February 1991 until July 1994. Mr. Vaidyanathan
also serves on the board of Paralogic Software Corporation, a software
company, and Santa Clara Valley School, Inc., a non-profit school he co-
founded in 1995. Mr. Vaidyanathan holds an M.S. in Instrumentation Technology
from the Birla Institute of Technology and Science in India and an M.S. in
Computer Science from the State University of New York at Albany.

Scott Duffy has served as the Company's Vice President, Sponsorships and
Online Sales Development since August 1998. Prior to joining the Company, Mr.
Duffy served as Western Region Sales Manager for SportsLine USA, Inc. from
August 1997 to August 1998. From January 1996 to March 1997, Mr. Duffy held a
number of positions for Quote.com, Inc., an Internet financial services
company, including Business Development Manager and most recently Director of
Advertising Sales. Prior to that, Mr. Duffy served as an Account Executive for
Seven Worldwide, Inc., a worldwide imaging company that manages the production
of advertising, promotional and packaging artwork and interactive multimedia,
from 1993 to 1995.

Russell S. Hyzen has served as the Company's Vice President, Business
Development since December 1997 and as the Company's director of Business
Development from November 1996 to December 1997. Prior to joining the Company,
Mr. Hyzen served as Business Development Manager for Quote.com, an Internet
Financial Services Company, from December 1995 to October 1996. From November
1993 to December 1995, he worked as an independent consultant. In August 1991,
Mr. Hyzen founded Pacific Coast Lending, a mortgage brokerage company, and he
served as its President until November 1993. Mr. Hyzen holds a B.S. in
Business Administration from California State University, Northridge.

Alicia Marziali has served as the Company's Vice President, Advertising
Sales, since December 1997. From October 1995 to November 1997, Ms. Marziali
held a number of management positions with Lycos most recently as Director of
Sales, Eastern Region. From December 1994 until September 1995, Ms. Marziali
served as Director of Network Sales for Point Communications. Prior to joining
Point Communications, Ms. Marziali was a Regional Sales Manager for College
Bound Magazine from September 1993 until October 1994. From February 1992 to
August 1993, she was employed as a Senior Account Manager for Linnette &
Harrison, an advertising agency. From January 1990 to December 1992, she
worked as an Account Manager for Chalek & Chalek, an advertising agency. Ms.
Marziali holds a B.A. in Communications from Montclair State University.

Janine Popick has served as the Company's Vice President, Direct Marketing
since April 1998. From November 1997 until April 1998, Ms. Popick served as
Manager of Direct Marketing for FileMaker, Inc., a wholly-owned subsidiary of
Apple Computer. From January 1996 to November 1997, Ms. Popick served as
Manager of Direct Marketing of Insignia Solutions, a computer software
company. Prior to joining Insignia Solutions, Ms. Popick served as Manager of
Direct Marketing of Claris Corporation, a computer software company, from
September 1994 to January 1996. From December 1993 to August 1994, Ms Popick
served as Manager of Direct Marketing for Symantec Corporation, a software
company. She was an account executive at JDA Corp., an enterprise software
solutions company, from September 1993 to December 1993. Ms Popick holds a
B.A. in Communications and English from Hofstra University.

Bob Ellis has served as a director of the Company and as publisher since
August 1997. From July 1995 to July 1997, Mr. Ellis was President of Paris
Productions, an online publishing company. In January 1988, he founded Compact
Publishing Company ("Compact"), a publishing company and served as its Chief
Executive Officer until its acquisition by Softkey International (now The
Learning Company) in July 1994, after which he served as Vice President of
Publishing of Softkey until July 1995. Prior to founding Compact, Mr. Ellis
was a Vice President of Time-Life, Inc. and President of Time-Life Software.
Mr. Ellis holds a B.A. in Philosophy from Yale and an M.A. in History from the
University of Chicago.

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<PAGE>

James J. Heffernan has served as a director of the Company since June 1998.
Mr. Heffernan co-founded USWeb Corporation, an internet professional services
company in December 1995 and has served as its Executive Vice President, Chief
Financial Officer, Secretary and a Director since that time. From May 1993 to
July 1994, he worked as an independent consultant and then joined Interlink
Computer Sciences, Inc. in July 1994 as Chief Financial Officer, where he
served until January 1996. From March 1992 to May 1993, Mr. Heffernan served
as Chief Financial Officer and Chief Operating Officer of Serius. Mr.
Heffernan has also served as an officer of several other technology companies,
including Software Publishing Corp., Zital Inc. and Measurex Corp. Mr.
Heffernan is a director of Savoir Technology Group, Inc and USWeb Corporation.
Mr. Heffernan has a B.S. in Business and an MBA from Santa Clara University.

Jeffrey Ballowe has served as a director of the Company since July 1998.
From 1991 to December 1997, Mr. Ballowe served in magazine publishing sales at
Ziff-Davis, including as Publisher of PC Magazine and held a number of
corporate positions in which he was responsible for establishing Ziff-Davis
European operations, managing Ziff-Davis' largest magazine group, launching
Ziff-Davis' Internet publications, creating ZDNet and launching ZDTV. At his
retirement from Ziff-Davis in December 1997, Mr. Ballowe was President of the
Ziff-Davis Interactive Media and Development Group, in charge of Ziff-Davis'
Internet publications, ZDNet, ZDTV and all development at Ziff-Davis. Prior to
working at Ziff-Davis, Mr. Ballowe worked as a marketing executive at various
technology and marketing services companies. Currently, Mr. Ballowe is
Chairman of the Board of Directors of Dejanews, serves on the boards of USWeb,
Personalogic and VerticalNet, and is an Internet Capital Group Venture
Partner. Mr. Ballowe holds a B.A. in French from Lawrence University, an M.A.
in French from the University of Wisconsin-Madison, and an MBA from the
University of Chicago.

Philip Schlein has served as a Director of the Company since July 1998.
Since April 1985, Mr. Schlein has been a general partner of U.S.
VenturePartners, a venture capital firm specializing in retail and consumer
products companies. From January 1974 to January 1985, Mr. Schlein served as
President and Chief Executive Officer of Macy's California, a division of R.
H. Macy & Co., Inc., a department store chain. Mr. Schlein also serves on the
Board of Directors of Ross Stores, Inc., ReSound Corporation, Quick Response
Services, Burnham Pacific Properties, Inc. and Bebe Stores. Mr. Schlein holds
a B.S. in Economics from the University of Pennsylvania.

Robert C. Harris, Jr. has served as a director of the Company since August
1998. Mr. Harris is a Senior Managing Director at Bear, Stearns & Co. Inc.
From 1989 to October 1997, he was a co-founder and Managing Director of
Unterberg Harris. From 1984 to 1989, he was a General Partner, Managing
Director and Director of Alex.Brown & Sons Inc. Mr. Harris is also a director
of N2K, Inc., MDSI Mobile Data Solutions, Inc. and SoftNet Systems, Inc. Mr.
Harris holds a B.S. and MBA from the University of California at Berkeley.

All Directors hold office until the next annual meeting of the stockholders
and until their successors have been duly elected and qualified. Executive
Officers are elected by and serve at the direction of the Board of Directors.

There are no family relationships among any of the Directors or Executive
Officers of the Company other than between Mr. Kitze and Ms. Marziali, who is
Mr. Kitze's sister-in-law.

BOARD COMMITTEES

The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee, consisting of Chris Kitze, James J. Heffernan
and Jeffrey Ballowe, recommends the selection of independent public
accountants to the Board of Directors, reviews the scope and results of the
audit and other services provided by the Company's independent accountants,
and reviews the Company's accounting practices and its systems of internal
accounting controls.

The Compensation Committee, consisting of James J. Heffernan and Philip
Schlein, reviews and approves the salaries, bonuses and other compensation
payable to the Company's executive officers and administers and makes
recommendations concerning the Company's employee benefit plans. See "Certain
Transactions."

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<PAGE>

DIRECTOR COMPENSATION

The Company's directors receive no cash compensation for their services as
Board members or committee members and are not reimbursed for expenses
incurred in connection with attending Board and committee meetings. On May 15,
1998, Mr. Heffernan, an outside director, entered into a consulting agreement
with the Company pursuant to which he is entitled to receive compensation in
the form of Common Stock and options to purchase Common Stock for his
services, which services include serving as a member of the Board of
Directors. See "Certain Transactions."

On August 4, 1997, Bob Ellis, one of the Company's outside directors,
entered into a letter agreement (the "Ellis Agreement") with the Company
pursuant to which Mr. Ellis agreed to provide certain services to the Company,
including serving as a member of the Board of Directors. The Ellis Agreement
provides for compensation in the form of options to buy 222,222 shares of the
Company's Common Stock at an exercise price of $0.03 per share, which will
vest ratably over an 18 month period. The Ellis Agreement will terminate after
18 months, on February 3, 1999.

On July 28, 1998, Jeffrey Ballowe, one of the Company's outside directors,
entered into a letter agreement (the "Ballowe Agreement") with the Company
pursuant to which Mr. Ballowe agreed to provide certain services to the
Company, including serving as a member of the Board of Directors and providing
consulting services relating to business strategy and strategic alliances. The
Ballowe Agreement provides for compensation in the form of options to buy
23,334 shares of the Company's Common Stock at an exercise price of $6.75 per
share, which will vest monthly over a two year period or immediately upon a
sale of the Company. Mr. Ballowe also receives a monthly fee of $10,000 as
compensation for consulting services to be provided to the Company, based upon
20 hours of service per month at a rate of $500 per hour. Prior to the
Offering, this fee is payable in options to purchase shares of the Company's
Common Stock, at an exercise price of $6.75 per share, and following the
Offering, this fee will be payable in shares of Common Stock based upon the
stock's trading price. Mr. Ballowe will also receive compensation equal to
5% of all funds raised by him for the Company, payable in options to purchase
shares of the Company's Common Stock prior to the Offering or, following the
Offering, payable in the Company's Common Stock. The Ballowe Agreement has a
term of 18 months.

On July 28, 1998, Philip Schlein, one of the Company's outside directors,
entered into a letter agreement (the "Schlein Agreement") with the Company
pursuant to which Mr. Schlein agreed to provide certain services to the
Company, including serving as a member of the Board of Directors and providing
consulting services relating to retail sales and merchandise. The Schlein
Agreement provides for compensation in the form of options to buy 23,334
shares of the Company's Common Stock at an exercise price of $6.75 per share,
which will vest monthly over a two year period or immediately upon a sale of
the Company. Mr. Schlein also receives a monthly fee of $10,000 payable in the
Company's Common Stock as compensation for consulting services to be provided
to the Company, based upon 20 hours of service per month at a rate of $500 per
hour. The Schlein Agreement has a term of 18 months.

On July 28, 1998, Robert Harris, one of the Company's outside directors,
entered into a letter agreement (the "Harris Agreement") with the Company
pursuant to which Mr. Harris agreed to provide certain services to the
Company, including serving as a member of the Board of Directors and providing
consulting services relating to business strategy and development. The Harris
Agreement provides for compensation in the form of options to buy 23,334
shares of the Company's Common Stock at an exercise price of $6.75 per share,
which will vest monthly over a two year period or immediately upon a sale of
the Company. Mr. Harris also receives a monthly fee of $10,000 payable in the
Company's Common Stock as compensation for consulting services to be provided
to the Company, based upon 20 hours of service per month at a rate of $500 per
hour. The Harris Agreement has a term of 18 months.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee of the Company serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.

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<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and each of the other most highly
compensated executive officers of the Company whose aggregate salary, bonus
and other compensation exceeded $100,000 during the fiscal year ended
December 31, 1997 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS/SARS (#)
- --------------------------- ---------- -------------------------
<S> <C> <C> <C>
Laurent Massa............................. $ 175,000 -- 83,334
President and Chief Executive Officer
Russell S. Hyzen.......................... $ 120,000 $ 3,333 53,334
Vice President, Business Development
</TABLE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning grants to
purchase shares of Common Stock to each of the Named Executive Officers during
the fiscal year ended December 31, 1997.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM(3)
OPTIONS FISCAL YEAR PRICE PER EXPIRATION -------------------------
NAME GRANTED(1) 1997(2) SHARE DATE 0%($) 5%($) 10%($)
- ---- ---------- ------------ --------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Laurent Massa........... 83,334 13.2% $0.03 3/15/07 $36,250 $ 60,619 $ 98,007
Russell S. Hyzen........ 53,334 8.4% $0.03 11/02/07 88,800 145,652 232,874
</TABLE>
- --------
(1) Represents options granted outside the Company's stock option plans.

(2) Based on options to purchase an aggregate of 632,982 shares of Common
Stock granted during fiscal 1997.

(3) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), shown are the hypothetical gains or "option spreads"
that would exist for the respective options. These gains are based on
assumed rates of annual compounded stock price appreciation of 0%, 5% and
10% from the date the option was granted over the full option term,
assuming a fair market value of $0.47 on the date of grant for Mr.
Massa's options and $1.70 on the date of grant for Mr. Hyzen's options.
The 0%, 5% and 10% assumed rates of appreciation are mandated by the
Commission and do not represent the Company's estimate or projection of
future increases in the price of its Common Stock.

AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1997 AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth certain information as of December 31, 1997
concerning exercisable and unexercisable stock options held by each of the
Named Executive Officers.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Laurent Massa........... -- -- 152,604 / 189,063 $276,976 / 343,149
Russell S. Hyzen........ -- -- 58,889 / 77,778 106,883 / 141,167
</TABLE>
- --------

(1) Based on the fair market value of the Company's Common Stock at December
31, 1997, of $1.85 per share (as determined by the Company's Board of
Directors), less the exercise price for such shares.

66
<PAGE>

EMPLOYMENT AGREEMENTS

On July 1, 1998, Laurent Massa, the Company's President and Chief Executive
Officer, entered into an employment agreement (the "Massa Agreement") with the
Company. The Massa Agreement provides for an annual salary of $216,000. Mr.
Massa is also eligible for an annual bonus of up to 33% of his base salary,
paid quarterly based on the following criteria: (i) exceeding quarterly
revenue goals: 50% of the eligible Bonus; (ii) achieving specific management
team goals: 25% of the eligible bonus and (iii) achieving personal objectives
that improve the organization: 25% of the eligible bonus. The goals will be
set and reviewed quarterly by the Compensation Committee of the Board. Should
the Company terminate Mr. Massa without Cause (as defined in the Massa
Agreement), the Company is required to provide Mr. Massa 180 days' advanced
written notice, and the Company may in its discretion terminate Mr. Massa's
employment at any time prior to the end of such notice period, provided the
Company pays Mr. Massa an amount equal to the base compensation plus benefits
Mr. Massa would have earned through the balance of the above notice period. In
the event the Company exercises it right to terminate Mr. Massa without Cause,
Mr. Massa shall be immediately entitled to exercise 100% of any stock options
granted to him by the Company that had not previously vested. If Mr. Massa is
terminated by the Company without Cause, after the beginning of trading of the
Company's stock on a public market, he may exercise his vested stock option
for a four month period from the date Mr. Massa is notified by the Company of
the intention to terminate his employment. Should the Company terminate Mr.
Massa for Cause, the Company is required to pay Mr. Massa all compensation due
on the date of termination. In the event of a Change in Control or Corporate
Transaction (as defined in the Massa Agreement) pursuant to which Mr. Massa's
employment with the Company is involuntarily terminated, with or without
cause, Mr. Massa will be entitled to payment of an amount equal to one year's
base compensation plus benefits and any and all stock options previously
granted to Mr. Massa by the Company will immediately become fully vested and
exercisable. Pursuant to the terms of the Massa Agreement, Mr. Massa may
terminate his employment with the Company at any time for any reason by
providing the Company with thirty days written advance notice. Should Mr.
Massa's employment with the Company terminate for any reason, the Massa
Agreement further provides that Mr. Massa (i) will not use any Proprietary
Information of the Company with the Company's prior written consent, (ii) will
not use any Confidential Information to compete against the Company or any of
its employees and (iii) will not, for one year following termination, solicit
any customer or employee of the Company. Mr. Massa will be eligible for an
annual review of the Massa Agreement no later than July 20, 1999. Pursuant to
a letter agreement entered into prior to the Massa Agreement, the Company
granted to Mr. Massa options to purchase up to an aggregate of 341,667 shares
of Common Stock at a per share exercise price of $0.03.

On August 4, 1998, John Harbottle, the Company's Chief Financial Officer,
entered into an employment agreement (the "Harbottle Agreement") with the
Company. The Harbottle Agreement provides for an annual salary of $144,000.
Mr. Harbottle is also eligible for a discretionary quarterly bonus of up to
$10,000. Should the Company terminate Mr. Harbottle without Cause (as defined
in the Harbottle Agreement), the Company is required to provide Mr. Harbottle
180 days' advanced written notice, and the Company may in its discretion
terminate Mr. Harbottle's employment at any time prior to the end of such
notice period, provided the Company pays Mr. Harbottle an amount equal to the
base compensation plus benefits Mr. Harbottle would have earned through the
balance of the above notice period. In the event the Company exercises it
right to terminate Mr. Harbottle without Cause, Mr. Harbottle shall be
immediately entitled to exercise 100% of any stock options granted to him by
the Company that had not previously vested. If Mr. Harbottle is terminated by
the Company without Cause after the beginning of trading of the Company's
stock on a public market, he may exercise his vested stock options for a four
month period after being notified by the Company of the intention to terminate
his employment. Should the Company terminate Mr. Harbottle for Cause, the
Company is required to pay Mr. Harbottle all compensation due on the date of
termination. In the event of a Change in Control or Corporate Transaction (as
defined in the Harbottle Agreement) pursuant to which Mr. Harbottle's
employment with the Company is involuntarily terminated, with or without
cause, Mr. Harbottle will be entitled to payment of an amount equal to 6
months base compensation plus benefits and all stock options previously
granted to Mr. Harbottle by the Company will immediately become fully vested
and exercisable. Pursuant to the terms of the Harbottle Agreement, Mr.
Harbottle may terminate his employment with the Company at any time for any

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<PAGE>

reason by providing the Company with thirty days written advance notice.
Should Mr. Harbottle's employment with the Company terminate for any reason,
the Harbottle Agreement further provides that Mr. Harbottle (i) will not use
any Proprietary Information of the Company with the Company's prior written
consent, (ii) will not use any Confidential Information to compete against the
Company or any of its employees and (iii) will not, for one year following
termination, solicit any customer or employee of the Company. Pursuant to a
letter agreement entered into prior to the Harbottle Agreement, the Company
granted to Mr. Harbottle options to purchase up to 86,667 shares of Common
Stock at a per share exercise price of $6.75 and options to purchase up to
20,000 shares of Common Stock at a per share exercise price of $12.00.

The Company has entered into an employment agreement (the "Vaidyanathan
Agreement"), dated March 10, 1998, as amended on August 12, 1998, with Vijay
Vaidyanathan, its Chief Technical Officer. The Agreement provides that Mr.
Vaidyanathan receives a yearly salary of $120,000. Mr. Vaidyanathan is also
entitled to participate in the Company's medical, dental and vision insurance
plan and in any other employee benefit plan adopted by the Company. Should the
Company terminate Mr. Vaidyanathan without Cause (as defined in the
Vaidyanathan Agreement), the Company is required to provide Mr. Vaidyanathan
90 days' advanced written notice, and the Company may in its discretion
terminate Mr. Vaidyanathan's employment at any time prior to the end of such
notice period, provided the Company pays Mr. Vaidyanathan an amount equal to
the base compensation plus benefits Mr. Vaidyanathan would have earned through
the balance of the above notice period. In the event the Company exercises it
right to terminate Mr. Vaidyanathan without Cause, Mr. Vaidyanathan shall be
immediately entitled to exercise 100% of any stock options granted to him by
the Company that had not previously vested. If Mr. Vaidyanathan is terminated
by the Company without Cause after the beginning of trading of the Company's
stock on a public market, he may exercise his vested stock options for a four
month period after being notified by the Company of the intention to terminate
his employment. Should the Company terminate Mr. Vaidyanathan for Cause, the
Company is required to pay Mr. Vaidyanathan all compensation due on the date
of termination. In the event of a Change in Control or Corporate Transaction
(as defined in the Vaidyanathan Agreement) pursuant to which Mr.
Vaidyanathan's employment with the Company is involuntarily terminated, with
or without cause, Mr. Vaidyanathan will be entitled to payment of an amount
equal to 6 months base compensation plus benefits and all stock options
previously granted to Mr. Vaidyanathan by the Company will immediately become
fully vested and exercisable. Pursuant to the terms of the Vaidyanathan
Agreement, Mr. Vaidyanathan may terminate his employment with the Company at
any time for any reason by providing the Company with thirty days written
advance notice. Should Mr. Vaidyanathan's employment with the Company
terminate for any reason, the Vaidyanathan Agreement further provides that Mr.
Vaidyanathan (i) will not use any Proprietary Information of the Company with
the Company's prior written consent, (ii) will not use any Confidential
Information to compete against the Company or any of its employees and (iii)
will not, for one year following termination, solicit any customer or employee
of the Company. Mr. Vaidyanathan will be eligible for an annual review of the
Vaidyanathan Agreement no later than August 12, 1999. Under the Vaidyanathan
Agreement, the Company granted to Mr. Vaidyanathan options to purchase up to
93,334 shares of Common Stock at a per share exercise price of $2.31.

On July 20, 1998, Russell S. Hyzen, the Company's Vice President Business
Development, entered into an employment agreement (the "Hyzen Agreement") with
the Company. The Hyzen Agreement provides for an annual salary of $120,000 and
a discretionary bonus of up to $10,000 per quarter to be paid upon achievement
of personal and company targets to be defined. Should the Company terminate
Mr. Hyzen without Cause (as defined in the Hyzen Agreement), the Company is
required to provide Mr. Hyzen 90 days' advanced written notice, and the
Company can, in its discretion, terminate Mr. Hyzen's employment at any time
prior to the end of such notice period, provided the Company pays Mr. Hyzen an
amount equal to the base compensation Mr. Hyzen would have earned through the
balance of the above notice period plus benefits. In the event the Company
exercises it right to terminate Mr. Hyzen without Cause, Mr. Hyzen shall be
immediately entitled to exercise 100% of any stock options granted to him by
the Company that had not previously vested. If Mr. Hyzen is terminated by the
Company without Cause, after the beginning of trading of the Company's stock
on a public market, he may exercise his vested stock option for a four month
period after being informed by the Company of the intention to terminate his
employment. Should the Company terminate Mr. Hyzen for Cause, the Company

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<PAGE>

is required to pay Mr. Hyzen all compensation due on the date of termination.
In the event of a Change in Control or Corporate Transaction (as defined in
the Hyzen Agreement) pursuant to which Mr. Hyzen's employment with the Company
is involuntarily terminated for any reason, with or without cause, Mr. Hyzen
will be entitled to payment of an amount equal to six month's base
compensation plus benefits and any and all stock options previously granted to
Mr. Hyzen by the Company will immediately become fully vested and exercisable.
Pursuant to the terms of the Hyzen Agreement Mr. Hyzen may terminate his
employment with the Company at any time for any reason by providing the
Company with thirty days written advance notice. Should Mr. Hyzen's employment
with the Company terminate for any reason, the Hyzen Agreement further
provides that Mr. Hyzen (i) will not use any Proprietary Information of the
Company with the Company's prior written consent, (ii) will not use any
Confidential Information to compete against the Company or any of its
employees and (iii) will not, for one year following termination, solicit any
customer or employee of the Company. Mr. Hyzen will be eligible for an annual
review of the Hyzen Agreement no later than November 30, 1998. Pursuant to a
letter agreement entered into prior to the Hyzen Agreement, the Company
granted to Mr. Hyzen options to purchase up to 136,667 shares of Common Stock
at a per share exercise price of $0.03. In June 1998, the Company granted Mr.
Hyzen options to purchase up to an additional 13,334 shares of Common Stock at
a per share exercise price of $3.33.

BENEFIT PLANS

1998 Stock Incentive Plan

The Company's 1998 Plan was approved by the Board of Directors and by the
Company's stockholders in February 1998. The 1998 Plan provides for the grant
of options intended to qualify as "incentive stock options" under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), nonqualified
stock options and stock appreciation rights. The 1998 Plan also provides for
the transfer or sale of Common Stock to selected individuals in connection
with the performance of services to the Company or its affiliates. A total of
2,000,000 shares of Common Stock have been reserved for issuance under the
1998 Plan. As of September 30, 1998, giving effect to an increase in the
number of shares reserved for issuance under the 1998 Plan from 1,166,667 to
2,000,000 that was approved and adopted by the Company's Board of Directors
and stockholders as of November 16, 1998, no shares of Common Stock had been
issued upon exercise of options granted under the 1998 Plan, 673,865 shares
remained reserved for future issuance upon the exercise of outstanding
options, and 1,326,135 shares remained available for future grant. The Board
of Directors or a committee designated by the Board is authorized to
administer the 1998 Plan, including the selection of individuals eligible for
grants of options, issuances of Common Stock, the terms of such grants or
issuances, possible amendments to the terms of such grants or issuances and
the interpretation of the terms of, and adoption of rules for, the 1998 Plan.
The maximum term of any stock option granted under the 1998 Plan is ten years,
except that with respect to incentive stock options granted to a person
possessing more than 10% of the combined voting power of the Company (a "10%
Stockholder"), the term of such stock options shall be for no more than five
years.

The exercise price of nonqualified stock options and incentive stock options
granted under the 1998 Plan must be at least 85% and 100%, respectively, of
the fair market value of the Common Stock on the grant date except that the
exercise price of incentive stock options granted to a 10% Stockholder must be
at least 110% of such fair market value on the grant date. The aggregate fair
market value on the date of grant of the Common Stock for which incentive
stock options are exercisable for the first time by an employee during any
calendar year may not exceed $100,000. The purchase price of shares of Common
Stock granted under the 1998 Plan must be at least 85% of the fair market
value of the Common Stock on the grant date except that the purchase price of
shares of Common Stock granted to a 10% Stockholder must be at least 100% of
such fair market value on the grant date. The individual agreements under the
1998 Plan may provide for repurchase rights for the Company under the terms
and conditions set forth in the 1998 Plan. The 1998 Plan will terminate in
2008, unless earlier terminated by the Board.

In the event of a merger in which the Company is not the surviving entity,
the sale of all or substantially all of the Company's assets or a reverse
merger resulting in a change of control of the Company, each grant which is at
the time outstanding under the Plan shall, unless the Administrator in its
discretion decides differently,

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<PAGE>

immediately prior to the specified effective date of such transaction,
automatically become fully vested and exercisable with respect to 75% of the
unvested shares at the time represented by such grant. To the extent it has
not been previously exercised, the grant will terminate immediately prior to
the consummation of such proposed transaction, unless the grant is assumed or
an equivalent grant is substituted by the successor corporation.

1998 Employee Stock Purchase Plan

The Company's Stock Purchase Plan was approved by the Board of Directors in
August 1998 and will be submitted to the Company's stockholders for approval
prior to the Offering. The Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Code in order to
provide employees of the Company with an opportunity to purchase Common Stock
through payroll deductions. An aggregate of 300,000 shares of the Company's
Common Stock has been reserved for issuance under the Stock Purchase Plan and
available for purchase thereunder, subject to adjustment in the event of a
stock split, stock dividend or other similar change in the Common Stock or the
capital structure of the Company. All employees of the Company (and employees
of "subsidiary corporations" and "parent corporations" of the Company (as
defined by the Code) designated by the administrator of the Stock Purchase
Plan) whose customary employment is for more than five months in any calendar
year and more than 20 hours per week are eligible to participate in the Stock
Purchase Plan. Employees hired after the consummation of the Offering are
eligible to participate in the Stock Purchase Plan, subject to a six-month
waiting period after hiring. Non-employee directors, consultants, and
employees subject to the rules or laws of a foreign jurisdiction that prohibit
or make impractical the participation of such employees in the Stock Purchase
Plan are not eligible to participate in the Stock Purchase Plan.

The Stock Purchase Plan designates Offer Periods, Purchase Periods and
Exercise Dates. Offer Periods are generally overlapping periods of 24 months.
The initial Offer Period begins on the effective date of the Stock Purchase
Plan, which is the effective date of the Company's Registration Statement
relating to the Offering, and ends on December 31, 2000. Additional Offer
Periods will commence each July 1 and January 1. Purchase Periods are
generally six month periods, with the initial Purchase Period commencing on
the effective date of the Stock Purchase Plan and ending on June 30, 1999.
Thereafter, Purchase Periods will commence each July 1 and January 1. Exercise
Dates are the last day of each Purchase Period. In the event of a merger of
the Company with or into another corporation, the sale of all or substantially
all of the assets of the Company, or certain other transactions in which the
stockholders of the Company before the transaction own less than 50% of the
total combined voting power of the Company's outstanding securities following
the transaction, the administrator of the Stock Purchase Plan may elect to
shorten the Offer Period then in progress.

On the first day of each Offer Period, a participating employee is granted a
purchase right which is a form of option to be automatically exercised on the
forthcoming Exercise Dates within the Offer Period during which deductions are
to be made from the pay of participants (in accordance with their
authorizations) and credited to their accounts under the Stock Purchase Plan.
When the purchase right is exercised, the participant's withheld salary is
used to purchase shares of Common Stock of the Company. The price per share at
which shares of Common Stock are to be purchased under the Stock Purchase Plan
during any Purchase Period is the lesser of (a) 85% of the fair market value
of the Common Stock on the date of the grant of the option (the commencement
of the Offer Period) or (b) 85% of the fair market value of the Common Stock
on the Exercise Date (the last day of a Purchase Period). The participant's
purchase right is exercised in this manner on each Exercise Date arising in
the Offer Period unless, on the first day of any Purchase Period, the fair
market value of the Common Stock is lower than the fair market value of the
Common Stock on the first day of the Offer Period. If so, the participant's
participation in the original Offer Period is terminated, and the participant
is automatically enrolled in the new Offer Period effective the same date.

Payroll deductions may range from 1% to 10% (in whole percentage increments)
of a participant's regular base pay, exclusive of bonuses, overtime, shift-
premiums, commissions, reimbursements or other expense allowances.
Participants may not make direct cash payments to their accounts. The maximum
number of shares of Common Stock which any employee may purchase under the
Stock Purchase Plan during an Purchase Period is 1,250 shares. Certain
additional limitations on the amount of Common Stock which may be purchased
during any calendar year are imposed by the Code.

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<PAGE>

The Stock Purchase Plan will be administered by the Board of Directors or a
committee designated by the Board, which will have the authority to terminate
or amend the Stock Purchase Plan (subject to specified restrictions) and
otherwise to administer the Stock Purchase Plan and to resolve all questions
relating to the administration of the Stock Purchase Plan.

Option Grants Outside the 1998 Stock Incentive Plan

In the period between August 1996 and August 1998, options to purchase
1,227,333 shares of Common Stock were granted to the Company's directors,
officers and all of the Company's employees, as well as to a number of
consultants. The options were granted outside the 1998 Plan by the Board of
Directors pursuant to individual stock option agreements under substantially
similar terms as the options granted under the 1998 Plan.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and
other agents to the fullest extent permitted by the Delaware Business
Corporations Act, as amended. The Company has entered into indemnification
agreements with its directors and officers and is also empowered under its
Bylaws to purchase insurance on behalf of any person whom it is required or
permitted to indemnify. The Company has entered into indemnification
agreements with each of its directors and executive officers and intends to
obtain a policy of directors' and officers' liability insurance that insures
such persons against the cost of defense, settlement or payment of a judgment
under certain circumstances.

In addition, the Company's Certificate of Incorporation provides that the
liability of the Company's directors for monetary damages shall be eliminated
to the fullest extent permissible under the Delaware Business Corporations
Act, as so amended. This provision in the Certificate of Incorporation does
not eliminate a director's duty of care, and in appropriate circumstances
equitable remedies such as an injunction or other forms of non-monetary relief
would remain available. Each director will continue to be subject to liability
for breach of the director's duty of loyalty to the Company, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for acts or omissions that the director believes to be
contrary to the best interests of the Company or its stockholders, for any
transaction from which the director derived an improper personal benefit, for
improper transactions between the director and the Company and for improper
distributions to stockholders and loans to directors and officers. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

There is no pending litigation or proceeding involving a director or officer
of the Company as to which indemnification is being sought, nor is the Company
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.

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CERTAIN TRANSACTIONS

Following the incorporation of the Company, Chris Kitze, one of the
Company's founders, purchased 333,334 shares of Common Stock for cash at a
price of $0.0003 per share, resulting in aggregate proceeds to the Company of
$100 and, pursuant to a Common Stock Purchase Agreement dated August 26, 1996,
Naveen Jain, an affiliate of the Company, purchased 333,334 shares of the
Company's Common Stock for cash at a price of $0.0003 per share, resulting in
aggregate proceeds to the Company of $100. In connection with these
transactions, the Company entered into a Stockholders' Agreement with Mr.
Kitze and Mr. Jain. This Stockholders' Agreement was terminated on February
10, 1998. Pursuant to a Common Stock Purchase Agreement dated December 31,
1996, Chris Kitze and Naveen Jain purchased an additional 2,333,334 and
1,000,000 shares, respectively, of the Company's Common Stock in exchange for
the cancellation of promissory notes in the amount of $700,000 and $300,000,
respectively. In the same agreement, Naveen Jain contributed 666,667 shares of
Common Stock to the Company. Pursuant to Common Stock Purchase Agreements
dated February 13, 1997 and November 23, 1997, Flying Disc Investments Limited
Partnership ("Flying Disc"), of which Mr. Kitze is general partner, purchased
an additional 1,333,336 and 94,445 shares of Common Stock, respectively, from
the Company for cash at $0.45 and $0.90 per share, respectively, resulting in
aggregate proceeds to the Company of approximately $685,000. An additional
129,870 shares of Common Stock were purchased by Flying Disc in February 1998
pursuant to a Common Stock Purchase Agreement for cash at a price of $2.31 per
share. Under a Common Stock and Warrant Purchase Agreement dated as of April
25, 1998, Flying Disc purchased 30,030 shares of Common Stock for cash at a
per share price of $3.33 along with a warrant to purchase an additional 6,006
shares at $3.33 per share resulting in aggregate proceeds to the Company of
approximately $100,000. Under a Common Stock and Warrant Purchase Agreement
dated as of June 18, 1998, Internet Investments, LLC ("Internet Investments")
purchased 30,030 shares of Common Stock for cash at a per share price of $3.33
along with a warrant to purchase an additional 6,006 shares at $3.33 per share
resulting in aggregate proceeds to the Company of approximately $100,000.
Mr. Jain is the managing member of Internet Investments. All of the Company's
outstanding warrants terminate, unless exercised, upon the completion of the
Offering.

Pursuant to a Stock Purchase Agreement dated February 13, 1997, Bob Ellis,
one of the Company's directors, purchased 55,556 shares of the Company's
Common Stock for cash at a price of $1.80 per share resulting in aggregate
proceeds to the Company of approximately $100,000. On August 4, 1997, due to a
revaluation of the shares purchased by Mr. Ellis, he was awarded an additional
55,556 shares of Common Stock at the new price of $0.90 per share. In
addition, on the same date, Mr. Ellis purchased an additional 222,222 shares
of Common Stock for cash at $0.90 per share resulting in aggregate proceeds to
the Company of approximately $200,000.

The Company has entered into a Consulting Agreement, dated May 15, 1998,
with James J. Heffernan, an outside director of the Company. The Consulting
Agreement will terminate on November 15, 1999. The Agreement provides for Mr.
Heffernan to receive a monthly compensation of $10,000, paid in the form of
Common Stock, and options to buy 16,667 shares of the Company's Common Stock
at an exercise price of $3.33 per share. Mr. Heffernan will be granted stock
options to buy an additional 16,667 shares of Common Stock at an exercise
price of $3.33 per share upon completion of the Offering. In addition, Mr.
Heffernan is entitled to a finder fee, payable in shares of the Company's
Common Stock, of 5% of any investment he secures on behalf of the Company
between May 15, 1998 and June 30, 1998. Under this arrangement, Mr. Heffernan
received 41,837 shares of Common Stock. See "Director Compensation."

The Company has entered into a Content License Agreement dated February 22,
1998, with Classic Media Holdings, whereby the Company was granted certain
non-exclusive perpetual, world-wide licensing rights in connection with
Classic Media Holdings' library of public domain movies. As consideration for
the license, the Company issued 43,290 shares of the Company's Common Stock to
Classic Media Holdings' principals. Mr. Kitze, the Company's Secretary and
Chairman of the Board of Directors, is a principal of Classic Media Holdings.

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The Company has entered into employment agreements, Indemnification
Agreements and certain consulting arrangements with certain of its directors
and officers. See "Management--Employment Agreements," "Director Compensation"
and "Limitation Of Liability And Indemnification Matters."

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company intends that all future transactions,
including loans, between the Company and its officers, directors, principal
stockholders and their affiliates will be approved by a majority of the Board
of Directors, including a majority of the independent and disinterested
outside directors on the Board of Directors and be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of September
30, 1998 and as adjusted to reflect the sale of the shares offered hereby, by
(i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers, and (iv) all executive officers
and directors of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
NUMBER OF SHARES BENEFICIALLY OWNED(1)
BENEFICIALLY OWNED ------------------------------
NAME OF BENEFICIAL OWNER PRIOR TO OFFERING(1) BEFORE OFFERING AFTER OFFERING
- ------------------------ -------------------- --------------- --------------
<S> <C> <C> <C>
Chris Kitze(2)............. 4,188,354 46.3% 34.6%
Naveen Jain(3)............. 702,703 7.8% 5.8%
Vijay Vaidyanathan(4)...... 581,967 6.4% 4.8%
Bob Ellis(5)............... 518,520 5.6% 4.2%
Laurent Massa(6)........... 243,403 2.6% 2.0%
James J. Heffernan(7)...... 162,441 1.8% 1.3%
Russell S. Hyzen(8)........ 115,001 1.3% *
John Harbottle(9).......... 12,501 * *
Jeffrey Ballowe(10)........ 8,756 * *
Philip Schlein(11)......... 5,464 * *
Robert C. Harris, Jr.(12).. 5,464 * *
All executive officers and
directors as a group
(10 persons)(13).......... 5,841,871 60.7% 46.1%
</TABLE>
- --------
* Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of September
30, 1998 and warrants to purchase shares of Common Stock that are
exercisable within 60 days of September 30, 1998 are deemed outstanding.
Percentage of beneficial ownership is based upon 9,038,024 shares of
Common Stock outstanding prior to the Offering and 12,098,024 shares of
Common Stock outstanding after the Offering, as of September 30, 1998 and
assuming no exercise of the Underwriters' over-allotment option. To the
Company's knowledge, except as set forth in the footnotes to this table
and subject to applicable community property laws, each person named in
the table has sole voting and investment power with respect to the shares
set forth opposite such person's name. Except as otherwise indicated, the
address of each of the persons in this table is as follows: c/o XOOM.com,
Inc., 300 Montgomery Street, Suite 300, San Francisco, California 94104.

(2) Includes 4,182,348 shares of Common Stock and warrants to purchase 6,006
shares of Common Stock held by Flying Disc, of which Mr. Kitze is a
general partner. Mr. Kitze may be deemed to be the beneficial owner of
the shares held by Flying Disc.

(3) Includes 30,030 shares of Common Stock and warrants to purchase 6,006
shares of Common Stock held by Internet Investments. Mr. Jain is the
managing member of Internet Investments and may be deemed to be the
beneficial owner of the shares held by Internet Investments.

(4) Includes 80,000 shares of Common Stock held by Mr. Vaidyanathan's Family
Trust (the "Vaidyanathan Trust"). Mr. Vaidyanathan may be deemed to be
the beneficial owner of the shares of Common Stock held by the
Vaidyanathan Trust.

(5) Includes 333,334 shares held by the Robert A. Ellis Revocable Trust. Also
includes options exercisable for 185,186 shares of Common Stock
exercisable within 60 days after September 30, 1998.

(6) Includes options exercisable for 243,403 shares of Common Stock
exercisable within 60 days after September 30, 1998.

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<PAGE>

(7) Includes options exercisable for 20,834 shares of Common Stock exercisable
within 60 days after September 30, 1998. Also includes 43,334 shares of
Common Stock and warrants to purchase 8,667 shares Common Stock held by
J.J. Heffernan, LLC ("Heffernan LLC"), of which Mr. Heffernan is the
managing member, and 82,939 shares of Common Stock and warrants to
purchase 6,667 shares of Common Stock held by the Heffernan Family Trust
("Heffernan Trust"). Mr. Heffernan may be deemed to be the beneficial
owner of the shares and warrants to purchase shares of Common Stock held
by the Heffernan LLC and the Heffernan Trust.

(8) Includes options exercisable for 103,334 shares of Common Stock
exercisable within 60 days after September 30, 1998.

(9) Includes options exercisable for 12,501 shares of Common Stock exercisable
within 60 days after September 30, 1998.

(10) Includes options exercisable for 8,756 shares of Common Stock exercisable
within 60 days after September 30, 1998.

(11) Includes options exercisable for 3,889 shares of Common Stock exercisable
within 60 days after September 30, 1998.

(12) Includes options exercisable for 3,889 shares of Common Stock exercisable
within 60 days after September 30, 1998.

(13) Includes options exercisable for 581,792 shares of Common Stock
exercisable within 60 days after September 30, 1998 and warrants to
purchase 21,340 shares of Common Stock.

75
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the closing of the Offering, the Company will be authorized to issue up
to 40,000,000 shares of Common Stock, $0.0001 par value per share, and
5,000,000 shares of Preferred Stock, $0.0001 par value per share.

The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Certificate of
Incorporation, which is included as an exhibit to the Registration Statement
of which this Prospectus is a part, and by the provisions of applicable law.

COMMON STOCK

As of September 30, 1998, there were 9,038,024 shares of Common Stock
outstanding that were held of record by approximately 90 stockholders
(assuming conversion of all warrants outstanding as of September 30, 1998).
There will be 12,098,024 shares of Common Stock outstanding (assuming no
exercise of the Underwriters' over-allotment option and no exercise of
outstanding options) after giving effect to the sale of Common Stock offered
to the public by the Company hereby.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The Company
does not have cumulative voting rights in the election of directors, and
accordingly, holders of a majority of the shares voting are able to elect all
of the directors. Subject to preferences that may be granted to any then
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor as well as any distributions to the
stockholders. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets of the Company remaining after payment of
liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no preemptive or other subscription of
conversion rights. There are no redemption or sinking fund provisions
applicable to the Common Stock.

PREFERRED STOCK

Effective upon the closing of the Offering and pursuant to the Company's
Certificate of Incorporation, the Board of Directors will have the authority,
without further action by the stockholders, to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, any or all of which may be greater than the rights of Common
Stock, without any further vote or action by stockholders. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock after consummation of the Offering.

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS

Upon completion of the Offering, the Company's Bylaws will provide that all
stockholder action must be effected at a duly called meeting of stockholders
and not by a consent in writing; the Bylaws will also provide that only the
Company's Chief Executive Officer and the President of the Company may call a
special meeting of stockholders.

These provisions will make it more difficult for the Company's existing
stockholders to replace the Board of Directors as well as for another party to
obtain control of the Company by replacing the Board of Directors. Since the
Board of Directors has the power to retain and discharge officers of the
Company, these provisions could also make it more difficult for existing
stockholders or another party to effect a change in management.

76
<PAGE>

These and other provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company. These
provisions are intended to enhance the likelihood of continued stability in
the composition of the Board of Directors and in the policies furnished by the
Board of Directors and to discourage certain types of transactions that may
involve an actual or threatened change of control of the Company. These
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used in proxy fights. However, such
provisions could have the effect of discouraging others from making tender
offers for the Company's shares and, as a consequence, they also may inhibit
fluctuations in the market price of the Company's shares that could result
from actual or rumored takeover attempts. Such provisions also may have the
effect of preventing changes in the management of the Company. See "Risk
Factors--Antitakeover Effects Of Certain Charter And Bylaws; Possible Issuance
Of Preferred Stock."

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the Board of Directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested holder, (ii) upon consummation of the transaction that that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of the stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder, (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder, (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder, (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock or any class or
series of the corporation beneficially owned by the interested stockholder or
(v) the receipt by the interested stockholder of the benefit of any loss,
advances, guarantees, pledges or other financial benefits by or through the
corporation. In general, Section 203 defines interested stockholder as an
entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation an any entity or person affiliated with or
controlling or controlled by such entity or person. See "Risk Factors--
Antitakeover Effects Of Certain Charter And Bylaws; Possible Issuance Of
Preferred Stock."

LISTING

Application has been made for quotation of the Company's Common Stock on The
Nasdaq National Market under the symbol XMCM.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is
BankBoston, N.A. Its address is c/o Boston EquiServe Trust Company, 150 Royall
Street, Canton, Massachusetts 02021, and its telephone number is (617) 575-
6127.

77
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock after the Offering
could adversely affect the market price of the Common Stock and could impair
the Company's ability to raise capital through the sale of equity securities.
Upon completion of the Offering, the Company will have outstanding 12,098,024
shares of Common Stock. Of these shares, the 3,000,000 shares offered hereby
will be freely tradable without restriction under the Securities Act, unless
they are held by "affiliates" of the Company defined under the Securities Act.

The remaining 9,098,024 outstanding shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities
Act and are "restricted securities" within the meaning of Rule 144 under the
Securities Act. The remaining 9,098,024 shares of Common Stock held by
existing stockholders upon the closing of the Offering (based on the number of
shares of Common Stock outstanding as of September 30, 1998) will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act. The Company's
directors, officers, stockholders and holders of options to purchase Common
Stock have agreed that they will not sell, directly or indirectly, any Common
Stock without the prior written consent of Bear, Stearns & Co. Inc. for a
period of 180 days from the date of this Prospectus. Bear, Stearns & Co. Inc.
may however, in its sole discretion and at any time without notice, release
all or any portion of the shares subject to lock-up agreements. Subject to the
provisions of Rules 144, 144(k) and 701, 9,098,024 shares will be eligible for
sale 180 days after the date of this Prospectus upon the expiration of the
lock-up agreements.

Prior to the Offering, there has been no public market for the Common Stock
of the Company, and any sale of substantial amounts in the open market may
adversely affect the market price of the Common Stock offered hereby. See
"Risk Factors--Shares Eligible For Future Sale."

78
<PAGE>

UNDERWRITING

The Underwriters of the Offering named below (the "Underwriters"), for whom
Bear, Stearns & Co. Inc. and Deutsche Bank Securities Inc. are acting as
representatives, have severally agreed with the Company, subject to the terms
and conditions of the Underwriting Agreement (the form of which has been filed
as an exhibit to the Registration Statement on Form S-1 of which this
Prospectus is a part), to purchase from the Company the aggregate number of
shares of Common Stock set forth opposite their respective names below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Bear, Stearns & Co. Inc.....................................
Deutsche Bank Securities Inc................................
---------
Total..................................................... 3,000,000
=========
</TABLE>

The nature of the respective obligations of the Underwriters is such that
all of the shares of Common Stock must be purchased if any is purchased. Those
obligations are subject, however, to various conditions, including the
approval of certain matters by counsel. The Company has agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, and, where such indemnification is unavailable, to contribute
to payments that the Underwriters may be required to make in respect of such
liabilities.

The Company has been advised that the Underwriters propose to offer the
shares of Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers at such price less a concession not to exceed $ per share, that
the Underwriters may allow, and such selected dealers may reallow, a
concession to certain other dealers not to exceed $ per share and that
after the commencement of the Offering, the public offering price and the
concessions may be changed.

The Company has granted to the Underwriters an option to purchase in the
aggregate up to 450,000 additional shares of Common Stock to be sold in the
Offering solely to cover over-allotments, if any. The option may be exercised
in whole or in part at any time within 30 days after the date of this
Prospectus. To the extent the option is exercised, the Underwriters will be
severally committed, subject to certain conditions, including the approval of
certain matters by counsel, to purchase the additional shares of Common Stock
in proportion to their respective purchase commitments as indicated in the
preceding table.

The Underwriters have reserved for sale at the initial public offering price
up to 5% of the number of shares of Common Stock offered hereby for sale to
certain directors, officers and employees of the Company, business affiliates
and related persons who have expressed an interest in purchasing shares. The
number of shares available for sale to the general public will be reduced to
the extent any reserved shares are purchased. Any reserved shares not so
purchased will be offered by the Underwriters on the same basis as the other
shares offered hereby.

The Underwriters do not expect sales of Common Stock to any accounts over
which they exercise discretionary authority to exceed 5% of the number of
shares being offered hereby.

The Company and its executive officers, directors and all of its current
stockholders have agreed that, subject to certain limited exceptions, for a
period of 180 days after the date of this Prospectus, without the prior

79
<PAGE>

written consent of Bear, Stearns & Co. Inc., they will not, directly or
indirectly, issue, sell, offer or agree to sell or otherwise dispose of any
shares of Common Stock (or securities convertible into, exchangeable for or
evidencing the right to purchase shares of Common Stock).

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price was determined through
negotiations among the Company and the representatives of the Underwriters.
Among the factors considered in making such determination were the Company's
financial and operating history and condition, its prospects and prospects for
the industry in which it does business in general, the management of the
Company, prevailing equity market conditions and the demand for securities
considered comparable to those of the Company.

In order to facilitate the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the Common Stock during and after the Offering.
Specifically, the Underwriters may over-allot or otherwise create a short
position in the Common Stock for their own account by selling more shares of
Common Stock than have been sold to them by the Company. The Underwriters may
elect to cover any such short position by purchasing shares of Common Stock in
the open market or by exercising the over-allotment option granted to the
Underwriters. In addition, the Underwriters may stabilize or maintain the
price of the Common Stock by bidding for or purchasing shares of Common Stock
in the open market and may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers participating
in the Offering are reclaimed if shares of Common Stock previously distributed
in the Offering are repurchased in connection with stabilization transactions
or otherwise. The effect of these transactions may be to stabilize or maintain
the market price of the Common Stock at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Common Stock to the extent that it discourages resales
thereof. No representation is made as to the magnitude or effect of any such
stabilization or other transactions. Such transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Morrison & Foerster LLP, San Francisco, California. Certain legal
matters in connection with the Offering will be passed upon for the
Underwriters by Brobeck, Phleger & Harrison LLP, San Francisco, California.

EXPERTS

The consolidated financial statements of Xoom.com, Inc. as of December 31,
1996 and 1997 and September 30, 1998 and for the period from April 16, 1996
(Inception) to December 31, 1996, for the year ended December 31, 1997 and for
the nine months ended September 30, 1998; the financial statements of
Paralogic Corporation as of December 31, 1996 and 1997 and each of the two
years in the period ended December 31, 1997; the financial statements of
Global Bridges Technology, Inc. as of December 31, 1996 and 1997 and for the
period from July 23, 1996 (inception) to December 31, 1996 and for the year
ended December 31, 1997; and the financial statements of Pagecount, Inc. as of
December 31, 1997 and for the period from January 23, 1997 (inception) to
December 31, 1997 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon (with respect to the consolidated financial statements of
Xoom.com, Inc., which contain an explanatory paragraph describing conditions
that raise substantial doubt about the Company's ability to continue as a
going concern described in Note 1 of the Notes to the consolidated financial
statements) appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.

80
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with Securities and Exchange Commission (the
"Commission") in Washington, D.C. a registration statement (together with all
amendments, the "Registration Statement") on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus, filed as
part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules
thereto, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and to such exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete and, in each instance, reference is made to the copy
of such contract, agreement or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661. Copies of all or any part of
such materials may be obtained from the Commission upon the payment of certain
fees prescribed by the Commission. Such reports and other information may also
be inspected without charge at a web site maintained by the commission. The
address of such site is http://www.sec.gov.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants and with
quarterly reports containing unaudited summary financial information for each
of the first three quarters of each fiscal year.

81
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

XOOM.COM, INC.

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)................. F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-8

PARALOGIC CORPORATION

Report of Ernst & Young LLP, Independent Auditors......................... F-28
Balance Sheets............................................................ F-29
Statements of Operations.................................................. F-30
Statements of Shareholders' Equity (Deficit).............................. F-31
Statements of Cash Flows.................................................. F-32
Notes to Financial Statements............................................. F-33

GLOBAL BRIDGES TECHNOLOGIES, INC.

Report of Ernst & Young LLP, Independent Auditors......................... F-37
Balance Sheets............................................................ F-38
Statements of Operations.................................................. F-39
Statements of Shareholders' Equity (Deficit).............................. F-40
Statements of Cash Flows.................................................. F-41
Notes to Financial Statements............................................. F-42

PAGECOUNT, INC.

Report of Ernst & Young LLP, Independent Auditors......................... F-46
Balance Sheets............................................................ F-47
Statements of Income...................................................... F-48
Statements of Stockholders' Equity........................................ F-49
Statements of Cash Flows.................................................. F-50
Notes to Financial Statements............................................. F-51

SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Introduction.............................................................. F-55
Selected Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the twelve months ended December 31, 1997................. F-56
Selected Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1998.................. F-57
Notes to Selected Unaudited Pro Forma Condensed Consolidated Statements of
Operations............................................................... F-58
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Xoom.com, Inc.

We have audited the accompanying consolidated balance sheets of Xoom.com,
Inc. as of December 31, 1996 and 1997 and September 30, 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the period from April 16, 1996 (inception) through December 31,
1996, for the year ended December 31, 1997, and for the nine months ended
September 30, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Xoom.com,
Inc. at December 31, 1996 and 1997 and September 30, 1998, and the
consolidated results of its operations and its cash flows for the period from
April 16, 1996 (inception) through December 31, 1996, for the year ended
December 31, 1997, and for the nine months ended September 30, 1998, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
Xoom.com, Inc. will continue as a going concern. As more fully described in
Note 1, the Company has incurred recurring operating losses and has a working
capital deficiency. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of this uncertainty.

Palo Alto, California

October 28, 1998

except for paragraph 3 of Note 4 and Note 11, as to which the date is

November 16, 1998

F-2
<PAGE>

XOOM.COM, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER
1996 1997 30, 1998
---------- ----------- ------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash.................................. $ 1,052 $ 5,587 $ 966,612
Accounts receivable, net of allowance
for doubtful accounts of $48,702 in
1997 and $105,171 in 1998............ -- 173,223 835,072
Stock subscription receivable from
related parties...................... 300,000 -- --
Stock subscription receivable......... -- 75,000 --
Inventories........................... -- -- 378,474
Other current assets.................. -- 906 121,682
---------- ----------- ------------
Total current assets.................... 301,052 254,716 2,301,840
Fixed assets, net....................... 61,657 413,685 1,468,339
Intangible assets, net.................. -- -- 5,282,241
Prepaid initial public offering costs... -- -- 805,325
Prepaid royalties and licenses.......... 324,000 53,556 134,068
Other assets............................ 18,544 59,713 423,426
---------- ----------- ------------
Total assets............................ $ 705,253 $ 781,670 $ 10,415,239
========== =========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................... $ 136,122 $ 461,931 $ 1,514,684
Accrued compensation and related
expenses............................. 8,906 38,391 367,211
Other accrued liabilities............. -- 4,700 773,882
Note payable to stockholder........... -- 150,000 --
Acquisition notes payable............. -- -- 1,825,704
Capital lease obligations............. -- -- 35,697
Contingency accrual................... -- 1,000,000 1,000,000
---------- ----------- ------------
Total current liabilities............... 145,028 1,655,022 5,517,178
Acquisition notes payable, less current
portion................................ -- -- 990,000
Capital lease obligations, less current
portion................................ -- -- 126,302
Commitments and contingencies...........
Stockholders' equity (deficit):
Convertible preferred stock, $0.0001
par value:
Authorized shares--1,000,000
Issued and outstanding shares--none
in 1996, 1997 or 1998 -- -- --
Common stock, $0.0001 par value:
Authorized shares--20,000,000
Issued and outstanding shares--
3,333,335, 5,541,367 and 8,731,597
in 1996, 1997 and 1998, respective-
ly................................. 1,000,200 3,001,424 14,940,421
Deferred compensation................. -- (302,924) (1,194,344)
Accumulated deficit................... (439,975) (3,571,852) (9,964,318)
---------- ----------- ------------
Total stockholders' equity (deficit).... 560,225 (873,352) 3,781,759
---------- ----------- ------------
Total liabilities and stockholders'
equity (deficit)....................... $ 705,253 $ 781,670 $ 10,415,239
========== =========== ============
</TABLE>

See accompanying notes.

F-3
<PAGE>

XOOM.COM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1996
(INCEPTION) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER SEPTEMBER 30,
DECEMBER 31, 31, ------------------------
1996 1997 1997 1998
-------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue:
Electronic commerce..... $ -- $ 327,080 $ 59,289 $ 3,366,048
Advertising............. -- 60,251 21,227 953,121
License fees and other.. -- 453,556 340,495 546,192
--------- ----------- ----------- -----------
Total net revenue........ -- 840,887 421,011 4,865,361
Cost of net revenue:
Cost of electronic
commerce............... -- 170,957 72,343 1,965,556
Cost of license fees and
other.................. -- 148,375 135,985 34,630
--------- ----------- ----------- -----------
Total cost of net
revenue................. -- 319,332 208,328 2,000,186
--------- ----------- ----------- -----------
Gross profit............. -- 521,555 212,683 2,865,175
Operating expenses:
Operating and
development............ 265,769 1,150,299 878,792 2,557,940
Sales and marketing..... 23,719 291,675 170,958 1,570,695
General and
administrative......... 150,487 720,534 477,342 2,157,860
Purchased in-process
research and
development............ -- -- -- 790,000
Amortization of deferred
compensation........... -- 247,924 110,712 1,110,941
Amortization of
intangible assets...... -- -- -- 1,087,029
Non-recurring charges... -- 1,243,000 1,243,000 --
--------- ----------- ----------- -----------
Total operating
expenses................ 439,975 3,653,432 2,880,804 9,274,465
--------- ----------- ----------- -----------
Loss from operations..... (439,975) (3,131,877) (2,668,121) (6,409,290)
Other income (expense):
Interest income........ -- -- -- 36,882
Interest expense....... -- -- -- (20,058)
--------- ----------- ----------- -----------
Net loss................. $(439,975) $(3,131,877) $(2,668,121) $(6,392,466)
========= =========== =========== ===========
Net loss per share--basic
and diluted............. $ (0.89) $ (0.64) $ (0.57) $ (0.89)
========= =========== =========== ===========
Number of shares used in
per share
calculation--basic and
diluted................. 496,733 4,874,319 4,687,658 7,171,676
========= =========== =========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE>

XOOM.COM, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK STOCKHOLDERS'
--------------------- DEFERRED ACCUMULATED EQUITY
SHARES AMOUNT COMPENSATION DEFICIT (DEFICIT)
--------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common
stock to founders at
inception............. 666,668 $ 200 $ -- $ -- $ 200
Issuance of common
stock in exchange for
cancellation of notes
payable to
stockholders.......... 2,666,667 1,000,000 -- -- 1,000,000
Net loss............... -- -- -- (439,975) (439,975)
--------- ----------- ----------- ----------- -----------
Balances at December 31,
1996................... 3,333,335 1,000,200 -- (439,975) 560,225
Issuance of common
stock for cash........ 1,914,452 1,223,000 -- -- 1,223,000
Issuance of common
stock in exchange for
cancellation of notes
payable to
stockholders.......... 38,889 35,000 -- -- 35,000
Issuance of common
stock in exchange for
stock subscription
receivable............ 254,691 175,000 -- -- 175,000
Issuance of stock
options to
consultants........... -- 17,376 -- -- 17,376
Deferred compensation
related to grant of
stock options......... -- 550,848 (550,848) -- --
Amortization of
deferred
compensation.......... -- -- 247,924 -- 247,924
Net loss............... -- -- -- (3,131,877) (3,131,877)
--------- ----------- ----------- ----------- -----------
Balances at December 31,
1997................... 5,541,367 3,001,424 (302,924) (3,571,852) (873,352)
Issuance of common
stock for cash, net of
issuance costs of
$139,316.............. 1,815,537 5,532,596 -- -- 5,532,596
Issuance of common
stock in exchange for
Classic Media Holdings
license rights........ 43,292 100,000 -- -- 100,000
Issuance of common
stock in connection
with acquisitions..... 1,179,135 3,618,235 -- -- 3,618,235
Issuance of common
stock in exchange for
cancellation of notes
payable to
stockholders.......... 64,937 150,000 -- -- 150,000
Issuance of common
stock in exchange for
stock subscription
receivable............ 78,224 260,480 -- -- 260,480
Issuance of common
stock to directors and
consultants in
exchange for
services.............. 9,105 86,660 -- -- 86,660
Issuance of stock
options to
consultants........... -- 188,665 -- -- 188,665
Deferred compensation
related to grant of
stock options......... -- 2,002,361 (2,002,361) -- --
Amortization of de-
ferred compensation... -- -- 1,110,941 -- 1,110,941
Net loss............... -- -- -- (6,392,466) (6,392,466)
--------- ----------- ----------- ----------- -----------
Balances at September
30, 1998............... 8,731,597 $14,940,421 $(1,194,344) $(9,964,318) $ 3,781,759
========= =========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

XOOM.COM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1996
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ------------------------
1996 1997 1997 1998
-------------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH USED IN OPERATING
ACTIVITIES:
Net loss................. $(439,975) $(3,131,877) $(2,668,121) $(6,392,466)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Charge for purchased in-
process research and
development............ -- -- -- 790,000
Depreciation and
amortization........... 2,496 254,077 56,825 481,118
Amortization of
intangible assets...... -- -- -- 1,087,029
Amortization of deferred
compensation........... -- 247,924 110,712 1,110,941
Write-off of prepaid
royalties.............. -- 243,000 243,000 --
Issuance of common stock
in exchange for Classic
Media Holdings license
rights................. -- -- -- 100,000
Issuance of stock
options to
consultants............ -- 17,376 7,451 188,665
Issuance of common stock
to directors and
consultants............ -- -- -- 86,660
Changes in operating
assets and liabilities:
Accounts receivable.... -- (173,223) (126,388) (634,271)
Inventories............ -- -- -- (378,474)
Other current assets... -- (906) (23,943) (116,323)
Prepaid initial public
offering costs........ -- -- -- (805,325)
Prepaid royalties and
licenses.............. (324,000) (185,815) 46,122 (281,671)
Other assets........... (18,544) (41,169) (28,580) (363,323)
Accounts payable....... 136,122 325,809 87,913 1,047,635
Accrued compensation
and related expenses.. 8,906 29,485 15,228 288,554
Other accrued
liabilities........... -- 4,700 1,890 645,498
Contingency accrual.... -- 1,000,000 1,000,000 --
--------- ----------- ----------- -----------
Net cash used in
operating activities.... (634,995) (1,410,619) (1,277,891) (3,145,753)
Cash used in investing
activities:
Purchases of fixed
assets................. (64,153) (392,846) (44,257) (1,099,347)
Business combinations,
net of cash acquired... -- -- -- (328,644)
Cash paid in connection
with the purchase of
certain assets from
Revolutionary Software,
Inc. .................. -- -- -- (19,900)
--------- ----------- ----------- -----------
Net cash used in
investing activities.... (64,153) (392,846) (44,257) (1,447,891)
Cash provided in
financing activities:
Proceeds from issuance
of common stock........ 200 1,223,000 500,000 5,532,595
Proceeds from issuance
of notes payable to
stockholders........... 700,000 185,000 35,000 --
Proceeds from repayment
of stock subscriptions
receivable............. -- 400,000 800,000 335,480
Principal payments on
capital lease
obligations............ -- -- -- (2,679)
Repayment of acquisition
note payable........... -- -- -- (310,727)
--------- ----------- ----------- -----------
Net cash provided by
financing activities.... 700,200 1,808,000 1,335,000 5,554,669
--------- ----------- ----------- -----------
Net increase in cash..... 1,052 4,535 12,852 961,025
Cash at beginning of
period.................. -- 1,052 1,052 5,587
--------- ----------- ----------- -----------
Cash at end of period.... $ 1,052 $ 5,587 $ 13,904 $ 966,612
========= =========== =========== ===========
</TABLE>

See accompanying notes.

F-6
<PAGE>

XOOM.COM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1996
(INCEPTION) NINE MONTHS ENDED
THROUGH YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, ----------------------
1996 1997 1997 1998
-------------- ------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Non-cash transactions:
Issuance of common stock in
exchange for stock
subscriptions receivable.. $ -- $175,000 $500,000 $ 260,480
========== ======== ======== ==========
Issuance of notes payable
to stockholders for stock
subscription receivable... $ 300,000 $ -- $ -- $ --
========== ======== ======== ==========
Issuance of common stock in
exchange for cancellation
of notes payable to
stockholders.............. $1,000,000 $ 35,000 $ -- $ 150,000
========== ======== ======== ==========
Deferred compensation
resulting from grant of
stock options............. $ -- $550,848 $288,075 $2,002,361
========== ======== ======== ==========
Fixed assets acquired under
capital lease
obligations............... $ -- $ -- $ -- $ 161,999
========== ======== ======== ==========
Issuance of common stock in
conjunction with business
and technology
acquisitions:
Paralogic Corporation.... $ -- $ -- $ -- $1,576,364
========== ======== ======== ==========
Global Bridges
Technologies, Inc....... $ -- $ -- $ -- $ 797,694
========== ======== ======== ==========
Revolutionary Software,
Inc..................... $ -- $ -- $ -- $ 800,178
========== ======== ======== ==========
ArcaMax, Inc............. $ -- $ -- $ -- $ 444,000
========== ======== ======== ==========
Issuance of notes payable
in conjunction with
business and technology
acquisitions:
Paralogic Corporation.... $ -- $ -- $ -- $1,400,000
========== ======== ======== ==========
Global Bridges
Technologies, Inc....... $ -- $ -- $ -- $ 62,500
========== ======== ======== ==========
Revolutionary Software,
Inc..................... $ -- $ -- $ -- $ 262,500
========== ======== ======== ==========
ArcaMax, Inc............. $ -- $ -- $ -- $ 180,000
========== ======== ======== ==========
Pagecount, Inc........... $ -- $ -- $ -- $1,200,000
========== ======== ======== ==========
Cash paid for interest..... $ -- $ -- $ -- $ 20,058
========== ======== ======== ==========
</TABLE>

See accompanying notes.

F-7
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

XOOM.com, Inc. (the "Company"), was formerly known as XOOM, Inc., Xoom
Software, Inc. and originally incorporated as Atomsoft, Inc. in the State of
Delaware on April 16, 1996.

The Company provides free community services such as Web site hosting, e-
mail, on-line chat networks and free proprietary content such as clip art and
greeting cards. The Company uses these free services and content to build a
membership base to direct market goods and services targeted to the interests
of its members. The Company derives a substantial portion of its revenue from
electronic commerce, and to a lesser extent from advertising and licensing.

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.

The Company began operations on April 16, 1996 and has financed its
operations through sales of common stock and issuances of notes payable which
have subsequently been converted to common stock. The Company incurred
operating losses for the period from April 16, 1996 (inception) through
December 31, 1996, for the year ended December 31, 1997 and for the nine
months ended September 30, 1998. The Company also has a working capital
deficiency at September 30, 1998. The Company's ability to continue as a going
concern is dependent upon successful expansion of marketplace acceptance of
its product offerings, the level of revenue growth, if any, and securing
additional equity financing. From January through September 1998, the Company
issued common stock, resulting in net cash proceeds of $5,532,595. On October
1, 1998, the Company completed negotiations for a $1 million note to be
secured by up to $1 million of the Company's computer equipment, which will be
repaid over 42 months at an annual interest rate of 14.6%. The Company is also
actively pursuing additional sources of capital and/or financing including
potential strategic alliances. If the Company cannot expand marketplace
acceptance of its product offerings and increase revenue or is unable to
secure additional financing, management has the intent and the ability to
delay or reduce expenditures so as not to require additional financial
resources if such resources are not available. Should the Company be required
to delay or reduce expenditures it may not be able to fund its expansion,
promote its brand, take advantage of acquisition opportunities, develop or
enhance services or respond to competitive pressures. The conditions described
above raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that may result
from the outcome of this uncertainty.

Dependence on Certain Vendors

The Company currently depends on one vendor to provide warehousing and order
fulfillment. Although the Company believes that there are alternative vendors
for warehousing and order fulfillment, there can be no assurance that the
Company will maintain its relationship with this vendor as the agreement is
cancelable at any time. The loss of this relationship could have a material
adverse effect on the Company's financial condition and results of operations.

F-8
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported results of operations during the reporting period. Actual
results could differ from those estimates.

Interim Financial Information

The interim financial information for the nine months ended September 30,
1997 is unaudited but has been prepared on the same basis as the audited
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, that the Company considers necessary for a fair
presentation of its financial position at such date and its results of
operations and cash flows for those periods. Operating results for the nine
months ended September 30, 1998 are not necessarily indicative of results that
may be expected for any future periods.

Cash

The Company maintains its cash in depository accounts with one financial
institution.

Concentrations of Credit Risk and Credit Evaluations

Financial instruments which subject the Company to concentrations of credit
risk consist primarily of cash and trade accounts receivable. The Company
maintains its cash in a domestic financial institution with a high credit
standing. The Company performs periodic evaluations of the relative credit
standing of this institution. The Company conducts business with companies in
various industries throughout the United States and with individuals over the
Internet. The Company performs ongoing credit evaluations of its corporate
customers and generally does not require collateral. Sales to individuals are
principally paid for via credit cards. Reserves are maintained for potential
credit losses and such losses to date have been within management's
expectations.

For the year ended December 31, 1997, one customer, Cybernet International,
Inc., accounted for $100,000 or 12% of total net revenue. No balances were
receivable from that customer at December 31, 1997. For the nine months ended
September 30, 1998, no single customer accounted for greater than 10% of total
net revenue.

Inventories

Inventories are carried at the lower of cost (determined on the first-in
first-out basis) or market. Inventories consist of products available for
sale.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives of three years. Fixed assets under capital leases are
amortized over the shorter of the estimated useful life or the life of the
lease. Useful lives are evaluated regularly by management in order to
determine recoverability in light of current technological conditions.

F-9
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets, Net

Intangible assets consist of purchased technology and goodwill related to
acquisitions accounted for by the purchase method. See Note 9. Amortization of
these purchased intangibles is provided on the straight-line basis over the
respective useful lives of the assets, which is two years. Purchased in-
process research and development without alternative future use is expensed
when acquired.

The Company identifies and records impairment losses on intangible assets
when events and circumstances indicate that such assets might be impaired. To
date, no such impairment has been recorded.

Prepaid Royalties and Licenses

Prepaid royalties represent prepayments of royalties due upon the sale or
sublicense of software technologies. Prepaid royalties are amortized as units
are sold or over estimated useful lives of approximately one year, whichever
is shorter. Licenses represent amounts paid to developers for fully paid
licenses to resell certain software. These licenses are amortized over the
estimated useful lives which are approximately one year. Amortization of
prepaid royalties and licenses, which is included in cost of electronic
commerce and cost of license fee revenue, totaled $0, $213,259 and $200,769
for the period from April 16, 1996 (inception) through December 31, 1996, for
the year ended December 31, 1997 and for the nine months ended September 30,
1998, respectively.

During the second quarter of 1997, the Company discontinued the sale of
certain products where royalty prepayments had been made and accordingly,
recorded a write-off of prepaid royalties included in non-recurring charges
totaling $243,000.

Other Assets

Other assets consist of non-current deposits relating to various ongoing
agreements entered into by the Company.

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"), which requires the use of the liability method in accounting for income
taxes. Under FAS 109, deferred tax assets and liabilities are measured based
on differences between the financial reporting and tax bases of assets and
liabilities using enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse.

Stock-Based Compensation

The Company accounts for stock-based awards to employees under the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and has adopted the
disclosure-only alternative of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("FAS 123").

F-10
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Advertising Expense

All advertising costs are expensed when incurred. Advertising costs, which
are included in sales and marketing expense, were $0, $50,000 and $30,000 for
the period from April 16, 1996 (inception) through December 31, 1996, for the
year ended December 31, 1997 and for the nine months ended September 30, 1998,
respectively.

Revenue Recognition

Electronic Commerce

The Company recognizes revenue from electronic commerce sales when the
products are shipped to customers. The Company provides for potential product
returns and estimated warranty costs in the period of the sale. Such costs
have not been material to date.

Advertising

Advertising revenues are derived from the sale of banner advertisements and
sponsorships under short-term contracts. Through September 30, 1998, the
duration of the Company's advertising commitments has been principally from
one to two months. Advertising revenues on banner contracts are recognized
ratably in the period in which the advertisement is displayed, provided that
no significant Company obligations remain and collection of the resulting
receivable is probable. Company obligations typically include the guarantee of
a minimum number of "impressions" or times that an advertisement appears in
pages viewed by the users of the Company's online properties. To the extent
minimum guaranteed impressions are not met, the Company defers recognition of
the corresponding revenue until the remaining guaranteed impression levels are
achieved.

License Fees

The Company licenses software under non-cancelable license agreements to
end-users and non-cancelable sub-license agreements to resellers. License fee
revenues are recognized when a non-cancelable license agreement has been
signed, the product has been delivered, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable, collection is
considered probable and all significant contractual obligations have been
satisfied.

Export Sales

Export sales were 30% of net revenues for the year ended December 31, 1997
and 29% for the nine months ended September 30, 1998. Information regarding
the Company's export sales are as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
North America......................... $ 39,193 $ 194,971
Europe................................ 157,228 736,761
Asia/Pacific.......................... 44,293 287,806
Rest of the World..................... 11,412 210,193
-------- ----------
Total............................... $252,126 $1,429,731
======== ==========
</TABLE>

F-11
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Computation of Net Loss Per Share

The Company adopted Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share," ("FAS 128") during the year ended December 31, 1997. FAS
128 replaced the calculation of primary and fully diluted net loss per share
with basic and diluted net loss per share. In accordance with FAS 128, basic
net income (loss) per share excludes dilutive common stock equivalents and is
calculated as net income (loss) divided by the weighted average number of
common shares outstanding. Diluted net income (loss) per share is computed
using the weighted average number of common shares outstanding and dilutive
common stock equivalents outstanding during the period. Common equivalent
shares from stock options and warrants (using the treasury stock method) are
excluded from the calculation of net loss per share as their effect is anti-
dilutive.

Recent Accounting Pronouncements

As of January 1, 1998 the Company adopted, Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("FAS 130") which
establishes standards for reporting and displaying comprehensive income and
its components in a full set of general-purpose financial statements. The
adoption of this standard has had no impact on the Company's consolidated
financial position, stockholders' equity, results of operations or cash flows.
Accordingly, the Company's comprehensive loss for the nine months ended
September 30, 1998 is equal to its reported loss.

Additionally, the Financial Accounting Standards Board issued Financial
Accounting Standards Board Statement No. 131, "Disclosure about Segments of an
Enterprise and Related Information" which establishes standards for the way
public business enterprises report information in annual statements and
interim financial reports regarding operating segments, products and services,
geographic areas, and major customers. The Company is evaluating additional
disclosures, if any, which may result from this pronouncement which is
effective for and will be reflected in the Company's December 31, 1998
financial statements.

2. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1996 1997 1998
------- -------- -------------
<S> <C> <C> <C>
Computers and equipment, including assets
under capital leases of $0, $0 and
$51,854 for 1996, 1997 and the nine
months ended September 30, 1998,
respectively............................. $64,153 $456,999 $1,676,985
Furniture and fixtures under capital
leases................................... -- -- 110,145
------- -------- ----------
Fixed assets.............................. 64,153 456,999 1,787,130
Less accumulated depreciation and
amortization, including amounts related
to assets under capital leases of $0, $0
and $4,574 for 1996, 1997 and the nine
months ended September 30, 1998,
respectively............................. (2,496) (43,314) (318,791)
------- -------- ----------
$61,657 $413,685 $1,468,339
======= ======== ==========
</TABLE>

F-12
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

3. INCOME TAXES

There has been no provision for U.S. federal or state income taxes for any
period as the Company has incurred operating losses.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets for federal and state income taxes are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1996 1997 1998
--------- ----------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.... $ 1,000 $ 537,000 $ 1,397,000
Acquired technology................. -- -- 225,000
Capitalized start up costs.......... 140,000 112,000 92,000
Prepaid royalties and licenses...... 23,000 257,000 457,000
Accrued liabilities................. -- 398,000 639,000
Other............................... 11,000 17,000 124,000
--------- ----------- -----------
Total deferred tax assets............. 175,000 1,321,000 2,934,000
Valuation allowance................... (175,000) (1,321,000) (2,934,000)
--------- ----------- -----------
Net deferred tax assets............... $ -- $ -- $ --
========= =========== ===========
</TABLE>

Realization of deferred tax assets is dependent upon future earnings, if
any, the timing and amount of which are uncertain. Accordingly, the net
deferred tax assets have been fully offset by a valuation allowance as it is
more likely than not that the deferred tax assets will not be realized.

During the period from April 16, 1996 (inception) through December 31, 1996,
the year ended December 31, 1997, and the nine months ended September 30, 1998
the valuation allowance for the deferred tax assets increased by $175,000,
$1,146,000 and $1,613,000, respectively.

As of September 30, 1998, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $3,506,000. There can be no
assurance that the Company will realize the benefit of the net operating loss
carryforwards. The federal net operating loss carryforwards will expire at
various dates beginning in the fiscal year 2011 through 2012 if not utilized.

Due to the "change of ownership" provisions of the Internal Revenue Code,
the availability of the Company's net operating loss and credit carryforwards
will be subject to an annual limitation against taxable income in future
periods if a change in ownership of more than 50% of the value of the
Company's stock should occur over a three year period, which could
substantially limit the eventual utilization of these carryforwards.

4. STOCKHOLDERS' EQUITY

In October 1998, the Company's Board of Directors authorized an increase in
the number of authorized shares of common and preferred stock from 20,000,000
to 40,000,000 and 1,000,000 to 5,000,000, respectively, each with a par value
of $.0001 per share.

F-13
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Proposed Public Offering of Common Stock

In June 1998, the Board of Directors authorized management of the Company to
file a Registration Statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public.

Stock Split

In February 1998, the Company completed a one-for-two reverse stock split of
the outstanding shares of common stock. In addition, in November 1998, the
Company completed a two-for-three reverse stock split of the outstanding
shares of common stock. All share information and per share amounts in the
accompanying consolidated financial statements has been retroactively adjusted
to reflect the effect of this stock split.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock, none
of which is issued or outstanding. The Board of Directors has the authority to
issue the preferred stock in one or more series and to fix the designations,
powers, preferences, rights, qualifications, limitations and restrictions with
respect to any series of preferred stock and to specify the number of shares
of any series of preferred stock without any further vote or action by the
stockholders.

Founders Stock

Pursuant to a common stock Purchase Agreement dated August 26, 1996 and
following the incorporation of the Company, two of the Company's founders each
purchased 333,334 shares (666,668 shares in total) of the Company's common
stock for an aggregate of $200 in cash. Pursuant to a common stock Purchase
Agreement dated December 31, 1996, the founders purchased an additional
2,333,334 and 1,000,000 shares, respectively, of the Company's common stock in
exchange for the cancellation of promissory notes that the Company owed to the
stockholders/founders in the amount of $700,000 and $300,000, respectively. In
the same agreement, one of the founders contributed 666,667 shares of his
common stock back to the Company without compensation pursuant to an agreement
between the founders.

Warrants

In connection with the issuance of common stock in the nine months ended
September 30, 1998, the Company issued warrants to purchase a total of 306,427
shares of common stock at an average price of $3.33 per share. These warrants
are immediately exercisable and expire on the earlier of the successful
completion of an initial public offering or 2003.

Stock Option Plan

The Company has reserved 1,166,667 shares of common stock under the
Company's 1998 Stock Incentive Plan (the "Plan"). The Plan provides for
incentive stock options, as defined by the Internal Revenue Code, to be
granted to employees, at an exercise price not less than 100% of the fair
value at the grant date as determined by the Board of Directors. The Plan also
provides for nonqualified stock options to be issued to non-employee officers,
directors and consultants at an exercise price of not less than 85% of the
fair value at the grant date.

F-14
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Stock Option Plan (continued)

Option vesting schedules are determined by the Board of Directors at the time
of issuance. Stock options generally vest over different periods ranging from
immediately to 25% at the end of the first year and monthly thereafter up to a
maximum of four years. Upon a change of control, as defined in the Plan, 75%
of unvested options become immediately exercisable. Certain options' vesting
can also accelerate based on the achievement of specified performance
criteria.

A summary of the option activity (including 1,227,333 options granted
outside of the Plan, all of which are outstanding as of September 30, 1998) is
as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------
<S> <C> <C>
Balance at April 16, 1996............................... -- $ --
Granted............................................... 440,000 0.03
Exercised............................................. -- --
Canceled.............................................. -- --
--------- -----
Balance at December 31, 1996............................ 440,000 0.03
Granted............................................... 632,982 0.05
Exercised............................................. -- --
Canceled.............................................. (95,000) 0.03
--------- -----
Balance at December 31, 1997............................ 977,982 0.05
Granted............................................... 1,044,716 4.94
Exercised............................................. -- --
Canceled.............................................. (121,500) 3.56
--------- -----
Balance at September 30, 1998........................... 1,901,198 $1.11
========= =====
</TABLE>

As of September 30, 1998, there are 492,802 options available for future
grant under the Plan.

The following table summarizes information about options outstanding and
exercisable at September 30, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- -------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
PRICE SHARES LIFE (IN YEARS) PRICE SHARES PRICE
-------------- --------- --------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$0.03--$0.03 1,013,890 8.6 $ 0.03 582,174 $ 0.03
$0.90--$3.33 520,880 9.5 2.88 112,783 2.94
$6.00--$6.75 199,428 9.8 6.72 8,095 6.63
$10.80--$13.50 167,000 9.8 11.34 5,168 11.00
--------- ---------
1,901,198 9.1 1,283,727
========= =========
</TABLE>

F-15
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Deferred Compensation

The Company has recorded deferred compensation charges of $0, $550,848 and
$2,002,361 during the period from April 16, 1996 (inception) through December
31, 1996, for the year ended December 31, 1997 and for the nine months ended
September 30, 1998, respectively, for the difference between the exercise
price and the deemed fair value of certain stock options granted by the
Company. These amounts are being amortized by charges to operations, using the
accelerated method, over the vesting periods of the individual stock options,
which range from three months to four years.

From December 1996 through June 1998 certain options were granted to various
employees which provided vesting upon certain events, such as the Company's
successful completion of an initial public offering or individual and Company
performance goals. In June 1998 these options were modified to vesting upon
the earlier of an event or vesting two years from the date of grant. As a
result, the related compensation charge was determined in June 1998.

Options Issued to Consultants

The Company granted options to purchase 87,422 shares of common stock to
consultants at exercise prices ranging from $0.03 to $6.30 per share during
the period from January 1, 1997 through September 30, 1998. These options were
granted in exchange for consulting services performed. The Company valued
these options using the estimated fair value of the services performed which
amounted to $0, $20,277 and $209,630, for the period from April 16, 1996
(inception) through December 31, 1996, for the year ended December 31, 1997
and for the nine months ended September 30, 1998 respectively. These amounts
are being amortized by charges to operations over the respective consulting
periods. The amounts charged to operations were $0, $17,376 and $188,665 for
the period from April 16, 1996 (inception) through December 31, 1996, for the
year ended December 31, 1997 and for the nine months ended September 30, 1998,
respectively.

1998 Employee Stock Purchase Plan

The Company's 1998 Employee Stock Purchase Plan was adopted by the Board of
Directors in October 1998. The Company has reserved a total of 300,000 shares
of common stock for issuance under the plan. Eligible employees may designate
up to 100% of their compensation subject to certain limitations as described
in the Plan, to be deducted each pay period for the purchase of common stock
at 85% of the lesser of the fair market value of the Company's common stock on
the first day of the applicable purchasing period or the last day of the
applicable accrual period.

F-16
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Pro Forma Disclosure of the Effect of Stock-Based Compensation

The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FAS 123 requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Pro forma information regarding net income (loss) and net
income (loss) per share is required by FAS 123. This information is required
to be determined as if the Company has accounted for its employee stock
options under the fair value method of FAS 123. Under this method, the
estimated fair value of the options is amortized to expense over the options'
vesting period. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted-
average assumptions:

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1996
(INCEPTION) NINE MONTHS
THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
-------------- ------------ -------------
<S> <C> <C> <C>
Risk-free interest rate............ 6.5% 6.5% 5.28%
Expected life of the option........ 5 years 5 years 5 years
Expected volatility................ 0% 0% 0%
Expected dividend yield............ 0% 0% 0%
</TABLE>

Because FAS 123 is applicable only to options granted since inception, its
adjusted effect will not be fully reflected until 2000.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimates, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

The weighted-average fair value of options granted to employees during the
period from April 16, 1996 (inception) through December 31, 1996, the year
ended December 31, 1997 and for the nine months ended September 30, 1998 were
$0.02, $0.36 and $0.84, respectively.

F-17
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Pro Forma Disclosure of the Effect of Stock-Based Compensation (continued)

The effect of applying the FAS 123 fair value method to the Company's stock-
based awards results in net loss and net loss per share as follows:

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16, 1996
(INCEPTION) NINE MONTHS
THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER SEPTEMBER 30,
1996 31, 1997 1998
-------------- ----------- -------------
<S> <C> <C> <C>
Net loss, as reported............. $(439,975) $(3,131,877) $(6,392,466)
Net loss, pro forma............... (441,946) (3,231,131) (6,507,034)
Net loss per share--basic and
diluted, as reported............. (0.89) (0.64) (0.89)
Net loss per share--basic and
diluted, pro forma............... (0.90) (0.66) (0.91)
</TABLE>

5. COMMITMENTS

The Company leases its facilities, furniture and fixtures and certain
computers and equipment under noncancelable leases for varying periods through
2007. The cost of assets acquired under capital leases during the nine months
ended September 30, 1998 was $161,999. Amortization expense related to these
assets of $4,574 is included in accumulated depreciation and amortization at
September 30, 1998. The Company's lease obligations are collateralized by
certain assets at September 30, 1998. The following are the minimum lease
obligations under these leases at September 30, 1998:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
1998 (remaining three months)........................ $ 15,816 $ 109,252
1999................................................. 63,264 379,441
2000................................................. 63,264 385,253
2001................................................. 63,264 382,620
2002................................................. 17,027 387,190
2003................................................. -- 410,762
-------- ----------
Minimum lease payments................................. 222,635 $2,054,518
==========
Less amount representing interest...................... (60,636)
--------
Present value of minimum lease payments................ 161,999
Less current portion................................... (35,697)
--------
Long-term portion...................................... $126,302
========
</TABLE>

Rent expense under operating lease arrangements for the period from April
16, 1996 (inception) through December 31, 1996, the year ended December 31,
1997 and for the nine months ended September 30, 1998 totaled $5,400, $43,125
and $169,785, respectively.

In August 1998, the Company entered into a nonexclusive software
distribution agreement with a third-party software vendor. Under this
agreement the Company is required to pay monthly installments of $45,000
through January 1999.

F-18
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

6. CONTINGENCY ACCRUAL AND OTHER MATTER

In January 1998, the Company became aware that Imageline, Inc. ("Imageline")
claimed to own the copyright in certain images that a third party, Sprint
Software Pty Ltd ("Sprint") had licensed to the Company. Some clip art images
that Imageline alleged infringed Imageline's copyright were included by the
Company in versions of the Company's Web Clip Empire product and licensed by
the Company to third parties, including other software clip publishers. The
Company's contracts with such publishers require the Company to indemnify the
publisher if copyrighted material licensed from the Company infringes a
copyright. Imageline claims that the Company's infringement of Imageline's
copyrights is ongoing. The Company and Imageline have engaged in discussions,
but were unable to reach any agreement regarding a resolution of this matter.
Based on the discussions with Imageline, the Company believes the range of
liability related to this matter is from $0 up to $10,000,000; however, the
Company believes it is unlikely that the liability would exceed $1,000,000.
Accordingly, the Company reserved $1,000,000 for this potential liability, the
expense of which is included in non-recurring charges for the year ended
December 31, 1997. The Company believes that the $1,000,000 accrual represents
a reasonable estimate of the loss that could be incurred in the Imageline
dispute. If not successful in defending this claim, the resulting outcome
could have a material adverse impact on the Company's business, results of
operations, cash flows and financial condition.

On August 27, 1998, the Company filed a lawsuit in the United States
District Court for the Eastern District of Virginia against Imageline, certain
parties affiliated with Imageline, and Sprint regarding the Company's and its
licensees' alleged infringement on Imageline's copyright in certain clip art
that the Company licensed from Sprint. The lawsuit seeks, among other relief,
disclosure of information from Imageline concerning the alleged copyright
infringement, a declaratory judgment concerning the validity and
enforceability of Imageline's copyrights and copyright registrations, a
declaratory judgment regarding damages, if any, owed by the Company to
Imageline, and indemnification from Sprint for damages, if any, owed by the
Company to Imageline. There is no contractual limitation on Sprint's
indemnification. While the Company is seeking indemnification from Sprint for
damages, if any, there can be no assurance that Sprint will be able to fulfill
the indemnity obligations under its license agreements with the Company. In
addition, the Company may be subject to claims by third parties seeking
indemnification from the Company in connection with the alleged infringement
of the Imageline copyrights.

On September 17, 1998, Imageline filed an answer and counterclaim, denying
the Company's allegations and requesting injunctive relief and damages for the
Company's alleged infringements of Imageline's clip art properties.

In September 1998, Zoom Telephonics, Inc. ("Zoom") contacted the Company and
asserted, among other things, that the "XOOM" trademark was confusingly
similar to Zoom's own "ZOOM" registered trademark, and requesting that the
Company cease using the "XOOM" trademark and the "xoom.com" domain name, and
change its name. The Company has responded to Zoom's correspondence by denying
any confusion between trademarks, and is in preliminary discussions with Zoom
to resolve the points Zoom raised in such correspondence. Although the Company
believes that Zoom's claims are without merit, it is possible that the two
companies will not resolve such points. A failure to do so could result in
litigation, which could have a material adverse effect on the Company's
business, results of operations and financial condition, particularly if such
litigation forces the Company to make substantial changes to its name and
trademark usage. However, the Company does not believe that the ultimate
outcome of this matter will have a material adverse effect on its results of
operations, financial position or cash flows.

7. RELATED PARTY TRANSACTIONS

F-19
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

7. RELATED PARTY TRANSACTIONS (CONTINUED)

receivable to related parties and to investors in exchange for shares of
common stock and, in some cases, notes payable. These subscriptions receivable
are due upon demand and bear no interest. As of September 30, 1998, there were
no outstanding amounts due under subscriptions receivable.

During the period from April 16, 1996 (inception) through December 31, 1996,
for the year ended December 31, 1997 and for the nine months ended September
30, 1998, the Company issued notes payable to related parties in exchange for
cash advances and stock subscriptions receivable. All notes payable issued
through September 30, 1998 have been converted into shares of common stock.

The Company entered into a Consulting Agreement, dated May 15, 1998, with an
outside director of the Company. The Consulting Agreement will terminate on
November 15, 1999. The Agreement provides for the director to receive monthly
compensation of $10,000, paid in the form of common stock. The director also
received options to buy 16,667 shares of the Company's common stock. The
options vest at the rate of 12.5% per quarter over two years. The value of the
options on the date of issue was $100,000. This amount was charged to general
and administrative expenses during the nine months ended September 30, 1998.
The director will be granted stock options to buy an additional 16,667 shares
of common stock upon completion of the Company's initial public offering.

The Company has entered into a Content License Agreement dated February 22,
1998, with Classic Media Holdings, whereby the Company was granted certain
non-exclusive perpetual, world-wide licensing rights in connection with
Classic Media Holdings' library of public domain movies. As consideration for
the license, the Company issued 43,290 shares of the Company's common stock to
Classic Media Holdings' principals. The stock was valued using the fair value
of the asset received, which yielded a value of $100,000 that was charged to
operating and development in the nine months ended September 30, 1998. A
director of the Company is a principal of Classic Media Holdings.

8. RETIREMENT PLAN

On March 26, 1998, the Company established a 401(k) Profit Sharing Plan (the
"Plan") available to all employees who meet the Plan's eligibility
requirements. Employees may elect to contribute from 1% to 25% of their
eligible earnings to the Plan subject to certain limitations. This defined
contribution plan provides that the Company may, at its discretion, make
contributions to the Plan on a periodic basis. The Company has not made
contributions to the Plan.

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS

During the nine months ended September 30, 1998, the Company made the
business and technology acquisitions described in the paragraphs that follow,
each of which has been accounted for as a purchase. The consolidated financial
statements include the operating results of each business from the date of
acquisition.

The amounts allocated to purchased research and development were determined
through established valuation techniques in the high-technology Internet
industry and were expensed upon acquisition, because technological feasibility
had not been established and no future alternative uses existed. Research and
development costs to bring the products from the acquired companies to
technological feasibility are not expected to have a material impact on the
Company's future results of operations or cash flows. Amounts allocated to
goodwill and other intangible assets are amortized on a straight-line basis
over a two-year period.

F-20
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)

Paralogic Corporation

On March 10, 1998, the Company acquired 100% of the outstanding shares of
Paralogic Corporation ("Paralogic"). Paralogic provides free communication
between members via a chat Web site network (i.e., chat rooms). The purchase
consideration was $3,037,607 consisting of 682,410 shares of common stock with
a fair value of $2.31 per share, $1,400,000 of debt, and $61,243 of
acquisition costs. Contingent consideration, which the Company does consider
probable of paying, consists of an additional $860,000, included in debt
above, which will be paid if certain performance criteria are met.

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

<TABLE>
<S> <C>
Accounts receivables and other current assets................... $ 8,725
Net fixed assets................................................ 50,112
Purchased in-process research and development charged to
operations in the quarter ended March 31, 1998................. 330,000
Purchased technology............................................ 160,000
Goodwill........................................................ 2,538,929
Liabilities assumed............................................. (83,214)
----------
Total purchase consideration.................................... $3,037,607
==========
</TABLE>

Purchased In-Process Research and Development. Management estimates that
$490,000 of the purchase price represents purchased in-process technology that
has not yet reached technological feasibility and has no alternative future
use. Accordingly, this amount was expensed in the three months ended March 31,
1998. The value assigned to purchased in-process technology, based on a
valuation analysis prepared by an independent third-party was determined by
identifying the research project in areas for which technological feasibility
had not been achieved and assessing the date of completion of the research and
development effort. The state of completion was determined by estimating the
costs and time incurred to date relative to those costs and time to be
incurred to develop the purchased in-process technology into commercially
viable products, estimating the resulting net cash flows only from the
percentage of research and development efforts complete at the date of
acquisition, and discounting the net cash flows back to their present value.
The discount rate included a factor that took into account the uncertainty
surrounding the successful development of the purchased in-process technology
projects.

Purchased Technology. To determine the value of purchased technology
($160,000), the expected future cash flows of the existing developed
technologies were discounted taking into account the characteristics and
applications of the product, the size of existing markets, growth rates of
existing and future markets as well as an evaluation of past and anticipated
product-life cycles.

Global Bridges Technologies, Inc.

On June 11, 1998, the Company acquired 100% of the outstanding shares of
Global Bridges Technologies, Inc. ("GBT"). GBT, owns the exclusive selling
rights to Sitemail, an HTML-based e-mail product thus expanding the Company's
suite of member services. The purchase consideration was $709,077 consisting
of 183,427 shares of common stock with a fair value of $3.33 per share,
$12,500 cash, a note payable of $62,500 with fixed payment terms and $23,267
of acquisition costs. The Company may, but is not required to, purchase the
common shares issued in connection with this acquisition at the fair market
value of the shares, if and when,

F-21
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)

Global Bridges Technologies, Inc. (continued)

the former shareholder of GBT proposes to sell such shares. This repurchase
option lapses upon the Company's successful completion of an initial public
offering.

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

<TABLE>
<S> <C>
Goodwill........................................................... $766,621
Liabilities assumed................................................ (61,697)
--------
Total purchase consideration....................................... $709,077
========
</TABLE>

In July 1998, the Company amended the purchase agreement with GBT to provide
for the issuance of an additional 17,304 shares of common stock with a fair
value of $10.80 per share. Related to this amendment, the Company increased
goodwill acquired from GBT by $186,883 during July 1998. In addition, the
Company modified the terms of the earn out agreement. If the Company completes
an initial public offering or a sale of substantially all of its assets, GBT
will receive $200,000 of the Company's common stock, based on the fair market
value on the date of the initial public offering and additional cash
consideration up to $130,000. If the Company has not completed an initial
public offering or a sale of substantially all of its assets prior to GBT
achieving the performance criteria, then GBT will receive 17,304 shares of
common stock upon the achievement of the performance criteria.

Revolutionary Software, Inc.

On June 11, 1998, the Company purchased certain technology of Revolutionary
Software, Inc. ("RSI"). RSI is the developer of the Sitemail technology and
had licensed Sitemail to GBT. The purchase consideration was $701,411,
consisting of 128,052 shares of common stock with a fair value of $3.33 per
share, $12,500 cash and a note payable of $262,500 with fixed payment terms.
Initially, RSI may earn up to an additional 34,608 shares of common stock if
certain performance targets are met. In each of the twenty-four months
following June 1998, the shareholders of RSI will receive 5% of net revenues
less certain costs from electronic commerce and banner advertising from e-mail
subscribers of certain Internet service providers. The Company may, but is not
required to, purchase the common shares issued in connection with this
acquisition at the fair market value of the shares, if and when, the former
shareholder of RSI proposes to sell such shares. This repurchase right lapses
upon the Company's successful completion of an initial public offering.

The purchase consideration of the acquired assets was allocated based on
fair values as follows:

<TABLE>
<S> <C>
Purchased in-process research and development charged to operations in the
quarter ended
June 30, 1998............................................................ $330,000
Purchased technology...................................................... 371,411
--------
Total purchase consideration.............................................. $701,411
========
</TABLE>

F-22
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)

Revolutionary Software, Inc. (continued)

In July 1998, the Company amended the agreement with RSI to provide for the
issuance of an additional 34,608 shares of common stock with a fair value of
$10.80 per share. Related to this amendment, the Company increased purchased
technology acquired from RSI by $373,766 during July 1998. In addition, the
Company modified the terms of the earn out agreement. If the Company completes
an initial public offering or a sale of substantially all of its assets, RSI
will receive $400,000 of the Company's common stock, based on the fair market
value on the date of the initial public offering and additional cash
consideration of $260,000. If the Company has not completed an initial public
offering or a sale of substantially all of its assets prior to RSI achieving
the performance criteria, then RSI will receive 34,608 shares of common stock.

Purchased In-Process Research and Development. Management estimates that
$330,000 of the purchase price represents purchased in-process technology that
has not yet reached technological feasibility and has no alternative future
use. Accordingly, this amount was expensed in the three months ended June 30,
1998. The value assigned to purchased in-process technology, based on a
valuation analysis prepared by an independent third-party was determined by
identifying the on-going research projects for which technological feasibility
had not been achieved and assessing the state of completion of the research
and development effort. The state of completion was determined by estimating
the costs incurred to date relative to those costs to be incurred to develop
the purchased in-process technology into commercially viable products,
estimating the resulting net cash flows only from the percentage of research
and development efforts complete at the date of acquisition, and discounting
the net cash flows back to their present value. The discount rate included a
factor that took into account the uncertainty surrounding the successful
development of the purchased in-process technology projects.

To determine the value of purchased technology $130,000, the expected future
cash flows of the existing developed technologies were discounted taking into
account the characteristics and applications of the product, the size of
existing markets, growth rates of existing and future markets as well as an
evaluation of past and anticipated product-life cycles. The purchase
consideration above the purchased in-process research and development and
purchased technology amounts as determined by the valuation were also included
in the purchased technology.

ArcaMax, Inc.

In June, 1998, the Company purchased certain intellectual property and
licensed certain technology from ArcaMax, Inc. ("ArcaMax") for $644,000,
consisting of 133,334 shares of common stock with a fair value of $3.33 per
share, $20,000 cash and a note payable of $180,000 with fixed payment terms.
This technology acquisition gave the Company the ability to offer a free
online greeting card service to members. The Company recorded this amount as
purchased technology and is amortizing it over its estimated useful life of
two years. The Company may, but is not required to, purchase the common shares
issued in connection with this acquisition at the fair market value of the
shares, if and when, the former shareholder of ArcaMax proposes to sell such
shares. This repurchase right lapses upon the Company's successful completion
of an initial public offering.

Pagecount, Inc.

On July 24, 1998, the Company acquired substantially all of the assets of
Pagecount, Inc. ("Pagecount"). The consideration was $1,460,000 and consisted
of, $200,000 cash, a note payable of $1,200,000 with fixed payment terms and
estimated acquisition costs of $60,000. If the Company successfully executes
an initial public offering or completes a sale of substantially all of its
assets, then the entire unpaid balance of the note payable at that time shall
become immediately due and payable.

F-23
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)

Pagecount, Inc. (continued)

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

<TABLE>
<S> <C>
Cash............................................................ $ 31,598
Accounts receivable and other current assets.................... 19,154
Net fixed assets................................................ 20,866
Purchased in-process research and development charged to
operations in the quarter ended September 30, 1998............. 130,000
Purchased technology............................................ 140,000
Goodwill........................................................ 1,163,970
Liabilities assumed............................................. (45,588)
----------
Total purchase consideration.................................... $1,460,000
==========
</TABLE>

Purchased In-Process Research and Development. Management estimates that
$130,000 of the purchase price represents purchased in-process technology that
has not yet reached technological feasibility and has no alternative future
use. Accordingly, this amount was expensed in the three months ended September
30, 1998. The value assigned to purchased in-process technology, based on a
valuation analysis prepared by an independent third-party was determined by
identifying the research project in areas for which technological feasibility
had not been achieved and assessing the date of completion of the research and
development effort. The state of completion was determined by estimating the
costs and time incurred to date relative to those costs and time to be
incurred to develop the purchased in-process technology into commercially
viable products, estimating the resulting net cash flows only from the
percentage of research and development efforts completed at the date of
acquisition, and discounting the net cash flows back to their present value.
The discount rate included a factor that took into account the uncertainty
surrounding the successful development of the purchased in-process technology
projects.

Purchased Technology. To determine the value of purchased technology
($140,000), the expected future cash flows of the existing developed
technologies were discounted taking into account the characteristics and
applications of the product, the size of existing markets, growth rates of
existing and future markets as well as an evaluation of past and anticipated
product-life cycles.

Purchased In-Process Research and Development and Purchased
Technology. Values assigned to purchased in-process research and development
and purchased technology were generally determined by independent appraisals
using an income approach. To determine the value of in-process research and
development, the Company considered, among other factors, the state of
completion of each project, the time and cost needed to complete each project,
expected income, and associated risks which included the inherent difficulties
and uncertainties in completing the project and thereby achieving
technological feasibility and risks related to the viability of and potential
changes to future target markets. This analysis results in amounts assigned to
in-process research and development projects that had not yet reached
technological feasibility (as defined and utilized by the Company in assessing
software capitalization) and does not have alternative future uses. To
determine the value of the purchased technology, the expected future cash
flows of each existing technology product were discounted taking into account
risks related to the characteristics and applications of each product,
existing and future markets and assessments of the life cycle stage of the
product. Based on the analysis, the existing technology that had reached
technological feasibility was capitalized.

F-24
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)

<TABLE>
<S> <C>
Purchased technology............................................ $ 1,696,578
Goodwill........................................................ 4,672,692
-----------
Intangible assets............................................... 6,369,270
Accumulated amortization........................................ (1,087,029)
-----------
Intangible assets, net.......................................... $ 5,282,241
===========

The total purchased in-process research and development that had no
alternative future use, and as such was charged to operations in the nine
month period ended September 30, 1998 is summarized below:

Paralogic Corporation........................................... $ 330,000
Revolutionary Software, Inc..................................... 330,000
Pagecount, Inc.................................................. 130,000
-----------
Total purchased in-process research and development............. $ 790,000
===========
</TABLE>

The following (unaudited) pro forma summary represents the consolidated
results of operations as if the acquisitions of Paralogic, GBT and Pagecount
had occurred at the beginning of the periods presented and are not intended to
be indicative of future results.

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -----------------
<S> <C> <C>
Pro forma net revenue........................ $ 1,371,101 $ 5,154,137
Pro forma net loss........................... (5,882,729) (6,905,231)
Pro forma net loss per share--basic and
diluted..................................... (1.02) (0.92)
Number of shares used in pro forma per share
calculation--basic and diluted.............. 5,740,156 7,483,248
</TABLE>

The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been in effect for the entire period
presented and are not intended to be a projection of future results.
In-process research and development charges of $0 and $460,000 were excluded
from the pro forma net loss and pro forma net loss per share figures for the
year ended December 31, 1997 and the nine months ended September 30, 1998,
respectively.

F-25
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

9. BUSINESS COMBINATIONS AND TECHNOLOGY ACQUISITIONS (CONTINUED)

Acquisition Notes Payable

Notes payable and other amounts due issued in connection with the
acquisitions described above consist of the following at September 30, 1998:

<TABLE>
<S> <C>
Note payable to the former shareholder of Global Bridges
Technologies, Inc. bearing interest of 5% annually. The note
is due in monthly installments of $2,500 through July 2000.... $ 55,000
Note payable to Pagecount, Inc. bearing interest of 7%
annually. The note is due in monthly installments of $53,727
through April 1999 and the remaining balance outstanding is
due April 30, 1999. If the company successfully executes an
initial public offering or completes a sale of substantially
all of its assets, then the entire balance at that time shall
become immediately due and payable............................ 1,153,273
Note payable to Revolutionary Software, Inc. bearing interest
of 5% annually. The note is secured by the acquired technology
and is due in monthly installments of $10,500 through July
2000.......................................................... 231,000
Note payable to ArcaMax, Inc. The note is non-interest bearing
and due in monthly installments of $15,000 through June 1999.
If the Company successfully executes an Initial Public
Offering or completes a sale of substantially all of its
assets, then the entire unpaid balance at that time shall
become immediately due and payable............................ 135,000
Note payable to former shareholder of GBT which is due upon
demand........................................................ 21,431
-----------
2,815,704
Less amounts due within one year from September 30, 1998....... (1,825,704)
-----------
Long-term acquisition notes payable............................ $ 990,000
===========

Scheduled maturities of acquisition notes payable and other amounts due are
as follows:
Year ending December 31,
1998 (remaining three months).................................. $ 358,685
1999........................................................... 2,366,019
2000........................................................... 91,000
-----------
Total.......................................................... $ 2,815,704
===========
</TABLE>

10. SECURED FINANCING ARRANGEMENT

On October 1, 1998, the Company entered into a secured financing agreement
("the Agreement") with a leasing Company. The Agreement provides for
borrowings of up to a cumulative amount of $1,000,000 through July 31, 1999.
All borrowings under the Agreement are collateralized by computer and office
equipment and bear interest at the rate of 14.58% annually. Payments are made
monthly over 42 months from the date of each borrowing in the amount of 2.87%
of the amount borrowed, plus a final payment equal to 10% of the amount
borrowed.

F-26
<PAGE>

XOOM.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED)

11. SUBSEQUENT EVENT

On November 3, 1998, the Company entered into a loan agreement which
provides for borrowings up to $2,750,000. The Company is eligible to borrow up
to $1,250,000 and will be eligible to borrow the remaining $1,500,000 upon
reaching 4.8 million members. The loan bears interest at 12% annually.
Principal is due on April 30, 1999 and interest is due monthly. All amounts
borrowed under this loan agreement are secured by certain fixed assets.
Pursuant to the terms of the loan agreement, if the Company is sold, at the
option of the holder, the Company is required to pay the lender $250,000 or
issue warrants to purchase 183,333 shares of the Company's common stock at a
per share price equal to the lower of the price per share paid by the
acquiring company or $12 per share. In the event the Company completes an
initial public offering, the Company is required to issue warrants to purchase
183,333 shares of its common stock at the initial public offering per share
price. If the Company completes a private equity financing with proceeds equal
to or greater than $10,000,000, the Company is required to issue warrants to
purchase 183,333 shares of its common stock at a per share price equal to 70%
of the per share price of the equity financing. The Company will record the
effect of any payment or issuance of warrants at the fair value at the time of
any such event.

On November 16, 1998 the Company's Board of Directors and stockholders
authorized an increase in the number of shares authorized under its 1998 Stock
Incentive Plan from 1,166,667 to 2,000,000.

F-27
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Paralogic Corporation

We have audited the accompanying balance sheets of Paralogic Corporation as of
December 31, 1996 and 1997, and the related statements of operations,
shareholders' equity (deficit) and cash flows for the years then ended. 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Paralogic Corporation at
December 31, 1996 and 1997, and the results of its operations and its cash
flows for years then ended, in conformity with generally accepted accounting
principles.

Palo Alto, California
July 20, 1998

F-28
<PAGE>

PARALOGIC CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash........................................................ $29,680 $ 26,910
Accounts receivable, net of allowance for doubtful accounts
of $375 in 1996 and $11,314 in 1997........................ 10,946 24,362
Income taxes receivable..................................... -- 836
------- ---------
Total current assets......................................... 40,626 52,108
Fixed assets, net............................................ 40,429 40,086
------- ---------
Total assets................................................. $81,055 $ 92,194
======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................ $15,202 $ 27,719
Accrued compensation and related expenses................... 27,155 12,641
Income taxes payable........................................ 2,261 --
Deferred revenue............................................ -- 64,210
Contingency accrual......................................... -- 164,802
Deferred income taxes....................................... 2,026 --
------- ---------
Total current liabilities.................................... 46,644 269,372
------- ---------
Commitments and contingencies
Shareholders' equity (deficit):
Common stock, $1.00 par value:
Authorized shares--1,000,000;
Issued and outstanding shares--5,000 in 1996 and 5,250 in
1997...................................................... 5,000 11,000
Retained earnings (accumulated deficit)..................... 29,411 (188,178)
------- ---------
Total shareholders' equity (deficit)......................... 34,411 (177,178)
------- ---------
Total liabilities and shareholders' equity (deficit)......... $81,055 $ 92,194
======= =========
</TABLE>

See accompanying notes.

F-29
<PAGE>

PARALOGIC CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR
ENDED DECEMBER 31,
------------------
1996 1997
-------- ---------
<S> <C> <C>
Net revenue:
Services.................................................. $132,569 $ 215,917
License fees.............................................. 39,074 --
Advertising............................................... 1,379 34,028
-------- ---------
Total net revenue.......................................... 173,022 249,945
Cost of net revenue:
Cost of services.......................................... 80,019 117,963
-------- ---------
Gross profit............................................... 93,003 131,982
Costs and expenses:
Operating and development................................. 38,529 45,875
Sales and marketing....................................... 26,129 86,097
General and administrative................................ 11,591 45,757
Contingency accrual....................................... -- 164,802
-------- ---------
Total costs and expenses................................... 76,249 342,531
-------- ---------
Income (loss) before provision for income taxes............ 16,754 (210,549)
Provision for income taxes................................. 3,666 7,040
-------- ---------
Net income (loss).......................................... $ 13,088 $(217,589)
======== =========
</TABLE>

See accompanying notes.

F-30
<PAGE>

PARALOGIC CORPORATION

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
-------------- (ACCUMULATED
SHARES AMOUNT DEFICIT) TOTAL
------ ------- ------------ ---------
<S> <C> <C> <C> <C>
Balances at December 31, 1995........... 5,000 $ 5,000 $ 16,323 $ 21,323
Net income............................. -- -- 13,088 13,088
----- ------- --------- ---------
Balances at December 31, 1996........... 5,000 5,000 29,411 34,411
Issuance of common stock in exchange
for consulting services............... 250 6,000 -- 6,000
Net loss............................... -- -- (217,589) (217,589)
----- ------- --------- ---------
Balances at December 31, 1997........... 5,250 $11,000 $(188,178) $(177,178)
===== ======= ========= =========
</TABLE>

See accompanying notes.

F-31
<PAGE>

PARALOGIC CORPORATION

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................. $ 13,088 $ (217,589)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 11,794 29,321
Common stock issued in exchange for consulting
services......................................... -- 6,000
Changes in operating assets and liabilities:
Accounts receivable.............................. 7,379 (13,416)
Accounts payable................................. 4,366 12,517
Accrued compensation and related expenses........ 10,265 (14,514)
Income tax payable/ receivable................... (238) (3,097)
Deferred revenue................................. -- 64,210
Contingency accrual.............................. -- 164,802
Deferred income taxes............................ (1,115) (2,026)
----------- ------------
Net cash provided by operating activities.......... 45,539 26,208
INVESTING ACTIVITIES:
Purchases of fixed assets.......................... (42,066) (28,978)
----------- ------------
Net cash used in investing activities.............. (42,066) (28,978)
----------- ------------
Net change in cash................................. 3,473 (2,770)
Cash at beginning of year.......................... 26,207 29,680
----------- ------------
Cash at end of year................................ $ 29,680 $ 26,910
=========== ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for income taxes......................... $ 5,019 $ 10,812
=========== ============
</TABLE>

See accompanying notes.

F-32
<PAGE>

PARALOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Paralogic Corporation (the "Company"), was incorporated in the State of
California on January 12, 1995.

The Company is a provider of chat room software and various online services.

Basis of Presentation

The Company has negative working capital and an accumulated deficit at
December 31, 1997. The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. On March 11, 1998,
the Company agreed to be acquired by Xoom.com, Inc.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain 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 results of operations during the reporting period.
Actual results could differ from those estimates.

Cash

The Company maintains cash in depository accounts with two financial
institutions.

Concentrations of Credit Risk

The Company conducts business primarily with companies throughout the United
States. Management believes that any risk of accounting loss is mitigated by
the Company's ongoing credit evaluations of its customers. The Company
generally does not require collateral. The Company analyzes the need for
reserves for potential credit losses and records reserves when necessary.

For the year ended December 31, 1996, four customers accounted for $41,000,
$35,320, $29,625 and $28,000 or 24%, 20%, 17% and 16% of net revenue; of
these, one customer owed the Company $8,020 at December 31, 1996. There was no
single customer that accounted for more than 10% of net revenue for the year
ended December 31, 1997.

Fixed Assets

Fixed assets are recorded at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of three years.

Revenue Recognition

Service

The majority of the Company's service revenue is from fees related to
fees charged for chat network hosting and are recognized when the services
are performed.

License Fees

The Company licenses software under non-cancelable license agreements to
end-users. License fee revenue is recognized when a non-cancelable license
agreement has been signed, the product has been

F-33
<PAGE>

PARALOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

License Fees (continued)

delivered, there are no uncertainties surrounding product acceptance, the
fees are fixed and determinable, collection is considered probable and all
significant contractual obligations have been satisfied.
Advertising

Advertising revenue are derived from the sale of banner advertisements
under short-term contracts. Advertising revenue on banner contracts are
recognized ratably in the period in which the advertisement is displayed,
provided that no significant Company obligations remain and collection of
the resulting receivable is probable. Company obligations typically include
the guarantee of a minimum number of "impressions" or times that an
advertisement appears in pages viewed by the users of the Company's online
properties. To the extent minimum guaranteed impressions are not met, the
Company defers recognition of the corresponding revenue until the remaining
guaranteed impression levels are achieved.

Advertising Expense

All advertising costs are expensed when incurred. Advertising costs which
are included in sales and marketing expense for the years ended December 31,
1996 and 1997 were $0 and $9,377, respectively.

Income Taxes

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("FAS 130"), and Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("FAS
131"). The Company is required to adopt these statements in fiscal year 1998.
FAS 130 establishes new standards for reporting and displaying comprehensive
income and its components. FAS 131 requires disclosure of certain information
regarding operating segments, products and services, geographic areas of
operation and major customers. Adoption of these statements is expected to
have no impact on the Company's consolidated financial position, results of
operations or cash flows.

2. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Computer equipment....................................... $ 49,122 $ 78,100
Office equipment......................................... 5,413 5,413
-------- --------
54,535 83,513
Accumulated depreciation................................. (14,106) (43,427)
-------- --------
$ 40,429 $ 40,086
======== ========
</TABLE>

F-34
<PAGE>

PARALOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. INCOME TAXES

Significant components of the provision (benefit) for income taxes
attributable to operations are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Current:
Federal.................................................. $ 2,770 $ 2,242
State.................................................... 2,011 1,824
Foreign.................................................. -- 5,000
------- -------
4,781 9,066
Deferred:
Federal.................................................. (368) (2,266)
State.................................................... (747) 240
------- -------
(1,115) (2,026)
------- -------
Total provision............................................ $ 3,666 $ 7,040
======= =======
</TABLE>

A reconciliation of income taxes at the statutory federal income tax rate to
net income taxes included in the accompanying statements of operations is as
follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
U.S. federal taxes at statutory rate..................... $ 4,774 $(72,658)
Impact of graduated U.S. statutory rate.................. (3,055) (2,098)
State taxes, net of federal benefit...................... 1,264 (12,261)
Foreign withholding taxes................................ -- 5,000
Foreign tax deduction.................................... -- (1,700)
Valuation allowance...................................... -- 89,586
Other.................................................... 683 1,171
------- --------
Total tax provision...................................... $ 3,666 $ 7,040
======= ========
</TABLE>

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

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
Deferred tax assets:
Cash to accrual adjustment............................... $ 1,431 $ 97,518
Depreciation............................................. (3,457) (7,932)
------- --------
Net deferred tax assets (liabilities)..................... (2,026) 89,586
Valuation allowance....................................... -- (89,586)
------- --------
Total net deferred tax assets (liabilities)............... $(2,026) $ --
======= ========
</TABLE>

The valuation allowance increased by $89,586 in 1997.

F-35
<PAGE>

4. SHAREHOLDERS' EQUITY (DEFICIT)

The Company is authorized to issue 1,000,000 shares of common stock, with a
par value of $1.00 per share.

During 1997, the Company issued shares of common stock to consultants in
exchange for consulting services. The Company valued the common stock using
the estimated fair value of the services performed which amounted to $6,000.
This amount was amortized by charges to operations over the consulting period.

5. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company has entered into certain operating leases for office space. At
December 31, 1997, the Company had no future commitments for noncancelable
operating leases.

The Company's rental expense under operating leases for the years ended
December 31, 1996 and 1997 totaled $300 and $3,900, respectively.

Contingency Accrual

Due to the nature of its business, Paralogic Corporation is subject to
various threatened or filed legal actions. At December 31, 1997, there were
certain legal proceedings pending against the Company. These legal disputes
were settled in 1998 in connection with the business combination which is
described in Note 6. The settlement consisted of an issuance to the plaintiff
of 71,343 shares of the acquiror's common stock, valued at approximately
$164,802. This settlement amount associated with this dispute was accrued for
at December 31, 1997.

6. SUBSEQUENT EVENTS

In March 1998, the Company spun off certain components of the business into
a new company named Paralogic Software, Inc. ("PSI"). The shareholders of the
Company retained the same ownership privileges and rights in PSI as were in
effect for the Company at the time of the spin off. PSI retained the Company's
advertising and services businesses as well as the ownership of the Paralogic
chat technology. The Company retained a perpetual right to use and license the
Paralogic chat technology and all of the tangible assets and liabilities.

Effective March 11, 1998, the Company entered into merger agreement with
Xoom.com, Inc. under which the outstanding shares of common stock of the
Company were exchanged for common shares of Xoom.com, Inc. and the right to
receive certain cash distributions from Xoom.com, Inc. The financial
statements do not include any adjustments to the recorded amounts of assets
and liabilities which may result from this transaction.

7. IMPACT OF YEAR 2000 (UNAUDITED)

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

The Company believes that it will not be required to modify or replace any
portion of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter.

F-36
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Global Bridges Technologies, Inc.

We have audited the accompanying balance sheets of Global Bridges
Technologies, Inc. as of December 31, 1996 and 1997, and the related
statements of operations, shareholders' equity (deficit) and cash flows for
the period from July 23, 1996 (inception) through December 31, 1996 and for
the year ended December 31, 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 audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Bridges Technologies,
Inc. at December 31, 1996 and 1997, and the results of its operations and its
cash flows for the period from July 23, 1996 (inception) through December 31,
1996 and for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.

Palo Alto, California
July 10, 1998

F-37
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................ $ -- $ 1,036 $ 230
Note receivable from shareholder................ 3,404 -- --
------- -------- --------
Total current assets............................. 3,404 1,036 230
Deposits......................................... 712 712 712
------- -------- --------
Total assets..................................... $ 4,116 $ 1,748 $ 942
======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses........... $19,466 $ 47,557 $ 46,131
Note payable to shareholder..................... -- 2,446 13,746
------- -------- --------
Total current liabilities........................ 19,466 50,003 59,877
Commitments
Shareholders' equity (deficit):
Preferred stock, no par value:
Authorized shares--10,000,000
Issued and outstanding shares--none in 1996,
1997 or 1998.................................. -- -- --
Common stock, no par value:
Authorized shares--10,000,000
Issued and outstanding shares--630,000, 500,000
and 500,000 in 1996, 1997 and 1998,
respectively.................................. 5,000 5,000 5,000
Accumulated deficit............................. (20,350) (53,255) (63,935)
------- -------- --------
Total shareholders' equity (deficit)............. (15,350) (48,255) (58,935)
------- -------- --------
Total liabilities and shareholders' equity
(deficit)....................................... $ 4,116 $ 1,748 $ 942
======= ======== ========
</TABLE>

See accompanying notes.

F-38
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

See accompanying notes.

F-39
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD FROM JULY 23, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
COMMON STOCK
---------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
-------- ------ ----------- --------
<S> <C> <C> <C> <C>
Issuance of common stock at inception
to founders........................... 630,000 $5,000 $ -- $ 5,000
Net loss............................... -- -- (20,350) (20,350)
-------- ------ -------- --------
Balances at December 31, 1996........... 630,000 5,000 (20,350) (15,350)
Repurchase of common stock in September
1997 in exchange for future royalties. (130,000) -- -- --
Net loss............................... -- -- (32,905) (32,905)
-------- ------ -------- --------
Balances at December 31, 1997........... 500,000 5,000 (53,255) (48,255)
Net loss (unaudited)................... -- -- (10,680) (10,680)
-------- ------ -------- --------
Balances at March 31, 1998 (unaudited).. 500,000 $5,000 $(63,935) $(58,935)
======== ====== ======== ========
</TABLE>

See accompanying notes.

F-40
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JULY 23, 1996
(INCEPTION) THREE MONTHS ENDED
THROUGH YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ----------------------
1996 1997 1997 1998
------------- ------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss................... $(20,350) $(32,905) $(12,098) $(10,680)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Deposits................. (712) -- -- --
Accounts payable and
accrued expenses........ 19,466 28,091 17,512 (1,426)
-------- -------- -------- --------
Net cash provided by (used
in) operating activities.. (1,596) (4,814) 5,414 (12,106)
INVESTING ACTIVITIES:
Cash advanced to
shareholder in exchange
for note receivable....... (3,404) -- -- --
Payment received from
shareholder............... -- 3,404 -- --
-------- -------- -------- --------
Net cash provided by (used
in) investing activities.. (3,404) 3,404 -- --
FINANCING ACTIVITIES:
Capital contributed by
founders.................. 5,000 -- -- --
Proceeds from note payable
to shareholder............ -- 2,446 -- 11,300
-------- -------- -------- --------
Net cash provided by
financing activities...... 5,000 2,446 -- 11,300
-------- -------- -------- --------
Net change in cash......... -- 1,036 5,414 (806)
Cash at beginning of
period.................... -- -- -- 1,036
-------- -------- -------- --------
Cash at end of period...... $ -- $ 1,036 $ 5,414 $ 230
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for income taxes. $ -- $ -- $ 2,454 $ --
======== ======== ======== ========
</TABLE>

See accompanying notes.

F-41
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD FROM JULY 23, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Global Bridges Technologies, Inc. (the "Company"), formerly known as Dream
Fabrications and Design, Inc., was incorporated in California on July 23,
1996.

The Company designs, develops and markets games, educational, and on-line
titles on behalf of publishers and developers. It also hosts and operates its
subscribers' branded web-based e-mail service using Sitemail, a web-based e-
mail solution which enables the integration of computer software for use in
the field of Internet based e-mail, advertising and commerce, and intranet
based content distribution.

Basis of Presentation

The Company began operations on July 23, 1996 and has incurred operating
losses through December 31, 1997. On June 11, 1998, the Company sold all of
its stock to Xoom.com, Inc.

Use of Estimates

Interim Financial Information

The interim financial information as of March 31, 1998 and for the three
months ended March 31, 1997 and 1998 is unaudited but has been prepared on the
same basis as the audited financial statements and includes all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of its financial position at such date and
its results of operations and cash flows for those periods. Operating results
for the three months ended March 31, 1998 are not necessarily indicative of
results that may be expected for any future periods.

Cash

The Company maintains its cash in depository accounts with one financial
institution.

Concentrations of Credit Risk

The Company conducts business primarily with companies in various industries
throughout the United States. The Company generally does not require
collateral.

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("FAS 109"), which requires the use of the liability method in
accounting for income taxes. Under FAS 109, deferred tax assets and
liabilities are measured using enacted rates and laws that will be in effect
when the differences are expected to reverse.

F-42
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JULY 23, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

The Company generally recognizes revenue from consulting services as such
services are performed and when collection is determined to be probable.

Advertising Expense

All advertising costs are expensed when incurred. Advertising costs, which
are included in sales and marketing expense, for the period from July 23, 1996
(inception) through December 31, 1996 and the year ended December 31, 1997
were $205 and $397, respectively.

Recent Accounting Pronouncements

As of January 1, 1998 the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("FAS 130") which
establishes standards for reporting and displaying comprehensive income and
its components in a full set of general-purpose financial statements. The
adoption of this standard had no impact on the Company's financial position,
shareholders' equity (deficit), results of operations or cash flows.

2. NOTE RECEIVABLE FROM AND PAYABLE TO SHAREHOLDER

At December 31, 1996 the note receivable from shareholder represents cash
advances to the shareholder by the Company. The note receivable is repayable
on demand and bears no interest.

The note payable to shareholder as of December 31, 1997 represented amounts
funded to the Company by the shareholder for working capital purpose and is
repayable on demand. The note payable bears no interest.

3. INCOME TAXES

Significant components of the provision for income taxes attributable to
operations are as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JULY 23, 1996
(INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------- ------------
<S> <C> <C>
Current:
Federal......................................... $1,656 $ --
State........................................... 798 --
------ ----
$2,454 $ --
====== ====
</TABLE>

F-43
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JULY 23, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

3. INCOME TAXES (CONTINUED)

A reconciliation of income taxes at the statutory federal income tax rate to
net income taxes included in the accompanying statements of operations is as
follows:

<TABLE>
<CAPTION>
PERIOD FROM
JULY 23, 1996
(INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------- ------------
<S> <C> <C>
U.S. federal taxes at statutory rate.............. $(6,085) $(11,188)
Impact of graduated U.S. statutory rate........... (1,919) 192
State taxes, net of federal benefit............... (397) (1,862)
Pre incorporation operations...................... 4,545 --
Valuation allowance............................... 6,331 12,064
Other............................................. (21) 794
------- --------
$ 2,454 $ --
======= ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
Deferred tax assets:
Cash to accrual adjustment............................... $ 5,667 $ 17,053
Depreciation............................................. 664 1,283
Net operating loss and tax credit carryovers............. -- 59
------- --------
Total deferred tax assets................................. 6,331 18,395
Valuation allowance....................................... (6,331) (18,395)
------- --------
Total net deferred tax assets............................. $ -- $ --
======= ========
</TABLE>

The valuation allowance increased by $6,331 and $12,064 in 1996 and 1997
respectively.

As of December 31, 1997, the Company has state net operating loss
carryforwards of approximately $1,000 that will expire in 2004. Due to the
change in ownership provisions of the Internal Revenue Code, the availability
of the Company's net operating loss carryforwards will be subject to an annual
limitation due to its acquisition by Xoom.com. This limitation could cause
these losses to expire prior to utilization by the Company.

4. STOCKHOLDERS' EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, no
par value, none of which is issued or outstanding. The Board of Directors has
the authority to issue preferred stock in one or more series and to fix the
designations, powers, preferences, rights, qualifications, limitations and
restrictions with respect to any series of preferred stock and to specify the
number of shares of any series of preferred stock without any further vote or
action by the shareholder.

F-44
<PAGE>

GLOBAL BRIDGES TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

FOR THE PERIOD FROM JULY 23, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock

The Company is authorized to issue 10,000,000 shares of common stock, no par
value.

In July 1996, the Company issued 630,000 shares of its common stock in
exchange for cash of $5,000. During September 1997, the Company repurchased
130,000 shares of its common stock from a shareholder in exchange for
royalties to be paid on the future sales of certain products. No payments
under this royalty agreement have been made through December 31, 1997 and
March 31, 1998 as no sales of the products bearing royalties were made in
those periods.

5. LEASE COMMITMENTS

The Company leases its operating facilities under a noncancelable operating
lease agreement that expires in 1998.

Total rent expense for the period from July 23, 1996 (inception) through
December 31, 1996 and the year ended December 31, 1997 totaled $4,605 and
$4,642, respectively.

6. RELATED PARTY TRANSACTIONS

During the period from July 23, 1996 (inception) through December 31, 1996
the Company paid certain expenses, totaling $3,918, on behalf of another
company which shares common ownership with the Company. All owed amounts were
reimbursed to the Company as of December 31, 1996.

7. SUBSEQUENT EVENTS

In April 1998, the Company issued 500,000 shares of its common stock to a
shareholder in exchange for cancellation of a note payable due to him of
$3,929 and the assignment of a software license to the Company.

In May 1998, the operating lease agreement for the lease of the Company's
facilities was assigned by the Company to the stockholder. As a result, all
rental payments are made to the stockholder. The minimum monthly rental
payments did not change from the original lease agreement with the lessor.

Effective June 11, 1998, the Company entered into a merger agreement with
Xoom.com, Inc. under which the outstanding shares of common stock of the
Company were exchanged for common shares of Xoom.com, Inc. and the right to
receive certain cash distributions from Xoom.com, Inc. The financial
statements do not include any adjustments to the recorded amounts of assets
and liabilities which may result from this transaction.

8. IMPACT OF YEAR 2000 (UNAUDITED)

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This situation
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

F-45
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Pagecount, Inc.

We have audited the accompanying balance sheet of Pagecount, Inc. as of
December 31, 1997, and the related statements of income, stockholders' equity
and cash flows for the period from January 23, 1997 (inception) through
December 31, 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 audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pagecount, Inc. at December
31, 1997, and the results of its operations and its cash flows for the period
from January 23, 1997 (inception) through December 31, 1997, in conformity
with generally accepted accounting principles.

Palo Alto, California
July 7, 1998,
except for Note 6, as to which the date is,
July 24, 1998

F-46
<PAGE>

PAGECOUNT, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................. $14,627 $50,145
Accounts receivable................................... 16,827 15,573
Unbilled receivables.................................. 4,931 2,133
Other current assets.................................. 725 725
------- -------
Total current assets................................... 37,110 68,576
Fixed assets, net...................................... 16,661 20,597
------- -------
Total assets........................................... $53,771 $89,173
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 7,237 $29,475
Accrued compensation and related expenses............. 9,037 11,709
Other accrued liabilities............................. 10,051 --
Deferred revenue...................................... -- 12,500
Income taxes payable.................................. 2,443 3,991
Deferred income taxes................................. 3,042 3,042
------- -------
Total current liabilities.............................. 31,810 60,717
------- -------
Commitment
Stockholders' equity:
Common stock, $1.00 par value:
Authorized shares--5,000
Issued and outstanding shares--115................... 650 650
Retained earnings..................................... 21,311 27,806
------- -------
Total stockholders' equity............................. 21,961 28,456
------- -------
Total liabilities and stockholders' equity............. $53,771 $89,173
======= =======
</TABLE>

See accompanying notes.

F-47
<PAGE>

PAGECOUNT, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 23, JANUARY 23,
1997 1997
(INCEPTION) (INCEPTION) SIX MONTHS
THROUGH THROUGH ENDED JUNE
DECEMBER 31, JUNE 30, 30,
1997 1997 1998
------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net revenue............................... $252,332 $111,200 $208,689
Cost of net revenue....................... 45,634 36,075 14,314
-------- -------- --------
Gross profit.............................. 206,698 75,125 194,375
Costs and expenses:
Sales and marketing...................... 1,519 -- 2,371
General and administrative............... 178,513 58,907 184,023
-------- -------- --------
Total costs and expenses.................. 180,032 58,907 186,394
-------- -------- --------
Income from operations.................... 26,666 16,218 7,981
Other income.............................. 130 -- 62
-------- -------- --------
Income (loss) before provision for income
taxes.................................... 26,796 16,218 8,043
Provision for income taxes................ 5,485 3,122 1,548
-------- -------- --------
Net income................................ $ 21,311 $ 13,096 $ 6,495
======== ======== ========
</TABLE>

See accompanying notes.

F-48
<PAGE>

PAGECOUNT, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- -------
<S> <C> <C> <C> <C>
Issuance of common stock to founders in January
1997.......................................... 115 $650 $ -- $ 650
Net income..................................... -- -- 21,311 21,311
---- ---- ------- -------
Balances at December 31, 1997................... 115 650 21,311 21,961
Net income (unaudited)......................... -- -- 6,495 6,495
---- ---- ------- -------
Balances at June 30, 1998 (unaudited)........... 115 $650 $27,806 $28,456
==== ==== ======= =======
</TABLE>

See accompanying notes.

F-49
<PAGE>

PAGECOUNT, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 23, JANUARY 23,
1997 1997
(INCEPTION) (INCEPTION)
THROUGH THROUGH SIX MONTHS
DECEMBER 31, JUNE 30, ENDED JUNE
1997 1997 30, 1998
------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES
Net income............................... $ 21,311 $ 13,096 $ 6,495
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation............................ 2,689 878 3,876
Changes in operating assets and
liabilities:
Accounts receivable.................... (16,827) (23,909) 1,254
Unbilled receivables................... (4,931) (2,112) 2,798
Other current assets................... (725) (725) --
Accounts payable....................... 7,237 4,119 22,238
Accrued compensation and related
expenses.............................. 9,037 8,951 2,672
Other accrued liabilities.............. 10,051 22,595 (10,051)
Deferred revenue....................... -- -- 12,500
Income taxes payable................... 2,443 3,122 1,548
Deferred income taxes.................. 3,042 -- --
-------- -------- --------
Net cash provided by operating
activities.............................. 33,327 26,015 43,330
CASH USED IN INVESTING ACTIVITIES
Purchases of computer equipment.......... (19,350) (6,535) (7,812)
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of common stock for cash........ 650 650 --
-------- -------- --------
Net increase in cash..................... 14,627 20,130 35,518
Cash at beginning of period.............. -- -- 14,627
-------- -------- --------
Cash at end of period.................... $ 14,627 $ 20,130 $ 50,145
======== ======== ========
</TABLE>

See accompanying notes.

F-50
<PAGE>

PAGECOUNT, INC.

NOTES TO FINANCIAL STATEMENTS

(INFORMATION FOR THE PERIOD FROM JANUARY 23, 1997 (INCEPTION) THROUGH JUNE 30,
1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Pagecount, Inc. (the "Company") was incorporated in the State of Maryland on
January 23, 1997.

The Company provides statistical counters which generate the number of times
a user views a customer's web site.

Use of Estimates

Interim Financial Information

The interim financial information as of June 30, 1998 and for the period
from January 23, 1997 (inception) through June 30, 1997 and the six months
ended June 30, 1998 is unaudited but has been prepared on the same basis as
the audited financial statements and include all adjustments, consisting only
of normal recurring adjustments, that the Company considers necessary for a
fair presentation of its financial position at such date and its results of
operations and cash flows for those periods. Operating results for the six
months ended June 30, 1998 are not necessarily indicative of results that may
be expected for any future periods.

Cash

The Company maintains its cash in depository accounts with one financial
institution.

Unbilled Receivables

Unbilled receivables represent amounts earned as revenue but not yet billed
to customers.

Concentrations of Credit Risk

The Company conducts business primarily with companies in various industries
throughout the United States. The Company generally does not require
collateral.

For the period from January 23, 1997 (inception) to December 31, 1997, three
customers accounted for 35%, 15%, and 11% of total revenue, and three
customers accounted for 27%, 20%, and 12% of accounts receivable at December
31, 1997.

For the six months ended June 30, 1998, two customers accounted for 42% and
12% of total revenue, and three customers accounted for 51%, 14%, and 10% of
accounts receivable at June 30, 1998.

Fixed assets

Fixed assets are stated at cost, less accumulated depreciation. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets, which is estimated to be three years.

F-51
<PAGE>

PAGECOUNT, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE PERIOD FROM JANUARY 23, 1997 (INCEPTION) THROUGH JUNE 30,
1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 IS UNAUDITED)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("FAS 109"), which requires the use of the liability method in
accounting for income taxes. Under FAS 109, deferred tax assets and
liabilities are measured based on differences between the financial reporting
and tax bases of assets and liabilities using enacted rates and laws that will
be in effect when the differences are expected to reverse.

Revenue Recognition

Advertising revenue is derived from the sale of banner advertisements under
short-term contracts. To date, the duration of the Company's advertising
commitments has been from one to seven months. Advertising revenue on banner
contracts is recognized ratably in the period in which the advertisement is
displayed, provided that no significant Company obligations remain and
collection of the resulting receivable is probable. Company obligations
typically include the guarantee of a minimum number of "impressions" or times
that an advertisement appears in pages viewed by the users of the Company's
online properties. To the extent minimum guaranteed impressions are not met,
the Company defers recognition of the corresponding revenue until the
remaining guaranteed impression levels are achieved.

Advertising Expense

All advertising costs are expensed when incurred. Advertising costs, which
are included in sales and marketing expense, for the period from January 23,
1997 (inception) through December 31, 1997 were $1,124.

Recent Accounting Pronouncements

2. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Computer equipment.................................. $19,350 $27,162
Accumulated depreciation............................ (2,689) (6,565)
------- -------
$16,661 $20,597
======= =======
</TABLE>

F-52
<PAGE>

PAGECOUNT, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE PERIOD FROM JANUARY 23, 1997 (INCEPTION) THROUGH JUNE 30,
1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 IS UNAUDITED)

3. COMMITMENTS

The Company has entered into certain operating leases for office space. The
future minimum lease payments under the Company's noncancelable operating
leases at December 31, 1997 are as follows:

The Company's rental expense under operating leases for the period from
January 23, 1997 (inception) through December 31, 1997 totaled $8,725.

4. COMMON STOCK

Common stock consists of the following at December 31, 1997:

<TABLE>
<CAPTION>
SHARES SHARES ISSUED
CLASS AUTHORIZED AND OUTSTANDING
----- ---------- ---------------
<S> <C> <C>
A................................................. 500 100
B................................................. 4,500 15
----- ---
5,000 115
===== ===
</TABLE>

5. INCOME TAXES

Significant components of the provision for income taxes attributable to
operations are as follows:

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 23, JANUARY 23,
1997 1997
(INCEPTION) (INCEPTION) SIX MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1997 1997 1998
------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Current:
Federal............................... $1,808 $2,311 $1,146
State................................. 635 811 402
------ ------ ------
2,443 3,122 1,548
------ ------ ------
Deferred:
Federal............................... 2,281 -- --
State................................. 761 -- --
------ ------ ------
3,042 -- --
------ ------ ------
Total provision......................... $5,485 $3,122 $1,548
====== ====== ======
</TABLE>

F-53
<PAGE>

PAGECOUNT, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION FOR THE PERIOD FROM JANUARY 23, 1997 (INCEPTION) THROUGH JUNE 30,
1997
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 IS UNAUDITED)

5. INCOME TAXES (CONTINUED)

A reconciliation of income taxes at the statutory federal income tax rate to
net income taxes included in the accompanying statements of income is as
follows:

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 23, JANUARY 23,
1997 1997
(INCEPTION) (INCEPTION) SIX MONTHS
THROUGH THROUGH ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1997 1997 1998
------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
U.S. federal taxes at statutory rate... $ 9,111 $ 5,514 $ 2,735
Impact of graduated U.S. tax at 15%
statutory rate........................ (5,092) (3,081) (1,589)
State income taxes, net of federal
benefit............................... 1,139 689 402
Other.................................. 327 -- --
------- ------- -------
$5,485 $ 3,122 $ 1,548
======= ======= =======
</TABLE>

The principal source of the Company's deferred tax liabilities is the use of
accelerated depreciation methods for tax purposes.

6. SUBSEQUENT EVENT

Effective July 24, 1998, the Company entered into an asset sale agreement
under which it sold substantially all of its net assets to Xoom.com, Inc. The
financial statements do not include any adjustments to the recorded amounts of
assets and liabilities which may result from this transaction.

7. IMPACT OF YEAR 2000 (UNAUDITED)

Based on a recent assessment, the Company has determined they will not be
required to modify or replace any portion of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter.

F-54
<PAGE>

SELECTED UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL INFORMATION

The selected unaudited pro forma condensed consolidated financial
information of the Company gives effect to the acquisition of Paralogic
Corporation ("Paralogic"), Global Bridges Technologies, Inc. ("Global
Bridges") and Pagecount, Inc. ("Pagecount"). The historical financial
information has been derived from, and is qualified by reference to, the
financial statements of the Company, Paralogic, Global Bridges and Pagecount
and should be read in conjunction with those financial statements and the
notes thereto included elsewhere herein. The selected unaudited pro forma
condensed consolidated statements of operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998, give effect to
the acquisitions as if they occurred on January 1, 1997 and January 1, 1998,
respectively. The selected unaudited pro forma condensed consolidated
statements of operations, reflect certain adjustments, including adjustments
to reflect the amortization of the intangible assets. The information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The selected unaudited pro forma
condensed consolidated financial information does not purport to represent
what the consolidated results of operations or financial condition of the
Company would actually have been if the acquisitions had in fact occurred on
such date or to project the future consolidated results of operations or
financial condition of the Company.

F-55
<PAGE>

SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
PAGECOUNT
FOR THE
GLOBAL PERIOD FROM
XOOM.COM PARALOGIC BRIDGES JANUARY 23, PRO FORMA
FOR THE FOR THE FOR THE 1997 PRO FORMA FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED (INCEPTION) TO BUSINESS YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, COMBINATION DECEMBER 31,
1997 1997 1997 1997 COMBINED ADJUSTMENTS 1997
------------ ------------ ------------ -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Electronic commerce.... $ 327,080 $ -- $ -- $ -- $ 327,080 $ -- $ 327,080
Advertising............ 60,251 34,028 -- 252,332 346,611 -- 346,611
License fees and
other................. 453,556 -- -- -- 453,556 -- 453,556
Services............... -- 215,917 27,937 -- 243,854 -- 243,854
----------- --------- -------- -------- ----------- ----------- -----------
Total net revenues...... 840,887 249,945 27,937 252,332 1,371,101 -- 1,371,101
Cost of net revenues:
Cost of electronic
commerce.............. 170,957 -- -- -- 170,957 -- 170,957
Cost of advertising.... -- -- -- 45,634 45,634 -- 45,634
Cost of license fees
and other............. 148,375 -- -- -- 148,375 -- 148,375
Cost of services....... -- 117,963 23,718 -- 141,681 -- 141,681
----------- --------- -------- -------- ----------- ----------- -----------
Cost of net revenue..... 319,332 117,963 23,718 45,634 506,647 -- 506,647
Gross profit............ 521,555 131,982 4,219 206,698 864,454 -- 864,454
Costs and expenses:
Operating and
development........... 1,150,299 45,875 19,300 -- 1,215,474 -- 1,215,474
Sales and marketing.... 291,675 86,097 3,841 1,519 383,132 -- 383,132
General and
administrative........ 720,534 45,757 13,983 178,513 958,787 -- 958,787
Amortization of
deferred
compensation.......... 247,924 -- -- -- 247,924 -- 247,924
Amortization of
intangible assets..... -- -- -- -- -- 2,486,345 (A) 2,486,345
Non-recurring charges... 1,243,000 164,802 -- -- 1,407,802 -- 1,407,802
----------- --------- -------- -------- ----------- ----------- -----------
Total costs and
expenses............... 3,653,432 342,531 37,124 180,032 4,213,119 2,486,345 6,699,464
Income (loss) from
operations............. (3,131,877) (210,549) (32,905) 26,666 (3,348,665) (2,486,345) 5,835,010
Interest (expense)
income................. -- -- -- 130 130 (47,849)(B) (47,719)
----------- --------- -------- -------- ----------- ----------- -----------
Income (loss) before
income taxes........... (3,131,877) (210,549) (32,905) 26,796 (3,348,535) (2,534,194) (5,882,729)
Income tax expense...... -- 7,040 -- 5,485 12,525 (12,525)(C) --
----------- --------- -------- -------- ----------- ----------- -----------
Net income (loss)....... $(3,131,877) $(217,589) $(32,905) $ 21,311 $(3,361,060) $(2,521,669) $(5,882,729)
=========== ========= ======== ======== =========== =========== ===========
Net loss per share--
basic and diluted ..... (D) $ (1.02)
===========
Number of shares used in
per share calculation--
basic and diluted...... (D) 5,740,156
===========
</TABLE>

F-56
<PAGE>

SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
GLOBAL
XOOM.COM PARALOGIC BRIDGES PAGECOUNT PRO FORMA
FOR THE NINE FOR THE TWO FOR THE FIVE FOR THE SIX PRO FORMA FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED BUSINESS MONTHS ENDED
SEPTEMBER 30, FEBRUARY 28, MAY 31, JUNE 30, COMBINATION SEPTEMBER 30,
1998 1998 1998 1998 COMBINED ADJUSTMENTS 1998
------------- ------------ ------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue:
Electronic commerce.... $ 3,366,048 $ -- $ -- $208,689 $ 3,574,737 $ -- $ 3,574,737
Advertising............ 953,121 51,071 -- -- 1,004,192 -- 1,004,192
License fees and
other................. 546,192 -- -- -- 546,192 -- 546,192
Services............... -- 29,016 -- -- 29,016 -- 29,016
----------- ------- -------- -------- ----------- --------- -----------
Total net revenue....... 4,865,361 80,087 -- 208,689 5,154,137 -- 5,154,137
Cost of net revenues:
Cost of electronic
commerce.............. 1,965,556 -- -- -- 1,965,556 -- 1,965,556
Cost of advertising.... -- -- -- 14,314 14,314 -- 14,314
Cost of license fees
and other............. 34,630 -- -- -- 34,630 -- 34,630
Cost of services....... -- 31,438 -- -- 31,438 -- 31,438
----------- ------- -------- -------- ----------- --------- -----------
Cost of net revenues.... 2,000,186 31,438 -- 14,314 2,045,938 -- 2,045,938
----------- ------- -------- -------- ----------- --------- -----------
Gross profit............ 2,865,175 48,649 -- 194,375 3,108,199 -- 3,108,199
Costs and expenses:
Operating and
development........... 2,557,940 12,227 10,526 -- 2,580,693 -- 2,580,693
Sales and marketing.... 1,570,695 2,091 -- 2,371 1,575,157 -- 1,575,157
General and
administrative........ 2,157,860 12,440 4,292 184,023 2,358,615 -- 2,358,615
Purchased in-process
research and
development........... 790,000 -- -- -- 790,000 (460,000)(E) 330,000
Amortization of
deferred
compensation.......... 1,110,941 -- -- -- 1,110,941 -- 1,110,941
Amortization of
intangible assets..... 1,087,029 -- -- -- 1,087,029 951,994 (A) 2,039,023
----------- ------- -------- -------- ----------- --------- -----------
Total costs and
expenses............... 9,274,465 26,758 14,818 186,394 9,649,935 491,994 9,994,429
Income (loss) from
operations............. (6,409,290) 21,891 (14,818) 7,981 (6,541,736) (491,944) (6,886,230)
Interest (expense)
income,
net.................... 16,824 -- -- 62 16,886 (35,887)(B) (19,001)
----------- ------- -------- -------- ----------- --------- -----------
Income (loss) before
income taxes........... (6,392,466) 21,891 (14,818) 8,043 (6,524,850) (527,881) (6,905,231)
Income tax expense...... -- -- -- 1,548 1,548 (1,548)(C) --
----------- ------- -------- -------- ----------- --------- -----------
Net income (loss)....... $(6,392,466) $21,891 $(14,818) $ 6,495 $(6,526,398) $(526,333) $(6,905,231)
=========== ======= ======== ======== =========== ========= ===========
Net loss per share--
basic and diluted...... (D) $ (0.92)
===========
Number of shares used in
per share calculation--
basic and diluted...... (D) 7,483,248
===========
</TABLE>

F-57
<PAGE>

NOTES TO THE SELECTED UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS

Pro forma adjustments for statements of operations for the year ended December
31, 1997 and for the nine months ended September 30, 1998 are as follows:

A. Reflects the amortization of intangible assets acquired in the
Paralogic, Global Bridges and Pagecount acquisitions in the amounts of
$2,698,928, $969,792 and $1,303,970, respectively, amortized over a two
year period.

B. Reflects interest charges of $47,849 and $35,887 for the year ended
December 31, 1997 and the nine months ended September 30, 1998,
respectively, for notes payable of $1,400,000 bearing no interest,
$62,500 bearing interest at an annual rate of 5% and $1,200,000 bearing
interest at an annual rate of 7%, related to the acquisitions of
Paralogic, Global Bridges and Pagecount, respectively.

C. Reduction of federal income taxes related to the foregoing adjustments
and operations as if the Companies were combined.

D. Basic and diluted net loss per share amounts have been adjusted to
reflect the issuance of 682,410 and 200,731 shares as part of the
Paralogic and Global Bridges acquisitions, respectively, as if the
shares had been outstanding for all periods presented.

E. Purchased in-process research and development of $460,000 has been
excluded from net loss for the nine months ended September 30, 1998 as
it represents non recurring charges of $330,000 relating to the
Paralogic acquisition and $130,000 relating to the Pagecount
acquisition.

F-58
<PAGE>

[INSIDE BACK OVER]

[DEPICTIONS OF XOOM.COM'S BACK-OFFICE OPERATIONS AND THE GEOGRAPHICAL RANGE OF
ITS CUSTOMER BASE.]

<PAGE>

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

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 28
Dividend Policy........................................................... 28
Capitalization............................................................ 29
Dilution.................................................................. 30
Selected Consolidated Financial Data...................................... 31
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 33
Business.................................................................. 48
Management................................................................ 62
Certain Transactions...................................................... 72
Principal Stockholders.................................................... 74
Description of Capital Stock.............................................. 76
Shares Eligible for Future Sale........................................... 78
Underwriting.............................................................. 79
Legal Matters............................................................. 80
Experts................................................................... 80
Additional Information.................................................... 81
Index to Financial Statements............................................. F-1
</TABLE>

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

UNTIL , (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS AND SUBSCRIPTIONS.

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

3,000,000 SHARES

XOOM.COM, INC.

COMMON STOCK

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

PRELIMINARY PROSPECTUS
---------------------------------

BEAR, STEARNS & CO. INC.

DEUTSCHE BANK SECURITIES

, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses to be paid by the Registrant in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:

<TABLE>
<CAPTION>
AMOUNT*
----------
<S> <C>
Securities and Exchange Commission Filing Fee.................... $ 13,570
NASD Filing Fee.................................................. 5,100
Nasdaq National Market Listing Fee............................... 90,000
Accounting Fees and Expenses..................................... 600,000
Blue Sky Fees and Expenses....................................... 5,000
Legal Fees and Expenses.......................................... 700,000
Transfer Agent and Registrar Fees and Expenses................... 15,000
Printing Expenses................................................ 200,000
Miscellaneous Expenses........................................... 271,330
----------
Total.......................................................... $1,900,000
==========
</TABLE>
- --------
* All amounts are estimates except the SEC filing fee, the NASD filing fee
and the Nasdaq National Market listing fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 145 of the General Corporate Law of the State of Delaware, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Bylaws (Exhibit 3.2 hereto) also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.

The Registrant's Amended and Restated Certificate of Incorporation (Exhibit
3.1 hereto) provides that the liability of its directors for monetary damages
shall be eliminated to the fullest extent permissible under Delaware law.
Pursuant to Delaware law, this includes elimination of liability for monetary
damages for breach of the directors' fiduciary duty of care to the Registrant
and its stockholders. These provisions do not eliminate the directors' duty of
care and, in appropriate circumstances, equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Delaware
law. In addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Registrant, for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for any transaction from which the director derived an
improper personal benefit, and for payment of dividends or approval of stock
repurchases or redemptions that are unlawful under Delaware law. The provision
also does not affect a director's responsibilities under any other laws, such
as the federal securities laws or state or federal environmental laws.

The Registrant has entered into agreements with its directors and certain of
its executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person
may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.

II-1
<PAGE>

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The Registrant intends to obtain in conjunction with the effectiveness of
the Registration Statement a policy of directors' and officers' liability
insurance that insures the Company's directors and officers against the cost
of defense, settlement or payment of a judgment under certain circumstances.

The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and its officers and directors for certain liabilities arising under the
Securities Act or otherwise.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

From its incorporation to September 30, 1998, the Registrant has granted or
issued and sold the following unregistered securities:

1. An aggregate of 11,314,940 shares of the Registrant's Common Stock in the
five rounds of private equity financing described below for an aggregate
purchase price of $8,615,592:

<TABLE>
<CAPTION>
NUMBER
OF AGGREGATE
ROUND SHARES PURCHASE PRICE
----- --------- --------------
<S> <C> <C>
1. 3,555,557 $1,200,200
2. 1,555,559 800,000
3. 397,783 358,000
4. 457,627 1,006,685
5. 1,576,831 5,250,707
--------- ----------
7,543,357 $8,615,592
</TABLE>

2. Stock options to employees, directors and consultants exercisable for up
to an aggregate of 1,227,333 shares of the Registrant's Common Stock at a
nominal exercise price.

3. Stock options to employees, directors and consultants under its 1998
Stock Incentive Plan exercisable for up to an aggregate of 673,864 shares of
the Registrant's Common Stock, at exercise prices ranging from $2.31 to $13.50
per share, with a weighted average exercise price of $5.055 per share.

4. An aggregate of 1,179,135 shares in connection with its acquisition
transactions with Paralogic, Global Bridges, Revolutionary Software and
ArcaMax.

5. An aggregate of 9,105 shares of the Registrant's Common Stock issued to
directors and consultants in exchange for services rendered.

The issuances of the securities in the transactions above were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act or Regulation D promulgated thereunder as transactions
by an issuer not involving a public offering, where the purchasers represented
their intention to acquire the securities for investment only not with a view
to distribution and received or had access to adequate information about the
Registrant, or Rule 701 promulgated thereunder as transactions pursuant to a
compensatory benefit plan or a written contract relating to compensation.

II-2
<PAGE>

Appropriate legends were affixed to the stock certificates issued in the
above transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. No Underwriters were employed in any
of the above transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

The exhibits are as set forth in the Exhibit Index.

(B) FINANCIAL STATEMENT SCHEDULES

All schedules have been omitted since they are not required or are not
applicable or the required information is shown in the financial statements or
related notes.

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

The Registrant hereby undertakes that:

(1) For purposes of any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California on the 18th day of November, 1998.

XOOM.COM, INC.

By /s/ LAURENT MASSA
___________________________________
Laurent Massa
Chief Executive Officer and
President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LAURENT MASSA Principal Executive Officer November 18, 1998
________________________ and Director
Laurent Massa

/s/ JOHN HARBOTTLE Principal Financial and November 18, 1998
________________________ Accounting Officer
John Harbottle

/s/ CHRIS KITZE Chairman November 18, 1998
________________________
Chris Kitze

/s/ VIJAY VAIDYANATHAN* Director November 18, 1998
________________________
Vijay Vaidyanathan

/s/ BOB ELLIS* Director November 18, 1998
________________________
Bob Ellis

/s/ JAMES J. HEFFERNAN* Director November 18, 1998
________________________
James J. Heffernan

/s/ JEFFREY BALLOWE* Director November 18, 1998
________________________
Jeffrey Ballowe

/s/ PHILIP SCHLEIN* Director November 18, 1998
________________________
Philip Schlein
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT C. HARRIS, JR.* Director November 18, 1998
___________________________
Robert C. Harris, Jr.
</TABLE>

/s/ LAURENT MASSA
*By: ___________________________
Laurent Massa
Attorney-in-fact

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT PAGE
------- -------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*......................
3.1 Restated Certificate of Incorporation of the
Registrant+..........................................
3.2 Amended and Restated Bylaws of the Registrant+.......
4.1 Reference is made to Exhibits 3.1 and 3.2............
4.2 Warrant to purchase Common Stock made by the
Registrant in favor of Sand Hill Capital, LLC, dated
as of November 3, 1998...............................
4.3 Specimen Stock Certificate of the Registrant*........
5.1 Opinion of Morrison & Foerster LLP as to the legality
of the Common Stock..................................
10.1 Form of Indemnification Agreement between the
Registrant and each of its executive officers and
directors+...........................................
10.2 Agreement of Sublease between the Registrant and
Cornerstone Internet Solutions Company d/b/a USWeb
Cornerstone dated August, 1998+......................
10.3 Assignment of Lease by Xaos Tools, Inc. and
Acceptance of Assignment and Assumption of Lease by
the Registrant, dated July 31, 1998+.................
10.4 Registrant's 1998 Stock Incentive Plan, including
forms of agreements thereunder+......................
10.5 Registrant's 1998 Employee Stock Purchase Plan,
including forms of agreements thereunder+............
10.6 Employment Agreement between the Registrant and
Russell Hyzen dated July 20, 1998+...................
10.7 Employment Agreement between the Registrant and Vijay
Vaidyanathan, dated March 10, 1998 and Addendum No. 1
thereto, dated August 12, 1998+......................
10.8 Employment Agreement between the Registrant and
Laurent Massa, dated
July 1, 1998+........................................
10.9 Employment Agreement between the Registrant and John
Harbottle dated
August 4, 1998+......................................
10.10 Agreement and Plan of Merger, among the Registrant,
XOOM Chat, Inc., Paralogic Corporation and
shareholders of Paralogic Corporation, dated March
10, 1998+............................................
10.11 Agreement and Plan of Merger, among the Registrant,
Xoom GBT Merger Corp., Global Bridges Technologies,
Inc. and Robert Kohler, dated June 11, 1998+.........
10.12 Asset Purchase Agreement, between the Registrant and
Revolutionary Software, Inc., dated June 11, 1998+...
10.13 Purchase and License Agreement between the Registrant
and ArcaMax, Inc., dated June 18, 1998+..............
10.14 Asset Purchase Agreement between the Registrant and
Pagecount, Inc., dated as of July 24, 1998+..........
10.15 First Amendment, dated July 27, 1998, to Asset
Purchase Agreement, between the Registrant and
Revolutionary Software, Inc., dated June 11, 1998+...

</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DOCUMENT PAGE
------- -------- ------------
<C> <S> <C>
10.16 First Amendment, dated July 28, 1998, to Agreement and
Plan of Merger, among Registrant, Xoom GBT Merger
Corp., Global Bridges Technologies, Inc. and Robert
Kohler, dated June 11, 1998+..........................
10.17 Letter Agreement between the Registrant and Robert
Ellis, dated August 4, 1997+..........................
10.18 Consulting Agreement between the Registrant and James
Heffernan, dated May 15, 1998+........................
10.19 Letter Agreement between the Registrant and Jeffrey
Ballowe, dated July 28, 1998+.........................
10.20 Letter Agreement between the Registrant and Philip
Schlein, dated July 28, 1998+.........................
10.21 Letter Agreement between the Registrant and Robert C.
Harris, Jr., dated July 28, 1998+.....................
10.22 Equipment Financing Agreement between the Registrant
and Pentech Financial Services, Inc., dated October 1,
1998..................................................
10.23 Loan Agreement between the Registrant and Sand Hill
Capital, LLC, dated as of
November 3, 1998......................................
21.1 Subsidiaries of the Registrant+.......................
23.1 Consent of Morrison & Foerster LLP. Reference is made
to Exhibit 5.1........................................
23.2 Consent of Ernst & Young LLP, Independent Auditors....
24.1 Powers of Attorney+...................................
27.1 Financial Data Schedule...............................
</TABLE>

- --------
*To be filed by amendment
+Exhibit previously filed

II-7

<PAGE>

EXHIBIT 4.2

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OInformation SystemsFinancial Printing GroupTHIS WARRANT
AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE COMMON STOCK

Corporation: XOOM.com, Inc.
Number of Shares: 275,000
Class of Stock: Common
Initial Exercise Price: See Below
Issue Date: November 3, 1998
Expiration Date: November 3, 2003

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, SAND HILL CAPITAL, LLC ("Holder") is entitled
to purchase the number of fully paid and nonassessable shares of Common Stock,
par value $0.0001 per share (the "Shares"), of the corporation (the "Company")
at the price per share (the "Warrant Price") all as set forth herein and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth of this Warrant. This Warrant shall be
exercisable only as follows: (a) if Company sells its capital stock in an
underwritten sale (an "IPO") pursuant to a registration statement filed under
the Securities Act of 1933, as amended, the Warrant Price shall be the price at
which such shares are sold in such offering; (b) if Company sells or issues its
capital stock after the Issue Date in a transaction (a "Private Placement") in
which Company receives net proceeds of not less than $10,000,000 but which sale
is not an IPO, then the Purchase Price shall be equal to 70% of the price at
which the shares were sold in the Private Placement; and (c) if Company sells
all or substantially all of its assets, or Company's outstanding shares are
acquired by one or more entities before an IPO or Private Placement, then, as a
condition to consummating such sale, at the option of Holder, (i) Company shall
pay Holder a fee equal to $250,000 or (ii) Holder may purchase 275,000 shares at
a Warrant price equal to the lesser of (x) $8.00 or (y) the price that the
acquiring entity has agreed to pay for, or the value assigned to, such Shares in
connection with the sale.

In addition to the Shares that Holder may purchase under the preceding
paragraph, Holder may purchase an additional 2,000 shares per day for each day
after April 30, 1999 that any amount is outstanding under the Loan Agreement
between Company and Holder dated as of the Issue Date.

ARTICLE 1. EXERCISE.
--------

1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.

1
<PAGE>

1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.

1.3 No Rights of Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.

1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking or public accounting firm to undertake such valuation. If the valuation
of such investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall be
paid by Holder.

1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.

1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.

1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------

1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.

1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
---------------------
successor entity shall either (a) assume the obligations of this Warrant, and
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing, with the Warrant Price adjusted
accordingly or (b) pay to Holder the amount of securities, cash or other
property to which Holder would have been entitled if this Warrant been exercised
and the Shares were outstanding prior to such Acquisition, less the aggregate
Warrant Price for the Shares.

2
<PAGE>

1.7.3 Purchase Right. At the election of Holder, the Company shall
--------------
purchase the unexercised portion of this Warrant for cash upon the closing of
any Acquisition for an amount equal to (a) the fair market value of any
consideration that would have been received by Holder in consideration of the
Shares had Holder exercised the unexercised portion of this Warrant immediately
before the record date for determining the shareholders entitled to participate
in the proceeds of the Acquisition, less (b) the aggregate Warrant Price of the
Shares, but in no event less than zero.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.

2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
------------------------------------------
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.

2.4 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.

2.5 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.

2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.

3
<PAGE>

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------

3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws. The Company shall at all
times reserve a sufficient number of shares of common stock for issuance upon
Holder's exercise of its rights hereunder. The capitalization of the Company is
as set forth on the table attached to this Warrant.

3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.

3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual financial statements of the Company.

ARTICLE 4. MISCELLANEOUS.
-------------

4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above.

4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

4
<PAGE>

4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.

4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.

4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.

4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

XOOM.com, Inc.

By: /s/ John Harbottle
-----------------------
Title: V.P. Finance and CFO
--------------------

5
<PAGE>

APPENDIX 1

NOTICE OF EXERCISE
------------------

1. The undersigned hereby elects to purchase __________ shares of the
Stock of __________________________ pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.

1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to _____________________ of the Shares
covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

--------------------------------
(Name)

--------------------------------
--------------------------------
(Address)

3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.

-----------------------------------------
(Signature)

- -----------------------------
(Date)

<PAGE>

Exhibit 5.1
________, 1998

XOOM.com, Inc.
300 Montgomery Street
3rd Floor
San Francisco, CA 94104

Ladies and Gentlemen:

At your request, we have examined the Registration Statement on Form
S-1 of XOOM.com, Inc., a Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission (the "Registration Statement") on August
28, 1998, relating to the registration under the Securities Act of 1933, as
amended, of up to 3,450,000 shares of the Company's common stock, $.0001 par
value (the "Stock"), all of which are authorized but unissued stock to be
offered and sold by the Company (including up to 450,000 shares subject to the
underwriters' over-allotment option). The Stock is to be sold to the
underwriters named in the Registration Statement for resale to the public.

As counsel to the Company, we have examined the proceedings taken by
the Company in connection with the issuance and sale by the Company of up to
3,450,000 shares of Stock.

We are of the opinion that the shares of Stock to be offered and sold
by the Company have been duly authorized and, when issued and sold by the
Company in the manner described in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be legally issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us in the
Registration Statement, the prospectus constituting a part thereof and any
amendments thereto.

Very truly yours,

Morrison & Foerster LLP

<PAGE>

EXHIBIT 10.22

PENTECH FINANCIAL SERVICES, INC

EQUIPMENT FINANCING AGREEMENT
EFA # 200201

THIS EQUIPMENT FINANCING AGREEMENT ("agreement") is dated as of the date set
forth at the foot hereof and is between PENTECH FINANCIAL SERVICES, INC.
("Secured Party") and the debtor designated at the foot hereof ("Debtor").

1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this agreement
cover each item of machinery, equipment and other property (individually an
"Item" or "Item of Equipment" and collectively the "Equipment") described in a
schedule now or hereafter executed by the parties hereto and made a part hereof
(individually a "Schedule" and collectively the "Schedules"). Debtor hereby
grants Secured Party a security interest in and to all Debtor's right, title and
interest in and to the Equipment under the Uniform Commercial Code, such grant
with respect to an Item of Equipment to be as of Debtor's execution of a related
equipment financing commitment referencing this agreement or, if Debtor then has
no interest in such Item, as of such subsequent time as Debtor acquires an
interest in the Item. Such security interest is granted by Debtor to secure
performance by Debtor of Debtor's obligations to Secured Party hereunder and
under any other agreements under which Debtor has or may hereafter have
obligations to Secured Party. Debtor will ensure that such security interest
will be and remain a sole and valid first lien security interest subject only to
the lien of current taxes and assessments not in default but only if such taxes
are entitled to priority as a matter of law.

2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this agreement
respecting an Item of Equipment, except the obligation to pay installment
payments with respect thereto which will commence as set forth in paragraph 3
below, commence upon the grant to Secured Party of a security interest in the
Item. Debtor's obligations hereunder with respect to an Item of Equipment and
Secured Party's security interest therein will continue until payment of all
amounts due, and performance of all terms and conditions required, hereunder
with respect thereto; provided, however, that if this agreement is then in
default said obligations and security interest will continue during the
continuance of said default. Upon termination of Secured Party's security
interest in an Item of Equipment, Secured Party will execute such release of
interest with respect thereto as Debtor reasonably requests.

3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances Secured
Party makes on account of the Equipment together with interest in installment
payments in the amounts and at the times set forth in the Schedules, whether or
not Secured Party has rendered an invoice therefor, at the office of Secured
Party set forth at the foot hereof, or to such person and/or at such other place
as Secured Party may from time to time designate on notice to Debtor. Any other
amounts required to be paid Secured Party by Debtor hereunder are

1
<PAGE>

due upon Debtor's receipt of Secured Party's invoice therefor and will be
payable as directed in the invoice. Payments under this agreement may be applied
to Debtor's then accrued obligations to Secured Party in such order as Secured
Party may choose.

4. NET AGREEMENT; NO OFFSET; SURVIVAL. This agreement is a net agreement, and
Debtor will not be entitled to any abatement of installment payments or other
payments due hereunder or any reduction thereof under any circumstances or for
any reason whatsoever. Debtor hereby waives any and all existing and future
claims, as offsets, against any installment payments or other payments due
hereunder and agrees to pay the installment payments and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Debtor or on its behalf. The obligations and liabilities of Debtor
hereunder will survive the termination of this agreement.

5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT. DEBTOR
ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND ACQUIRED
SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND WILL NOT
BE THE VENDOR OF ANY EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT
MAKE ANY AGREEMENT, REPRESENTATION OR WARRANTY WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR
VALUE OF THE EQUIPMENT OR ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT
WHATSOEVER.

6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR OTHER
SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN CONNECTION
WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY IS NOT BOUND BY
A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN PARAGRAPH 27 BELOW,
THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR CONCERNING THE FINANCING OF THE
EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS IT MAY BE AMENDED AS PROVIDED IN
THAT PARAGRAPH.

7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering the
Equipment or any Items thereof will conclusively establish that such Equipment
has been included under and will be subject to all the terms and conditions of
this agreement. If Debtor has not furnished Secured Party with a Schedule by
the earlier of fourteen (14) days after receipt thereof or expiration of the
commitment period set forth in the applicable equipment financing commitment,
Secured Party may terminate its obligation to advance funds as to the applicable
Equipment.

8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control at the
Equipment Location designated in the applicable Schedule, or at such other
location to which such Item of Equipment may have been moved with the prior
written consent of Secured Party. Whenever requested by Secured Party,

2
<PAGE>

Debtor will advise Secured Party as to the exact location of an Item of
Equipment. Secured Party will have the right to inspect the Equipment and
observe its use during normal business hours and to enter into and upon the
premises where the Equipment may be located for such purpose. The Equipment will
at all times be used solely for commercial or business purposes and operated in
a careful and proper manner and in compliance with all applicable laws,
ordinances, rules and regulations, all conditions and requirements of the policy
or policies of insurance required to be carried by Debtor under the terms of
this agreement and all manufacturer's instructions and warranty requirements.
Any modifications or additions to the Equipment required by any such
governmental edict or insurance policy will be promptly made by Debtor.

9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written consent
of Secured Party, Debtor will not make any alterations, additions or
improvements to any Item of Equipment which detract from its economic value or
functional utility, except as may be required pursuant to paragraph 8 above.
Secured Party's security interest in the Equipment will include all
modifications and additions thereto and replacements and substitutions therefor,
in whole or in part. Such reference to replacements and substitutions will not
grant Debtor greater rights to replace or substitute than are provided in
paragraph 11 below or as may be allowed upon the prior written consent of
Secured Party.

10. MAINTENANCE. Debtor will maintain the Equipment in good repair, condition
and working order. Debtor also will cause each Item of Equipment for which a
service contract is generally available to be covered by such a contract which
provides coverages typical as to property of the type involved and is issued by
a competent servicing entity.

11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment ("Casualty
Occurrence") Debtor will give Secured Party prompt notice thereof and will
thereafter place such Item in good repair, condition and working order;
provided, however, that if such Item is determined by Secured Party to be lost,
stolen, destroyed or damaged beyond repair, is requisitioned or suffers a
constructive total loss as defined in any applicable insurance policy carried by
Debtor in accordance with paragraph 14 below, Debtor, at Secured Party's option,
will (a) replace the Item with like equipment in good repair, condition and
working order whereupon such replacement equipment will be deemed such Item for
all purposes hereof or (b) pay Secured Party the "Casualty Value" of such Item
which will equal the total of (i) all installment payments and other amounts due
with respect to such item from Debtor to Secured Party at the time of such
payment and (ii) each future installment payment due with respect to such Item
with each such payment other than any final uneven payment discounted at eight
percent (8%) per annum simple interest from the date due to the date of such
payment. Any final uneven payment will be due without discount. The discounting
contemplated in this paragraph will be in accordance with the Financial Compound
Interest and Annuity Tables, Sixth Edition published by the Financial Publishing
Company. Upon such replacement or payment, as appropriate, this agreement and
Secured Party's security interest will terminate with, and only with, respect to
the Item of Equipment so replaced or as to which such payment is made in
accordance with paragraph 2 above.

3
<PAGE>

12. TITLING; REGISTRATION. Each Item of Equipment subject to title registration
laws will at all times be titled and/or registered by Debtor as Secured Party's
agent and attorney-in-fact with full power and authority to register (but
without power to affect title to) the Equipment in such manner and in such
jurisdiction or jurisdictions as Secured Party directs. Debtor will promptly
notify Secured Party of any necessary or advisable retitling and/or
reregistration of an Item of Equipment in a jurisdiction other than one in which
such Item is then titled and/or registered. Any and all documents of title will
be furnished or caused to be furnished Secured Party by Debtor within sixty (60)
days of the date any titling or registering or retitling or reregistering, as
appropriate, is directed by Secured Party.

13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges and
assessments based on the ownership or use of the Equipment and will pay as
directed by Secured Party or reimburse Secured Party for all taxes, including,
but not limited to, gross receipts taxes (exclusive of federal and state taxes
based on Secured Party's net income, unless such net income taxes are in
substitution for or relieve Debtor from any taxes which Debtor would otherwise
be obligated to pay under the terms of this paragraph 13), fees, charges and
assessments whatsoever, however designated, whether based on the installment
payments or other amounts due hereunder, levied, assessed or imposed upon the
Equipment or otherwise related hereto or to the Equipment, now or hereafter
levied, assessed or imposed under the authority of a federal, state or local
taxing jurisdiction, regardless of when and by whom payable. Filings with
respect to such other amounts will, at Secured Party's option, be made by
Secured Party or by Debtor as directed by Secured Party.

14. INSURANCE. Debtor will procure and continuously maintain all risk insurance
against loss of or damage to the Equipment from any cause whatsoever for not
less than the full replacement value thereof naming Secured Party as Loss Payee.
Such insurance must be in a form and with companies approved by Secured Party,
must provide at least thirty (30) days advance written notice to Secured Party
of cancellation, change or modification in any term, condition or amount of
protection provided therein, must provide full breach of warranty protection and
must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide Secured
Party with an original policy or certificate evidencing such insurance. In the
event of an assignment of this agreement by Secured Party of which Debtor has
notice, Debtor will cause such insurance to provide the same protection to the
assignee as its interest may appear. The proceeds of such insurance, at the
option of Secured Party or such assignee, as appropriate, will be applied toward
(a) the repair or replacement of the appropriate Item or Items of Equipment, (b)
payment of the Casualty Value thereof or (c) payment of, or as provision for,
satisfaction of any other accrued obligations of Debtor hereunder. Debtor hereby
appoints Secured Party as Debtor's attorney-in-fact with full power and
authority to do all things, including, but not limited to, making claims,
receiving payments and endorsing documents, checks or drafts, necessary to
secure payments due under any policy contemplated hereby on account of a
Casualty Occurrence. Debtor and Secured Party contemplate that the jurisdictions
where the Equipment will be located will not impose any liability upon Secured
Party for personal injury and/or property damage resulting out of the
possession, use, operation or condition of the Equipment. In the event Secured
Party determines that such is not or may not be the case with respect to a given

4
<PAGE>

jurisdiction, Debtor will provide Secured Party with public liability and
property damage coverage applicable to the Equipment in such amounts and in such
form as Secured Party requires.

15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due hereunder
or to perform any of its other obligations under this agreement, Secured Party
may, at its option, but without any obligation to do so, pay such amounts or
perform such obligations, and Debtor will reimburse Secured Party the amount of
such payment or cost of such performance.

16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from and
against any and all liabilities, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including court costs and legal
expenses, of whatever kind and nature, imposed on, incurred by or asserted
against Secured Party (whether or not also indemnified against by any other
person) in any way relating to or arising out of this agreement or the
manufacture, financing, ownership, delivery, possession, use, operation,
condition or disposition of the Equipment by Secured Party or Debtor, including,
without limitation, any claim alleging latent and other defects, whether or not
discoverable by Secured Party or Debtor, and any other claim arising out of
strict liability in tort, whether or not in either instance relating to an event
occurring while Debtor remains obligated under this agreement, and any claim for
patent, trademark or copyright infringement. Debtor agrees to give Secured Party
and Secured Party agrees to give Debtor notice of any claim or liability hereby
indemnified against promptly following learning thereof.

17. DEFAULT. Any of the following will constitute an event of default here
under: (a) Debtor's failure to pay when due any installment payment or other
amount due hereunder, which failure continues for ten (10) days after the due
date thereof; (b) Debtor's default in performing any other obligation, term or
condition of this agreement or any other agreement between Debtor and Secured
Party or default under any further agreement providing security for the
performance by Debtor of its obligations hereunder, provided such default has
continued for more than twenty (20) days, except as provided in (c) and (d)
hereinbelow, or, without limiting the generality of subparagraph (1)
hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the real
estate where an Item of Equipment is located; (c) any writ or order of
attachment or execution or other legal process being levied on or charged
against any Item of Equipment and not being released or satisfied within ten
(10) days; (d) Debtor's failure to comply with its obligations under paragraph
14 above or any transfer by Debtor in violation of paragraph 21 below, (e) a
non-appealable judgement for the payment of money in excess of $100,000 being
rendered by a court of record against Debtor which Debtor does not discharge or
make provision for discharge in accordance with the terms thereof within ninety
(90) days from the date of entry thereof; (f) death or judicial declaration of
incompetency of Debtor, if an individual; (g) the filing by Debtor of a petition
under the Bankruptcy Act or any amendment thereto or under any other insolvency
law or law providing for the relief of debtors, including, without limitation, a
petition for reorganization, arrangement or extension, or the commission by
Debtor of an act of bankruptcy; (h) the filing against Debtor of any such
petition not dismissed or permanently stayed within thirty (30) days of the
filing thereof; (i) the voluntary or involuntary making of an assignment of

5
<PAGE>

substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's assets,
institution by or against Debtor or any other type of insolvency proceeding
(under the Bankruptcy Code or otherwise) or of any formal or informal proceeding
for dissolution, liquidation, settlement of claims against or winding up of the
affairs of Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets or
inventory not in the ordinary course of business; the occurrence of any event
described in parts (e), (f), (g), (h) or (i) hereinabove with respect to any
guarantor or other party liable for payment or performance of this agreement;
(k) any certificate, statement, representation, warranty or audit heretofore or
hereafter furnished with respect hereto by or on behalf of Debtor or any
guarantor or other party liable for payment or performance of this agreement
proving to have been false in any material respect at the time as of which the
facts therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor or any
such guarantor or other party; (1) breach by Debtor of any lease or agreement
providing financial accommodation under which Debtor or its property is bound or
(m) a transfer of effective control of Debtor, if an organization.

18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a secured party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial Code
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and, without limiting
the foregoing, Secured Party may exercise any one or more of the following
remedies: (a) declare the Casualty Value or such lesser amount as may be set by
law immediately due and payable with respect to any or all Items of Equipment
without notice or demand to Debtor; (b) sue from time to time for and recover
all installment payments and other payments then accrued and which accrue during
the pendency of such action with respect to any or all Items of Equipment; (c)
take possession of and, if deemed appropriate, render unusable any or all Items
of Equipment, without demand or notice, wherever same may be located, without
any court order or other process of law and without liability for any damages
occasioned by such taking of possession and remove, keep and store the same or
use and operate or lease the same until sold; (d) require Debtor to assemble any
or all Items of Equipment at the Equipment Location therefor, such location to
which such Equipment may have been moved with the written consent of Secured
Party or such other location in reasonable proximity to either of the foregoing
as Secured Party designates; (e) upon ten days notice to Debtor or such other
notice as may be required by law, sell or otherwise dispose of any Item of
Equipment, whether or not in Secured Party's possession, in a commercially
reasonable manner at public or private sale at any place deemed appropriate and
apply the net proceeds of such sale, after deducting all costs of such sale,
including, but not limited to, costs of transportation, repossession, storage,
refurbishing, advertising and broker's fees, to the obligations of Debtor to
Secured Party hereunder or otherwise, with Debtor remaining liable for any
deficiency and with any excess being returned to Debtor; (f) upon thirty (30)
days notice to Debtor, retain any repossessed or assembled Items of Equipment as
Secured Party's own property in full satisfaction of Debtor's liability for the
installment payments due hereunder with respect thereto, provided that Debtor
will have the right to redeem such Items by payment in full of its obligations
to Secured Party hereunder or otherwise or to require Secured Party to sell or
otherwise dispose of such Items in the manner set forth in subparagraph (e)
hereinabove upon notice to Secured Party within such thirty (30) day

6
<PAGE>

period or (g) utilize any other remedy available to Secured Party under the
Uniform Commercial Code or similar provision of law or otherwise at law or in
equity.

No right or remedy conferred herein is exclusive of any other right or remedy
conferred herein or by law; but all such remedies are cumulative of every other
right or remedy conferred hereunder or at law or in equity, by statute or
otherwise, and may be exercised concurrently or separately from time to time.
Any sale contemplated by subparagraph (e) of this paragraph 18 may be adjourned
from time to time by announcement at the time and place appointed for such sale,
or for any such adjourned sale, without further published notice, and Secured
Party may bid and become the purchaser at any such sale. Any sale of an Item of
Equipment, whether under said subparagraph or by virtue of judicial proceedings,
will operate to divest all right, title, interest, claim and demand whatsoever,
either at law or in equity, of Debtor in and to said Item and will be a
perpetual bar to any claim against such Item, both at law and in equity, against
Debtor and all persons claiming by, through or under Debtor.

19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this agreement and such proceedings are discontinued or abandoned for any
reason or are determined adversely, then and in every such case Debtor and
Secured Party will be restored to their former positions and rights thereunder.

20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including reasonable attorney's fees and court costs and sales costs
not offset against sales proceeds under paragraph 18 above, incurred by Secured
Party in exercising any of its rights or remedies hereunder or enforcing any of
the terms, conditions or provisions hereof. This obligation includes the
payment or reimbursement of all such amounts whether an action is ultimately
filed and whether an action filed is ultimately dismissed.

21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor will
not sell, lease, pledge or hypothecate, except as provided in this agreement, an
Item of Equipment or any interest therein or assign, transfer, pledge or
hypothecate this agreement or any interest in this agreement or permit the
Equipment to be subject to any lien, charge or encumbrance of any nature except
the security interest of Secured Party contemplated hereby. Debtor's interest
herein is not assignable and will not be assigned or transferred by operation of
law. Consent to any of the foregoing prohibited acts applies only in the given
instance and is not a consent to any subsequent like act by Debtor or any
person.

All rights of Secured Party hereunder may be assigned pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without notice
to Debtor but always, however, subject to the rights of Debtor under this
agreement. If Debtor is given notice of any such assignment, Debtor will
acknowledge receipt thereof in writing. In the event Secured Party assigns this
agreement or the installment payments due or to become due hereunder or any
other interest herein, whether as security for any of its indebtedness or
otherwise, no breach or default by Secured Party hereunder or pursuant to any
other agreement between Secured Party and Debtor, should there be one, will
excuse performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor will pursue

7
<PAGE>

any rights on account thereof solely against Secured Party. No such assignee,
unless such assignee agrees in writing, will be obligated to perform any duty,
covenant or condition required to be performed by Secured Party in connection
with this agreement.

Subject always to the foregoing, this agreement insures to the benefit of, and
is binding upon, the heirs, legatees, personal representatives, successors and
assigns of the parties hereto.

22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with labels,
plates, decals or other markings stating that Secured Party has an interest in
the Equipment, Debtor will affix and keep the same prominently displayed on the
Equipment or will otherwise make the Equipment or its then location or
locations, as appropriate, at Secured Party's request to indicate Secured
Party's security interest in the Equipment. The Equipment is, and at all times
will remain, personal property notwithstanding that the Equipment or any Item
thereof may now be, or hereafter become, in any manner affixed or attached to,
or embedded in, or permanently resting upon real property or any improvement
thereof or attached in any manner to what is permanent as by means of cement,
plaster, nails, bolts, screws or otherwise. If requested by Secured Party,
Debtor will obtain and deliver to Secured Party waivers of interest or liens in
recordable form satisfactory to Secured Party from all persons claiming any
interest in the real property on which an Item of Equipment is or is to be
installed or located.

23. LATE CHARGE. If Debtor fails to pay any installment payment or any other
sum to be paid by Debtor to Secured Party within seven (7) days of when due,
Debtor will pay to Secured Party (a) Secured Party's collection costs paid third
parties relevant to the collection thereof and (b) interest on such unpaid
installment or other amount at the rate of eighteen percent (18%) per annum, or
at such greater or lesser contract rate as may be applicable, computed from the
date due to the date paid.

24. NON-WAIVER. No covenant or condition of this agreement can be waived except
by the written consent of Secured Party. Forbearance or indulgence by Secured
Party in regard to any breach hereunder will not constitute a waiver of the
related covenant or condition to be performed by Debtor.

25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party hereunder
Debtor will execute and deliver to Secured Party such financing statements and
similar documents as Secured Party requests. Debtor authorizes Secured Party
where permitted by law to make filings of such financing statements without
Debtor's signature. Debtor further will furnish Secured Party (a) a fiscal year
end financial statement including balance sheet and profit and loss statement
within ninety (90) days of the close of each fiscal year, (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this agreement and the Equipment,
including, without limitation, copies of vendor proposals and purchase orders
and agreements, listings of serial numbers or other identification data and
confirmations of such information, as Secured Party may from time to time
reasonably request. Debtor will procure and/or execute, have executed,
acknowledge, have acknowledged, deliver to Secured Party, record and file such
other documents and showings as Secured Party deems necessary or

8
<PAGE>

desirable to protect its interest in and rights under this agreement and
interest in the Equipment. Debtor will pay as directed by Secured Party or
reimburse Secured Party for all filing, search, title report, legal and other
fees incurred by Secured Party in connection with any documents to be provided
by Debtor pursuant to this paragraph or paragraph 22 and any further similar
documents Secured Party may procure.

26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial data
and other information which Debtor has submitted, or will submit, to Secured
Party in connection with this agreement is, or will be at time of delivery, as
appropriate, a true and complete statement of the matters therein contained.
Debtor further certifies and warrants that (a) this agreement has been duly
authorized by Debtor and when executed and delivered by the person signing on
behalf of Debtor below will constitute the legal, valid and binding obligation,
contract and agreement of Debtor enforceable against Debtor in accordance with
its respective terms; (b) this agreement and each and every showing provided by
or on behalf of Debtor in connection herewith may be relied upon by Secured
Party in accordance with the terms thereof notwithstanding the failure of Debtor
or other applicable party to ensure proper attestation thereto, whether by
absence of a seal or acknowledgment or otherwise; (c) Debtor has the right,
power and authority to grant a security interest in the Equipment to Secured
Party for the uses and purposes herein set forth and (d) each Item of Equipment
will, at the time such Item becomes subject hereto, be in good repair, condition
and working order.

27. ENTIRE AGREEMENT. This instrument constitutes the entire agreement between
Secured Party and Debtor and will not be amended, altered or changed except by a
written agreement signed by the parties.

28. NOTICES. Notices under this agreement must be in writing and must be mailed
by United States mail, certified mail with return receipt requested, duly
addressed, with postage prepaid, to the party involved at its respective address
set forth at the foot hereof or at such other address as such party may provide
on notice to the other from time to time. Notices will be effective when
deposited. Each party will promptly notify the other of any change in the first
party's address.

29. GENDER; NUMBER; JOINT AND SEVERAL LIABILITY. Whenever the context of this
agreement requires, the neuter gender includes the feminine or masculine and the
singular number includes the plural; and whenever the words "Secured Party" are
used herein, they include all assignees of Secured Party, it being understood
that specific reference to "assignee" in paragraph 14 above is for further
emphasis. If there is more than one Debtor named in this agreement, the
liability of each will be joint and several.

30. TITLES. The titles to the paragraphs of this agreement are solely for the
convenience of the parties and are not an aid in the interpretation of the
instrument.

31. GOVERNING LAW; VENUE. This agreement will be governed and construed in
accordance with the law of the State of California. Venue for any action related
to this agreement will be in an appropriate court in Santa Clara County,
California, to which Debtor consents, or in another court selected by Secured
Party which has jurisdiction over the parties. In the event any

9
<PAGE>

provision hereof is declared invalid, such provision will be deemed severable
from the remaining provisions of this agreement which will remain in full force
and effect.

32. TIME. Time is of the essence of this agreement and each and all of its
provisions.

IN WITNESS WHEREOF, the undersigned have executed this agreement as of
October 1, 1998.
- ---------------
(date)

<TABLE>
<S> <C>
SECURED PARTY DEBTOR
PENTECH FINANCIAL SERVICES, INC., XOOM.COM, INC.,
A California Corporation A Delaware corporation
doing business as XOOM, INC. (Debtor)

BY: /s/ Pentech Financial Services, Inc. BY: /s/ John Harbottle
------------------------------------- -------------------------------------

(Title) (Title) VP Finance & CFO
---------------------------------- ----------------------------------

Address: 310 West Hamilton Ave #202 Address: 300 Montgomery, 3rd Floor
Campbell, CA 95008 San Francisco, CA 94104
</TABLE>

10
<PAGE>

PENTECH FINANCIAL SERVICES, INC.

EQUIPMENT FINANCING COMMITMENT
EFA NO. 200201

Subject to the terms set forth in this commitment, the following equipment
financing transaction is agreed to by the undersigned Debtor and PENTECH
FINANCIAL SERVICES, INC. ("Secured Party") in connection with the terms of the
Equipment Financing Agreement herein referenced (the "Agreement").

Equipment Financing Agreement: Dated as of October 1, 1998
---------------

Equipment (all Equipment to be acceptable to Secured Party):

Commitment Amount: $1,000,000.00
-------------

Installment Payments: 42 payments of 2.870% of advance
-- -----
payable monthly in advance, PLUS A FINAL PAYMENT
EQUAL TO 10 % OF THE ADVANCE.

First such payment(s) are due at time of scheduling.

Commitment Expiration Date: JULY 31, 1999. As more fully
-------------
explained below, Secured Party has no obligation to
make any advance with respect to Equipment not
covered by a Schedule to the Agreement executed by
Secured Party and Debtor on or prior to this date.

Debtor will comply with, procure, execute and/or have executed, acknowledge,
have acknowledged, deliver to Secured Party, record and file any documents set
forth in Exhibit A or accompanying this commitment. The form, substance and
sufficiency of all documents and showings employed in documenting the
contemplated financing transaction must be acceptable to Secured Party and its
counsel. Debtor will do likewise as to such further documents and showings as
Secured Party and its counsel may now or hereafter deem reasonably necessary or
advisable to protect Secured Party's rights under the Agreement and interest in
the Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all searches, filings, title reports, attorney's services and other
charges incurred by Secured Party in connection with all such documents and
showings and any similar documents and showings Secured Party may procure.

Secured Party may, at its option, terminate its obligations to Debtor hereunder
with respect to any and all unscheduled Items of Equipment: (a) at or subsequent
to the Commitment Expiration

11
<PAGE>

Date, (b) upon the advent of a material adverse change in Debtor's financial
condition or Debtor's probable ability to perform its obligations under the
Agreement, (c) if the Agreement or any other agreement under which Debtor has
obligations to Secured Party is in default or an event which with the giving of
notice or lapse of time or both would constitute such a default has occurred and
is continuing or (d) with respect to which more than fifteen percent (15%) would
be advanced for shipping costs, installation charges and design costs by giving
Debtor written notice of such termination.

ACCEPTED AND AGREED to as of: October 1, 1998
---------------

PENTECH FINANCIAL SERVICES, INC. XOOM.COM, INC.
A California Corporation A Delaware Corporation
doing business as XOOM, INC.

BY: /s/ Pentech Financial Services, Inc. BY: /s/ John Harbottle
--------------------------------------- -----------------------------

(Title) President (Title) VP Finance & CFO
----------------------------------- -------------------------

ADDRESS: 310 WEST HAMILTON AVE. ADDRESS: 300 MONTGOMERY STREET
SUITE 202 3rd FLOOR
CAMPBELL, CA 95008 SAN FRANCISCO, CA 94104

12
<PAGE>

EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of October 1, 1998
Page 1 of 2
--- ---

These provisions hereby become part of the Equipment Financing Commitment
between Pentech Financial Services, Inc., Secured Party, and XOOM.com, Inc. dba
------------------
XOOM, Inc., Debtor., dated OCTOBER 1, 1998.
- ----------

In addition to the terms of the Agreement, Debtor further agrees to the
following additional provisions:

1. UCC SEARCH/RELEASES
-------------------
The Secured Party may search all public records of Debtor to locate and
identify any conflicting liens against the above referenced Equipment.
Releases from any intervening parties holding a security interest in said
Equipment shall be required prior to funding provided herein.

2. TYPE OF FINANCING
-----------------
This is a net equipment financing transaction whereby maintenance,
insurance, property taxes, and all items of a similar nature are for the
account of the Debtor.

3. EXPENSES
--------
All expenses associated with the completion of this Agreement including,
but not limited to, UCC filing fees and searches, documentation costs,
legal expenses, and equipment verification costs are for the account of the
debtor.

4. MASTER AGREEMENT
----------------
This is a Master Equipment Financing Agreement whereby Schedules may be
funded as equipment is delivered. Each Schedule to the Agreement, however,
shall cover equipment with a minimum aggregate cost of $50,000.00.
----------

5. INSTALLMENT PAYMENT AMOUNT
--------------------------
The installment payment amount of $28.70 per $1,000.00 of advance payable
-----
monthly in advance is based on the current Wall Street Journal prime rate
of 8.5%. Once a Schedule is funded, however, the installment payment amount
----
remains fixed for the duration of the term.

6. COMMITMENT EXPIRATION DATE
--------------------------
The commitment expiration date of July 31, 1999 may be extended ninety (90)
-------------
days upon review by Secured Party of the Debtor's then current financial
condition. Debtor agrees to provide Security Party such financial
information and other information Secured Party may reasonably request to
evaluate Debtor's financial condition for purposes of granting such
extension.

13
<PAGE>

7. COMMITMENT FEE DEPOSIT
----------------------
Debtor shall provide Secured Party a $20,000.00 commitment fee deposit,
---------
receipt of which is hereby acknowledged. This deposit shall be applied
proportionally to the first rental payment of each schedule funded under
this Agreement. Any unapplied balance as of the commitment expiration date
may be retained by Secured Party.

8. MONTHLY FINANCIAL STATEMENTS
----------------------------
Debtor agrees to provide Secured Party the Debtor's internally prepared
financial statements on an ongoing basis not later than fifteen (15) days
after the close of each month of Debtor's fiscal year. Upon request by
Secured Party, Debtor also agrees to provide any other pertinent and
reasonable information as Secured Party may deem necessary to evaluate
Debtor's future financial condition.

9. ANNUAL FINANCIAL STATEMENTS
---------------------------
Debtor agrees to provide Secured Party the Debtor's annual financial
statements within ninety (90) days of the close of Debtor's fiscal year
end.

10. SCHEDULES
---------
There shall be no more than five (5) Schedules to the Agreement covering
equipment with a maximum aggregate cost of $1,000,000.00.
-------------

<PAGE>

EXHIBIT 10.23

[SAND HILL CAPITAL LOGO HERE]

LOAN AGREEMENT

Dated as of November 3, 1998

by and between

SAND HILL CAPITAL, LLC

as lender

and

XOOM.COM, INC.

as borrower

TOTAL CREDIT AMOUNT: $2,750,000

Maturity: April 30, 1999
Formula: None
Loan Fee: $55,000
Interest: 12%
Warrants/Success Fee: See Agreement

The terms and information set forth on this cover page are a part of the
attached Loan Agreement, dated as of the date first written above (this
"Agreement"), entered into by and among Sand Hill Capital, LLC ("Sand Hill") and
XOOM.com, Inc. ("Borrower") set forth above. The terms and conditions of the
Agreement agreed to between Sand Hill and Borrower are as follows:
<PAGE>

1. Advances. Borrower may request one or more advances (each, an
--------
"Advance" and collectively, the "Advances") under Tranche 1 from time to time
upon one Business Day's notice in an aggregate outstanding amount not to exceed
$1,250,000. Borrower may request Advances under Tranche 2 in an aggregate
outstanding amount not to exceed $2,750,000 after Sand Hill receives
satisfactory evidence that Borrower has achieved not less than 4,750,000 members
(as calculated in accordance with Borrower's usual and customary methods),
provided that the proceeds of the initial Advance under Tranche 2 shall be used
to repay in full all Advances outstanding under Tranche 1.

Borrower shall pay interest on the outstanding Advances at the fixed rate
specified on the cover page. Interest shall be payable in arrears on the first
day of each month. Subject to the next paragraph, on the Maturity Date
specified on the cover page, the entire outstanding principal balance of the
Advances and all accrued and unpaid interest thereon shall be immediately due
and payable.

All payments on this Agreement shall be applied first to fees and expenses,
then to interest and then to principal. If any payment is not made within ten
(10) days of the due date, Borrower shall pay a late payment fee equal to the
lesser of 5% of the amount of such late payment or the maximum amount permitted
by law. Any principal or interest payments on this Agreement outstanding after
the occurrence and during the continuance of a default under this Agreement
shall bear interest at a rate equal to 5% above the rate otherwise applicable
under this Agreement. In addition to the foregoing amounts, on the Maturity
Date, Borrower shall pay Sand Hill an extension fee of $25,000 if Borrower
wishes to postpone the date on which all amounts are due hereunder by forty-five
(45) days, or if any amount remains outstanding under this Agreement after the
Maturity Date. In addition, the number of Shares that Sand Hill may purchase
under the Warrant issued as of the date hereof shall automatically increase by
2,000 Shares per day for each day after April 30, 1999 that any amount remains
outstanding under this Agreement. The provision in this paragraph for any
extension or postponement, late fees and default interest shall not be construed
as Sand Hill's consent to Borrower's failure to pay any amounts in strict
accordance with this Agreement, and Sand Hill's acceptance of any such payments
shall not restrict Sand Hill's exercise of any remedies arising out of any such
failure.

2. Secured Agreement. To secure repayment of all obligations evidenced by
-----------------
this Agreement and performance of all of Borrower's obligations hereunder
(including interest accruing after an Insolvency Event), Borrower grants Sand
Hill a security interest in the property described in Exhibit A attached hereto
---------
(the "Collateral"). Borrower shall take such actions as Sand Hill requests from
time to time to perfect or continue the security interest granted hereunder.
Borrower shall not dispose of or encumber or permit to be encumbered or attached
any part of the Collateral without Sand Hill's prior written consent except for
dispositions of inventory made in the ordinary course of Borrower's business.

3. Representations and Warranties. Borrower represents to Sand Hill that,
------------------------------
as of the date of this Agreement: (a) Borrower is not in default under any
agreement under which Borrower owes any money, or any agreement, the violation
or termination of which could have a material adverse effect on Borrower; (b)
Borrower has taken all action necessary to authorize the execution, delivery and
performance of this Agreement; (c) except as set forth in Schedule 1 attached
hereto, and except for purchase money security interests on particular items of
equipment, there are no liens, security interests or other encumbrances on the
Collateral; (d) the execution and performance of this Agreement do not conflict
with, or constitute a default under, any agreement to which Borrower is party or
by which Borrower is bound; (e) the information provided to Sand Hill on or
prior to the date of this Agreement is true and correct in all material
respects; (f) all financial statements and other information provided to Sand
Hill fairly present Borrower's financial condition, and there has not been a
material adverse change in the financial condition of Borrower since the date of
the most recent of the financial statements submitted to Sand Hill; (g) Borrower
is in compliance with all laws and orders applicable to it; (h) except as set
forth in Schedule 2 attached hereto, Borrower is not party to any litigation and
is not the subject of any government investigation, and Borrower has no
knowledge of any pending litigation or investigation or the existence of
circumstances that reasonably could be expected to give rise to such litigation
or investigation; and (i) no representation or other statement made by Borrower
to Sand Hill contains any untrue statement of a material fact or omits to state
a material fact necessary to make any statements made to Sand Hill not
misleading.

1
<PAGE>

4. Covenants.
---------
(a) Borrower will provide Sand Hill (i) within 25 days after the last
day of each month, monthly company-prepared financial statements in form and
substance satisfactory to Sand Hill, prepared in accordance with GAAP, and (ii)
promptly upon Sand Hill's request, such other information relating to Borrower's
operations and condition, including information on equity and funding status, as
Sand Hill may reasonably request from time to time. Sand Hill shall have a right
to review and copy Borrower's books and records from time to time upon
reasonable notice to Borrower. Borrower will pay Sand Hill for the reasonable
costs it may incur from time to time in auditing the Collateral.

(b) Borrower will maintain insurance on the Collateral that includes a
lender's loss payable endorsement in favor of Sand Hill as an additional loss
payee. Borrower will maintain insurance in a form acceptable to Sand Hill
relating to the Collateral and Borrower's business in amounts and of a type that
are customary to businesses similar to Borrower's.

(c) Borrower will maintain its corporate existence and good standing
and will maintain in force all licenses and agreements, the loss of which could
have a material adverse effect on Borrower's business. Borrower will pay all
taxes on or before the date such taxes are due, and will comply with all laws
and orders applicable to it.

(d) Borrower will not (i) make any investments in, or loans or
advances to, any person other than in the ordinary course of business as
currently conducted, (ii) acquire any assets other than in the ordinary course
of business as currently conducted, (iii) make any distributions or pay any
dividends to any person on account of Borrower's shares, (iv) borrow any money
except under equipment lease agreements, or (v) dispose of or encumber any
portion of its assets, except for dispositions of inventory in the ordinary
course of Borrower's business. Lender acknowledges that an acquisition of the
assets or stock of an entity in which the total consideration paid is less than
$5,000,000 is in Borrower's ordinary course of business.

(e) Borrower will register on an expedited basis with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Intellectual Property Security Agreement delivered to Sand Hill by Borrower.
Borrower will register such additional intellectual property rights developed or
acquired by Borrower from time to time in connection with any product prior to
the sale or licensing of such product to any third party. Borrower will execute
such documents and take such other actions as Sand Hill may reasonably request
to perfect the security interest granted in such rights.

(f) If Borrower merges or consolidates with any person or entity such
that Borrower is not the surviving entity, Sand Hill shall have the right to
terminate this Agreement and require Borrower to pay all unpaid principal,
interest and other amounts owing hereunder on the effective date of such merger
or consolidation.

5. Fees and Expenses. On the date of this Agreement, Borrower shall pay
-----------------
Sand Hill the Loan Fee specified on the cover page, plus all legal expenses that
Sand Hill incurs in connection with this Agreement. Borrower shall also deliver
a warrant to purchase stock to Sand Hill in a form acceptable to Sand Hill.
Borrower shall pay all costs that Sand Hill incurs in enforcing this Agreement
or exercising any rights with respect to the Collateral (including all costs
incurred after the occurrence of an Insolvency Event), including without
limitation reasonable attorneys fees and expenses.

6. Events of Default; Remedies. Any one or more of the following shall
---------------------------
constitute an Event of Default under this Agreement:

(a) Borrower's failure (i) to pay all or any part of the principal or
interest hereunder on the date due and payable, or (ii) to comply with any
agreement or covenant set forth in this Agreement, or (iii) to comply with the
terms of any material contract to which Borrower is a party and any agreement
pursuant to which Borrower has incurred indebtedness, or (iv) to comply with any
law to which Borrower is subject; or

2
<PAGE>

(b) Borrower becomes insolvent, or becomes the subject of any case or
proceeding under the United States Bankruptcy Code or any other law relating to
the reorganization or restructuring of debt (an "Insolvency Event"); or

(c) any representation made to Sand Hill in this Agreement, the
Warrant issued of even date herewith, or any information given to Sand Hill by
or on behalf of Borrower shall be incorrect in any material respect when made;
or

(d) the occurrence of a material adverse change in the financial or
other condition of Borrower.

Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of Sand
Hill, be immediately collectible by or on behalf of Sand Hill, and Sand Hill may
exercise all of the rights of a secured party under the California Uniform
Commercial Code. In each case, Sand Hill shall have a right to dispose of the
Collateral in any commercially reasonable manner, and shall have a royalty-free
license to use any name, trademark, advertising matter or any property of a
similar nature to complete production of, advertisement for, and disposition of
any Collateral and Sand Hill shall have a license to enter into, occupy and use
Borrower's premises and the Collateral without charge to exercise any of Sand
Hill's rights or remedies under this Agreement. Effective upon the occurrence
of an Event of Default, Borrower irrevocably appoints Sand Hill (and any of Sand
Hill's designated employees or agents) as Borrower's true and lawful attorney in
fact to: endorse Borrower's name on any checks or other forms of payment; make,
settle and adjust all claims under and decisions with respect to Borrower's
policies of insurance; settle and adjust disputes and claims respecting accounts
receivable with account debtors; execute and deliver all notices, instruments
and agreements in connection with the perfection of the security interest
granted in this Agreement; and sell, lease or otherwise dispose of all or any
part of the Collateral. The appointment of Sand Hill as Borrower's attorney in
fact, and each of Sand Hill's rights and powers, being coupled with an interest,
is irrevocable until all amount owing to Sand Hill have been repaid in full.

7. Waivers; Indemnity. Borrower waives presentment and demand for payment,
------------------
notice of dishonor, protest and notice of protest of this Agreement, and shall
pay all costs of collection when incurred, including reasonable attorneys' fees,
costs and expenses incurred before, after or in connection with an Insolvency
Event. Borrower shall indemnify and hold Sand Hill harmless from any claim,
obligation or liability (including without limitation reasonable attorneys fees
and expenses) arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties and covenants or other
obligations of Borrower in this Agreement or the transactions contemplated
hereby, including any such claim, obligation or liability arising before, after
or in connection with an Insolvency Event.

8. Miscellaneous. Sand Hill may assign all or any part of its interest in
-------------
this Agreement and the Advances to any person or entity, or grant a
participation of any interest in this Agreement, without notice to, or the
consent of, Borrower, provided that such assignment or grant complies with the
Securities Act of 1933, as amended, and any applicable state securities laws,
and does not put Borrower in violation of such statutes. This Agreement can be
amended only by an instrument signed by Sand Hill and Borrower. All prior
agreements are superseded by this Agreement. Borrower may not assign any
obligation hereunder without Sand Hill's consent. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one instrument. This Agreement shall be governed by
the internal laws of the State of California, without regard to conflicts of
laws rules. Borrower and Sand Hill consent to the exclusive jurisdiction of the
United States District Court of the Northern District of California and the
state courts for San Mateo County, California.

3
<PAGE>

9. JURY WAIVER. SAND HILL AND BORROWER EACH WAIVES ANY RIGHT TO A JURY
-----------
TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN.

XOOM.COM, INC.

By: /s/ John Harbottle
------------------

Title: VP Finance and CFO
----------------------

SAND HILL CAPITAL, LLC

By: /s/ Sand Hill Capital LLC
--------------------------

Title:
----------------------

4
<PAGE>

EXHIBIT A
---------

The Collateral shall consist of all right, title and interest of Borrower
in and to the following:

(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;

(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;

(e) All documents, cash, deposit accounts, securities, financial
assets, securities entitlements, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
books relating to the foregoing;

(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions, know-
how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and

(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.

<PAGE>

EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our reports
pertaining to Xoom.com, Inc. dated October 28, 1998, except for paragraph 3 of
Note 4 and Note 11, as to which the date is November 16, 1998, pertaining to
Paralogic Corporation dated July 20, 1998, pertaining to Global Bridges
Technologies, Inc. dated July 10, 1998 and pertaining to Pagecount, Inc. dated
July 7, 1998 (except for Note 6 as to which the date is July 24, 1998)
included in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-
62395) and related Prospectus of Xoom.com, Inc. for the registration of
3,000,000 shares of its Common Stock.

Ernst & Young LLP

/s/ ERNST & YOUNG LLP

Palo Alto, California

November 16, 1998

<PAGE>
<ARTICLE> 5

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