TICKETS COM INC, 10-K, 2000-03-29

TICKETS COM INC
10-K, 2000-03-29
AMUSEMENT & RECREATION SERVICES

Previous: BRIDGESTREET ACCOMMODATIONS INC, PRE 14A, 2000-03-29

Next: WELLSFORD REAL PROPERTIES INC, 10-K, 2000-03-29

<PAGE> 1

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

FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 000-27893

TICKETS.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 06-1424841
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

ADDRESS
555 ANTON BOULEVARD, 12TH FLOOR
COSTA MESA, CALIFORNIA 92626

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 327-5400

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
COMMON STOCK, $.000225 PAR VALUE THE NASDAQ NATIONAL MARKET
</TABLE>

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

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

As of March 15, 2000 the approximate aggregate market value of voting stock
held by non-affiliates of the registrant was $340,125,680 (based upon the
closing price for shares of the Registrant's Common Stock as reported by The
National Market System of the National Association of Securities Dealers
Automated Quotation System on that date). Shares of Common Stock held by each
officer, director, and holder of 5% or more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of March 15, 2000, there were approximately 57,247,195 shares of Common
Stock outstanding.

THE TABLE OF EXHIBITS FILED APPEARS AT PAGE E-1.

DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
DOCUMENT WHERE INCORPORATED
-------- ------------------
<S> <C>
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT PART III
TO BE FILED BY APRIL 30, 2000 RELATING TO THE
ANNUAL MEETING OF SHAREHOLDERS
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

TICKETS.COM, INC

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I.................................................................. 1
ITEM 1. BUSINESS.................................................... 1
ITEM 2. PROPERTIES.................................................. 18
ITEM 3. LEGAL PROCEEDINGS........................................... 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 19
PART II................................................................. 19
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS......................................... 19
ITEM 6. SELECTED FINANCIAL DATA..................................... 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................ 46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 46
PART III................................................................ 46
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 46
ITEM 11. EXECUTIVE COMPENSATION...................................... 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 47
ITEM
13... CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 47
PART IV................................................................. 47
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K......................................................... 47
</TABLE>

i
<PAGE> 3

This Annual Report on Form 10-K, including information incorporated herein
by reference, contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward looking statements include risks and
uncertainties and relate to expectations concerning matters that are not
historical facts. Words such as "projects," "believes," "anticipates," "plans,"
"expects," "intends," and similar words and expressions are intended to identify
forward-looking statements. Although Tickets.com believes that such
forward-looking statements are reasonable, it cannot assure you that such
expectations will prove to be correct. Important language regarding factors that
could cause actual results to differ materially from such expectations are
disclosed herein in the business and management discussion and analysis
sections. All forward-looking statements are expressly qualified in their
entirety by such language. Tickets.com does not undertake any obligation to
update any forward-looking statements or explain the reasons why actual results
may differ. The risks and uncertainties under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Forward Looking Information under the Private Securities
Litigation Reform Act of 1995" contained herein, among other things, should be
considered in evaluating Tickets.com's prospects and future financial
performance. You are also urged to carefully review and consider the various
disclosures made by Tickets.com which describe certain factors which affect
Tickets.com's business, including the risk factors set forth in Tickets.com's
Registration Statement on Form S-1 (No. 333-79709), as amended, as filed with
the Securities and Exchange Commission ("SEC").

PART I.

ITEM 1. BUSINESS

OVERVIEW

Tickets.com is a leading source for entertainment tickets, event
information and related products and services. Consumers can buy tickets from us
for our clients' events on the Internet, through our telephone sales centers and
interactive voice response systems and through retail stores. By combining our
powerful brand, extensive event database, and relationships with entertainment
organizations, we create a convenient one-stop solution for consumers in search
of event information and tickets. We provide automated ticketing solutions to
over 4,100 entertainment organizations and venues such as stadiums, performing
arts centers, museums and professional sports franchises. Our automated
ticketing solutions include providing outsourcing services and the license and
support of our in-house systems products. In 1999 we sold approximately 5.4
million tickets for which we received service fees from ticket buyers. Consumers
may also use our web site to purchase tickets from multiple sources and shop for
related products. Our goal is to use our brand and state-of-the-art ticketing
solutions to create the preeminent location for entertainment information and
tickets on the Internet. Our clients include The John F. Kennedy Center for the
Performing Arts, The Marine Midland Arena, the Texas Rangers, The Lincoln Center
for the Performing Arts, The National Air & Space Museum, Golden State Warriors,
San Francisco Giants and the Salt Lake Organizing Committee for the 2002 Olympic
Games.

In 1999 we derived 60.6% of our revenues from ticketing services and 13.8%
of ticketing services revenues were derived over the Internet. Our top five
ticketing services clients accounted for 26.9% of our ticketing services
revenues in 1999. We derived 36.6% of our revenues from software licenses and
services. Of our total revenues, we derived 10.2% internationally. Internet
revenues comprised 20.3% of the fourth quarter total revenues and 11.0% of
fiscal year 1999 total revenues. For additional information regarding the
segments of our business see Item 8 of this Form 10-K "Financial Statements and
Supplementary Data".

Tickets.com, Inc. was incorporated in Delaware in January 1995 as The
Entertainment Express, Inc. We commenced business operations in May 1996 when we
acquired Hill Arts and Entertainment Systems, Inc. In December 1996 we changed
our name to Advantix, Inc., and in May 1999 we changed our name to Tickets.com,
Inc.

In this document, the terms "Tickets.com," "we," "us" and "our" refer to
Tickets.com, Inc. and its subsidiaries.

1
<PAGE> 4

INDUSTRY BACKGROUND

Overview of the Ticketing Industry

The entertainment and sports industries and consequently, the event
ticketing market, are large and growing. We estimate that the market for event
ticketing in the United States, based on the face value of tickets sold for live
entertainment and sporting events and attractions, totaled approximately $14.5
billion in 1998, and is expected to grow to $18.0 billion in 2001. This growth
is evidenced by increases in the number and types of entertainment and sporting
events, the number and size of venues and the length of event seasons, as well
as the expansion of events into new domestic and international markets.

As the entertainment and sports industries have grown, so has the demand
for more convenient methods for the sale and distribution of tickets.
Historically, consumers were often required to spend hours in long lines at the
box office in order to purchase tickets to popular events. This process was
inconvenient for consumers, created logistical problems for entertainment
organizations and made ticket distribution more costly. Over the past 20 years,
consumers increasingly have purchased tickets over the telephone or at remote
retail stores because of advances in telephone sales center and computing
technologies. More recently, advances in telecommunications and emerging
e-commerce technologies have enabled consumers to purchase tickets through the
Internet and through telephone-based interactive voice response systems, which
allow consumers to purchase tickets without human assistance by using a touch
tone telephone. Consumers are increasingly embracing these new technologies and
purchasing event tickets through these more convenient means.

Current Approaches to Ticketing

The process of selling and distributing tickets to an event is inherently
complex. Entertainment organizations often simultaneously sell tickets to a
number of different events, such as hockey games, basketball games, and rock
concerts, each of which requires a different seating configuration for the same
venue. In addition, tickets for any particular event may be sold concurrently
through a variety of distribution channels, including the Internet, telephone
sales centers, interactive voice response systems, retail stores and the venue
box office. All of these sales channels compete simultaneously for the same
inventory of seats. Furthermore, ticketing systems must be able to track a
variety of different types of ticket sales for the same event, including
individual advance ticket sales, season and subscription ticketing, day of event
walk-up ticket sales, various discount tickets and group ticket sales, each of
which has its own unique requirements. Finally, the high demand for admission to
popular live events creates a number of operational and logistical complexities
related to the sale and distribution of numerous tickets in a very short period
of time.

Entertainment organizations generally have used one of three alternatives
to meet their ticketing needs:

- Outsourcing Service Providers. Entertainment organizations that produce
high-demand marquee events, such as large concert promoters, often
require the broad sales and distribution capabilities of outsourcing
service providers. Outsourcing service providers sell and distribute
tickets on behalf of entertainment organizations and often give the
entertainment organizations access to their software and hardware at no
charge in return for the exclusive right to sell that organization's
tickets. Outsourcing service providers typically charge the consumer a
service fee based upon the type and location of the event. Using large
telephone sales centers, retail store networks, and more recently,
e-commerce solutions, these outsourcing service providers enable
entertainment organizations to sell a large volume of tickets in a short
period of time and over a wide geographic area.

- In-House System Providers. Many entertainment organizations, such as
performing arts centers, elect to manage their ticket sales through
software products licensed from in-house system providers. The software
products licensed by in-house system providers allow entertainment
organizations to better control the level of service offered to, and
gather relevant information about, their consumers. These entertainment
organizations can use consumer information to develop marketing programs
to target audiences for specific events and address their often complex
season and subscription ticketing needs. Under license arrangements,
entertainment organizations generally undertake the costs of establishing

2
<PAGE> 5

and maintaining their own sales and distribution channels, including
computer, networking and telecommunications systems.

- Manual Ticketing. Other typically small entertainment organizations,
such as local theater and dance companies and other organizations
generally rely on manual ticketing through a single box office. These
entertainment organizations often have limited administrative, marketing
and financial resources and rely on box office personnel to manually
record transactions and keep track of available ticket inventories.

Limitations of Current Ticketing Alternatives

Consumer Perspective. Currently, there are few sources where consumers can
find extensive event information and ticket selection. As a result, the consumer
must often search through a variety of sources, including newspapers,
entertainment guides and the Internet, in order to gather information about
upcoming events. Even on the Internet, consumers often must conduct several
time-consuming searches before obtaining the information they are seeking. Then
consumers frequently must turn to a different source, such as a telephone sales
center or separate web site, in order to determine ticket availability for an
event and purchase tickets. Most outsourcing service providers limit the
information and tickets they provide to those entertainment organizations that
use their ticketing services. Also, because most outsourcing service providers
use closed, proprietary systems, consumers are not able to use them to access
event information or buy tickets from the thousands of organizations that use
in-house systems. Many entertainment organizations that use in-house systems or
that process their tickets manually have no Internet presence, limited marketing
resources and, consequently, have limited brand awareness. As a result,
consumers often find little or no information about events available from these
entertainment organizations. In addition, many of these organizations currently
sell tickets only through their box offices, which typically results in an
inconvenient buying experience for consumers.

Entertainment Organization Perspective. Outsourcing services, in-house
systems and manual ticketing may serve as incomplete solutions for many
entertainment organizations. Although outsourcing service providers may provide
broad distribution capabilities, they generally are limited to order-taking and
often cannot supply the information or services necessary for entertainment
organizations to develop effective marketing and promotional campaigns. This
lack of proactive marketing can result in ineffective marketing campaigns,
inefficient ticket pricing structures and, ultimately, unsold tickets. In-house
systems allow entertainment organizations to collect pertinent marketing
information but often have limited distribution capabilities. In addition,
entertainment organizations that use in-house systems often lack the financial,
marketing and technical resources required to generate significant interest in
their events or traffic to their web sites, if they have them. As a result,
consumers who might be interested in these events are unaware of them, resulting
in unsold tickets. Manual ticket processing operations have very limited
distribution infrastructures, and require substantial personnel and time
commitments to gather and organize patron information. Accordingly, these
ticketing alternatives do not consistently address all of the varied and complex
needs of entertainment organizations.

Internet Ticketing Information and E-Commerce Opportunity

The Internet has emerged as a powerful medium for aggregating and
disseminating event information, selling tickets and related products, and
marketing and promoting events. According to Forrester Research, a leading
market research firm, U.S. online ticketing sales to marquee events, regular
performances and sporting events are expected to grow from $300 million in 1999
to an estimated $3.9 billion in 2004. The Internet creates advantages and
conveniences for consumers and entertainment organizations alike. We believe
consumers want a single web site where they can find information about a wide
range of events and conveniently buy tickets to those events. Entertainment
organizations are increasingly interested in using modern software tools and the
Internet to efficiently sell tickets, market their events, deliver event
information and promotional material to consumers, and generate increased
revenues. We believe that significant opportunities exist for providers of
extensive event information and automated ticketing solutions that can

3
<PAGE> 6

provide both the convenience requirements of consumers as well as the revenue
maximization objectives of entertainment organizations.

THE TICKETS.COM SOLUTION

We have developed an automated ticketing solution that combines the
information sharing and interactivity of the Internet with our flexible
technology and an extensive sales and distribution network. Through our
www.tickets.com web site, we enable consumers to obtain information about a wide
range of sports and entertainment events, purchase tickets from multiple sources
and shop for related products. We provide a wide variety of entertainment
organizations with a broad range of flexible outsourcing services and in-house
systems to sell and distribute tickets, promote their events, collect and
analyze important patron demographic information and conduct related commerce.
Our strategy to deliver a ticketing transaction wherever the consumer buys
tickets, combined with our open platform technology, enables us to deliver
transactions on the web in three ways: through the Tickets.com web site, through
co-branded ticketing web sites, and through private label web sites of
entertainment organizations.

Benefits to Consumers

Extensive Event Information. We provide consumers with a broad database of
events and venues, including addresses, phone numbers, maps and directions,
event schedules, ticket availability and seating charts. Our database contains
information on entertainment organizations and sporting and entertainment events
and performances, including local and national sporting events, concerts,
theater and dance performances and museum exhibits. Our database includes events
for entertainment organizations that use our in-house systems and outsourcing
services as well as entertainment organizations that use other in-house systems
or outsourcing services. Consumers can conduct searches for events on our web
site based on criteria such as event name, venue name, event type or geographic
location.

Convenient Access to Multiple Ticket Sources. After selecting a particular
event for a ticket purchase, consumers are generally either linked to a web site
that allows them to purchase a ticket or are provided with contact information
for those ticket sellers who do not sell tickets on the Internet. Traditionally,
outsourcing service providers only offer consumers access to tickets sold
through their own proprietary systems. However, we allow consumers to locate
tickets to events through a variety of methods, including:

- sales of tickets for entertainment organizations who use our outsourcing
services;

- links into web pages of entertainment organizations that use our in-house
systems;

- links and referrals to other online ticket sellers; and

- access to our ticket auction site.

By providing links to a variety of ticket sources, we offer consumers the
ability to purchase tickets to a broad range of sporting and entertainment
events simply by visiting our web site. In addition to our Internet services, we
offer tickets through interactive voice response systems, telephone sales
centers, retail stores and the venue's box office, all with a view toward
providing consumers with a superior buying experience.

Wide Variety of Related Products and Services Available. Our web site
offers consumers a variety of products and services related to their
entertainment and ticketing needs, including:

- auction capabilities, which bring together ticket buyers and sellers, and
allow sellers to receive the going market value for their tickets;

- personalized entertainment calendars;

- one-time personal registration, which allows consumers to enter their
personal profiles and entertainment preferences once, eliminating the
need to re-enter information on subsequent transactions;

- event packages, which include event tickets, transportation and travel
arrangements;

- airline, hotel and rental car reservation services; and

- links to related merchandise.

4
<PAGE> 7

By integrating our extensive database of events and entertainment
organizations with broad access to multiple ticket sources and our related
products and services on one web site, we offer consumers a one-stop shopping
and information solution.

Benefits to Entertainment Organizations

Flexible, End-to-End Technology Solutions. Unlike many other ticket
sellers, our automated ticketing solutions offer the benefits of both
outsourcing services and in-house systems to entertainment organizations. The
flexible, open structure of our outsourcing services contrasts with the closed,
proprietary systems of other ticket sellers generally require the use of their
full services as a condition to participating in their distribution network. As
an outsourcing service, we offer a wide range of ticketing services, including
ticketing inventory and control, patron data management, and ticket sales and
distribution through our international online and traditional sales and
distribution network and sophisticated information systems. As an in-house
systems provider, we offer a variety of specially tailored, in-house systems,
from general admission systems for amusement parks to highly sophisticated,
multi-module systems for the world's leading performing arts centers and arenas.
All of our in-house system products are scalable in that they may be adapted for
both low and high volume transactions and for users with simple to complex
ticketing needs. By using the Internet, advanced data communications technology
and standardized open interfaces that connect our sales and distribution network
to our in-house systems, we can also offer entertainment organizations real-time
Internet ticketing capabilities through our web site or through their own web
site.

Targeted Marketing and Event Promotion Capabilities that Provide
Incremental Revenue and Cost Savings Opportunities. Our automated ticketing
solutions and web site offer entertainment organizations effective targeted
marketing and event promotion capabilities. Our core ticketing system enables
entertainment organizations to build, maintain and access a consumer database
and to organize and analyze information about ticket buyers. Entertainment
organizations can use this information to earn higher fees from their
advertisers and corporate sponsors, sell more tickets, create more efficient
ticket pricing strategies and lower their marketing expenditures by targeting
specific consumers or groups of consumers. We also offer entertainment
organizations promotional services on our web site, including special venue or
event listings, venue seating charts, banner advertising and customized web
pages promoting specific events.

Ability to Take Advantage of our Strong Brand Name to Increase Ticket
Sales. We believe our brand name, "tickets.com," is a powerful tool for
connecting the ticket buying public to entertainment organizations. Tickets.com
is a simple and logical place for consumers to look for tickets online, because
it concisely tells what we sell and where to find it. We believe that our brand
name may be compelling to many smaller entertainment organizations that lack the
marketing resources to generate broad consumer interest in their events.

THE TICKETS.COM WEB SITE

The Tickets.com web site offers extensive event, venue and ticketing
information, ticket purchasing options and other related services.

Event Search and Information

Our web site provides consumers with information about a wide variety of
sporting and entertainment events. Consumers can access our database comprised
of information on entertainment organizations and sporting and entertainment
events and performances. Consumers can search our web site by event, performer,
venue name or location. They can also view event schedules, league standings,
tour dates, show times, box office information, news stories and seating charts.
After selecting an event, consumers are presented with more detailed event and
venue information, and a selection of one or more ticket sources for that event.

Ticket Purchasing Options

After receiving search results from our web site, consumers are presented
with several ways to locate tickets through a variety of sources, including
venue box offices, the primary ticket seller or through our auction site. When
purchasing tickets from entertainment organizations that use our automated
ticketing solutions via the Internet, the consumer can generally purchase
tickets directly on a real-time basis for the best available seat. When
purchasing tickets to events of entertainment organizations that use another
automated

5
<PAGE> 8

ticketing solution via the Internet, the consumer can be linked directly either
to the organization's web site or to the web site of that organization's
outsourcing service. For tickets that are available on our auction site, the
ticket buyer is given a direct link to the auction page containing tickets to
that event. Finally, we also provide contact information for ticket sources that
do not sell tickets online.

Our ticket auction enables consumers to bid on tickets to sporting and
entertainment events across the country. Our auction has been engineered to meet
the particular requirements of ticketing, which is time sensitive and
geographically fixed. Once at the auction, consumers may bid on tickets via our
auto-bidder, which automatically ensures that they are the top bidder as long as
their maximum bid is not exceeded.

In consumer-to-consumer auctions, ticket sellers pay us a per-ticket
auction posting fee and a per-transaction success fee upon the closing of each
auction. Sellers can customize their own auctions, specifying the length of time
the auction remains open, the location of the auction on the web site, and the
minimum opening bid. All bids are displayed in real time as potential buyers
bid. At the closing of an auction, if the highest bid exceeds the minimum
acceptable bid, the success fee is automatically billed to the seller's credit
card. The buyer and seller then make their own arrangements for payment and
ticket delivery. We are taking measures to lower the risk of fraudulent
activities related to the posting and purchase of tickets on our
consumer-to-consumer auction site. For example, we require all auction members
to register with a valid credit card and to enter their name, address, e-mail
address and telephone numbers. We have also instituted other measures such as a
rating system for sellers and buyers of tickets, as well as a requirement that
all postings include section, row and seat information.

In 1999 we entered into arrangements with several performers to provide
online ticket auctions of tickets for live concerts. Under these arrangements,
concert tickets are allocated by performers for auction on our web site and
certain amounts collected above the face value are donated to a charity of the
performer's choice. The minimum opening bid is set at the face value of the
tickets plus the service fees that we charge to consumers. In addition, the
buyer pays a charge for delivery of the tickets. As part of our arrangement with
the performers, we have typically agreed to purchase any unsold tickets at the
face value. We also intend to offer demand-driven pricing capabilities to allow
event promoters, artists and venues to capture the market value of premium
tickets while also allowing them to increase attendance through dynamic pricing
of low demand seats.

Related Services

Our web site offers consumers a variety of services related to their
ticketing and entertainment needs, including:

- Personalized Entertainment Calendars and Event Notification. At the
personalized entertainment calendars and event notification section of
our web site, consumers can specify areas of particular interest to them,
such as rock performers or sports teams. Once registered, consumers are
able to create an event calendar organized by city, date and event type.
In addition, they will receive e-mail notifications of events of interest
in their local area, with the opportunity to purchase tickets to those
events.

- Event Packages. We offer consumers a variety of custom event travel
packages, which generally include event tickets, travel arrangements and
hotel accommodations. We offer packages to such high-demand sports events
as the Super Bowl and the Daytona 500, as well as activity-oriented
packages such as ski and golf vacations. We serve as the selling agent
for packages by referring customers to our travel and entertainment
partners, and we receive a commission on the sale of each package.
Recently, we have also purchased travel packages for resale to consumers.

- Travel Services. We currently have an outsourcing agreement with a
travel planning and reservation agency that provides travel services
through our web site and our 1-800-TICKETS phone number. Visitors to our
web site can make airline, hotel and car rental reservations by using
this service. Consumers can also call our 1-800-TICKETS number and be
transferred to a travel representative.

6
<PAGE> 9

THE TICKETS.COM SALES AND DISTRIBUTION NETWORK

Our sales and distribution network is comprised of various channels through
which information is accessed and tickets are sold. This network consists of
various distribution channels including our web site, three national telephone
sales centers, individual venue box offices, interactive voice response
technology and numerous retail store locations.

- Internet. We currently sell tickets through our web site at
www.tickets.com, as well as through the various web sites of many of our
clients, including the Buffalo Sabres, San Francisco Giants, Oakland
Athletics and Playhouse Square Foundation. The majority of transactions
conducted through our www.tickets.com site use our highly specialized
system-to-system interface, the Transaction Application Gateway, that
connects various automated ticketing solutions to our sales and
distribution network, creating consistency in information display and the
ticket purchasing process. Entertainment organizations can sell tickets
through our web site or directly from their own web sites using our
Transaction Application Gateway product. The details of this interaction
with the various ticket engines is transparent to the consumer.

- National Telephone Sales Centers. Consumers can purchase tickets through
our three national sales centers located in Concord, California;
Cleveland, Ohio; and Fairfax, Virginia. Operators at our telephone sales
centers take ticket orders and mail the tickets directly to the ticket
purchasers or, at the purchaser's request, arrange for the tickets to be
held at the venue's will call window. In addition, our operators respond
to questions regarding facility characteristics, directions to the
facility, parking, hotel accommodations and nearby restaurants. We
recently announced plans to cease ticket sales activities at our
Cleveland, Ohio telephone sales center. We expect to redirect the ticket
sales activities to our Concord, California telephone sales center by the
end of the second quarter of 2000. We will maintain sales, technical and
client support functions in Cleveland for our clients within that region.

- Interactive Voice Response. Our ticketing sales and distribution
capabilities also include an advanced interactive voice response system,
which enables consumers to access information and purchase tickets to
certain events, by using a touch tone telephone without human assistance.
Ticket and event information is prerecorded and stored on specialized
computer systems, and is accessed by consumers through the use of touch
tone prompts. The first time a consumer purchases tickets through our
interactive voice response system, that consumer's unique profile is
stored on the system and can be easily accessed to quickly process any
subsequent purchases by that consumer. The interactive voice response
system can also be scaled to handle a significant volume of transactions
without degradation of processing speed or data integrity.

- Retail Stores. We currently sell tickets through a number of retail
stores in those locations where we offer outsourcing services to
entertainment organizations. These retail stores are typically
high-visibility retail chain stores that have a strong brand name and
substantial consumer traffic, and that cater to consumers who are likely
to attend entertainment and sporting events. Our retail stores include
music and video stores, such as The Wherehouse and grocery stores, such
as Tops Friendly Markets and Raley and also includes Mail Boxes, Etc. We
are generally responsible for installing and maintaining the necessary
hardware and software at the retail stores and for training employees of
the retail stores in the operation of the Tickets.com system. The retail
stores are responsible for providing personnel for ticket sales and daily
operations, as well as advertising and promotions to augment ticket
sales.

- Venue Box Office and Back Office Operations. Our clients use our
in-house systems and outsourcing services to access, sell and print
tickets from their box offices, as well as for various financial and
marketing functions related to ticket sales and payment collection. Many
of our clients also use our automated ticketing solutions to manage and
sell various forms of ticketing programs, including season tickets,
subscription packages as well as single tickets.

7
<PAGE> 10

TICKETS.COM TECHNOLOGIES

Our ticketing technologies include our proprietary Transaction Application
Gateway and a family of in-house systems products designed to meet the needs of
a wide variety of entertainment organizations.

Our system-to-system interface, Transaction Application Gateway, is a
specialized software system that connects a variety of clients' ticketing
systems to our system and our database through standard interfaces. We have
developed our Transaction Application Gateway to achieve the standardization and
scalability needed to simultaneously sell tickets for multiple entertainment
organizations, independent of the ticketing system used by those organizations.
Our Transaction Application Gateway is capable of facilitating interaction
between various automated ticketing solutions on one end, and various sales and
distribution points on the other end. We intend to enhance our Transaction
Application Gateway to create a distributed network capable of selling and
printing tickets at any connected location, for any entertainment organization
that uses our Transaction Application Gateway as a transactional middleware.

Our system-to-system interface is designed to store and maintain current
event and ticket availability information from a variety of individual ticketing
servers. Transaction records are centrally stored on our Transaction Application
Gateway and are written to the specific automated ticketing solution's database
to update inventory availability. In addition, our system-to-system interface
can store and transmit to the corresponding ticketing server consumer
information that can later be used for analysis and development of targeted
marketing efforts by entertainment organizations. The open nature of the
architecture of our Transaction Application Gateway also makes it possible to
develop interfaces with a variety of sales and distribution channels, such as
web sites, kiosks, interactive voice response applications, automated teller
machines and WebTV.

TICKETING SOFTWARE

We currently offer a broad portfolio of specialized in-house systems
products designed to meet the needs of a variety of entertainment organizations,
from the general admission needs of fairs and parks to the highly sophisticated,
high-capacity reserved seating needs of large arenas, stadiums and performing
arts centers. Some entertainment organizations rely on our products as their
in-house systems and purchase and maintain their own computer and communications
equipment. Other entertainment organizations use our ticketing engine on an
outsourcing basis and rely on us to store all necessary data on our computer
equipment and provide them with access to that information through terminals at
their box offices.

The functionality of our in-house products can generally be divided into
four components:

- a presentation layer that determines the manner in which information
about events and tickets are communicated to system users;

- a middleware layer that communicates information between the presentation
component and the data storage component, processes transactions and
prints tickets;

- a data storage component that stores and maintains a large amount of data
related to events, tickets, venues and transactions; and

- a reporting component that produces records related to the sale of
tickets such as payment methods and ticket sales patterns.

Depending on the needs of individual entertainment organizations and
industry sectors, each of these components can vary greatly in sophistication,
capability, scalability and transaction processing speed. Our in-house systems
product offerings include our Advantix SQL and Artsoft/Sportsoft systems, as
well as Prologue, PASS, TicketMaker Professional, Admits, Select-A-Seat, Access
Control System 2100 and Databox which we obtained through acquisitions of other
ticketing companies. Over the next several years we intend to consolidate our
broad portfolio of in-house systems products into a few in-house systems and to
develop links from our clients' various software and hardware systems to our
in-house systems and databases.

8
<PAGE> 11

OUTSOURCING SERVICES

We use Advantix SQL and Prologue software to provide flexible outsourcing
services that enable entertainment organizations to benefit from our industry
knowledge, telecommunications infrastructure and technology development to
manage their ticketing needs in an efficient and economic manner. We generally
serve as the exclusive outsourcing services provider for our outsourcing clients
pursuant to contracts that generally have terms ranging from one to five years
with automatic one-year renewals. These contracts usually contain termination
provisions generally allowing our clients to terminate the contract upon notice
of a breach after a 30- to 60-day period to cure. Our outsourcing services
clients determine all face values for tickets sold through our services. These
clients also generally determine when tickets for their events will be sold to
the public and the number and type of tickets that will be available for sale
through us. We usually sell only a portion of our clients' total tickets. Our
clients' personnel will often handle group sales and season ticket sales through
their own box offices. The number of tickets that our clients sell in-house
varies from client to client and varies as to any single client from year to
year. Tickets allocated by our clients to us are sold to the public directly
through our distribution network.

Our outsourcing services include integrated patron data management, ticket
processing and customer service and support.

Integrated Patron Data Management Capabilities

The Advantix SQL and Prologue software used in our outsourcing services can
capture and store information regarding the purchasing habits, preferences and
demographics of ticket buyers on a real-time basis. When a consumer purchases a
ticket to an event, an electronic file is built on that consumer, including the
consumer's name, address, telephone number and any other demographic information
specified by the entertainment organization. Thereafter, when that consumer
purchases tickets, the system retrieves that consumer's relevant information and
tracks historical ticket purchases, enabling the entertainment organization to
obtain valuable information about its repeat customers.

Ticket Processing Capabilities

Our ticketing systems are designed to track and manage the complex
ticketing needs of a variety of entertainment organizations. The systems used by
our outsourcing services clients are accessible on a real-time basis by any
authorized user. The ticket processing capabilities of our outsourcing services
systems include the following functions:

- Creation of Master Seating Charts. During the first step of the
ticketing inventory and control process, we create a master seating chart
for each seating configuration that a particular entertainment
organization may use. For example, an arena may use one seating
configuration for hockey games, another for basketball games and another
for rock concerts. Each master seating chart can then be used as a
template in the event creation process.

- Creation of Ticket Prices. Next, a set of ticket price zones in the
configuration can be created. Different configurations of prices for
season sales, group sales and single ticket sales can be added to the
ticket price grids. The ticket price grids also contain pertinent service
charges and handling fees. We can create multiple price points for each
event. We eventually plan to use this capability to create various
dynamic pricing programs that will allow us to price individual seats at
an event and enable entertainment organizations to change prices for
tickets to accurately reflect market demand for that seat.

- Customization of Seating Charts for an Event. A sequence of customized
events can be created which use the already established master seating
chart and prices. The individual chart for an event includes the date and
time of the event and contains rules for seating availability and for the
determination of the seats to be sold on a best available seat basis. An
authorized operator can change information regarding events online at any
time in the system.

9
<PAGE> 12

- Real-Time Tracking of Ticket Inventory. Tickets are often sold
simultaneously through multiple distribution channels, including the
Internet, interactive voice response systems, telephone sales centers,
retail stores and the box office. We centralize control of ticket sales
through the various distribution channels and monitor, on a real-time
basis, the progress of the sale of tickets for a particular event. This
capability allows facilities and promoters to determine whether to add
additional performances for the event in order to satisfy demand. We are
also capable of executing rapid searches to find the best available seats
for a particular performance.

- Ticket Sales, Printing and Delivery. Orders for tickets are generated
through our various sales and distribution points. Once tickets have been
selected by a consumer, the system automatically puts these tickets on
hold until a transaction is completed. Our automated ticketing solutions
generally provide for automatic credit card approval, as well as
real-time capture of information in a customizable database structure.
Upon receiving approval of the credit card or receipt of cash payment at
retail stores, the transaction is completed and a unique transaction
number is provided by the system. For most transactions completed through
the Internet, interactive voice response systems or our telephone sales
centers, tickets are printed and sent to consumers via the mail or
express delivery, depending on consumers' preferences. For transactions
completed at retail stores, tickets are printed and given to consumers at
the time of the transaction.

- Reports. Standard reports relating to ticket sales and proceeds
collected for particular events are available to clients online and are
updated at the time each transaction occurs. A system of checks and
balances continually verifies the accuracy of the report data. These
reports allow clients to monitor, on a real-time basis, the progress of
ticket sales to any particular event or a specific performance of that
event. Customized reports can be designed and tailored to clients'
specific requests. These reports are often used by our clients as
management tools in their accounting, finance and marketing departments.

- Closing of an Event. For each event, our automated ticketing solutions
track ticket sales and capture pertinent information relating to each
ticket sale, including the channel through which the ticket was sold, the
price of the ticket, the amount of any service or handling fees, the type
of ticket sold and the seat location. Upon closing of the event, we
prepare final detailed settlement reports for the client that verify
funds due to that client.

CLIENT SERVICE AND SOFTWARE SUPPORT

We currently maintain regional sales and support offices, each of which is
staffed with account representatives and technical support personnel. Each
outsourcing services client is assigned an account representative located in our
nearest regional office, and that account representative manages the client's
account, acts as the day-to-day interface with the client and coordinates our
services for the client's various events.

In addition to providing outsourcing services to entertainment
organizations, we typically license our in-house systems, sell hardware and
provide maintenance and support services to individual licensees. Our license
agreements generally have perpetual terms. Our support and maintenance contracts
have terms ranging from one to five years and typically have automatic one-year
renewals, and contain termination provisions generally allowing our clients to
terminate the contract upon notice of a breach after a 30- to 60-day period to
cure. Our licenses generally are limited in geographic scope and functional
scope. Through our e-commerce network, we can provide our licensees a broad
distribution network that includes our www.tickets.com web site.

We also provide support to our licensees under software support agreements.
Our technical team of over 30 employees in the United States and in Europe
provides full-time product support for our licensees.

10
<PAGE> 13

FOREIGN OPERATIONS

We have software licensing and support operations in four European
countries and in Australia. In fiscal years 1997 and 1998, our foreign sales
were not material. For 1999 our revenues are geographically classified as
follows:

<TABLE>
<CAPTION>
FOREIGN
UNITED STATES OPERATIONS
------------- ----------
<S> <C> <C>
Ticketing Services.......................................... 100.0% 0.0%
Software Services and Other................................. 74.5% 25.5%
</TABLE>

For additional information regarding foreign operations see Item 8 of this
Form 10-K "Financial Statements and Supplementary Data".

SALES AND MARKETING

Our sales strategy is primarily focused on increasing the inventory of
tickets available to consumers, increasing Internet ticket sales, increasing
consumer exposure to those tickets and other products and services offered by
us, and increasing our advertising and sponsorship revenues. Our sales force is
currently divided along the following product lines and service functions:
in-house systems; outsourcing services; online sales of tickets allocated to us
by entertainment organizations; and advertising and sponsorships.

We market and license our in-house systems through a direct sales force
organized by region and product line. We maintain direct sales personnel in the
United States and internationally in the United Kingdom, the Netherlands,
Germany, Australia and Canada. The sales force generates leads through inbound
inquiries into our sales offices and web site, contacts made at industry
conferences and trade shows, and our ongoing promotional programs. In some
cases, entertainment organizations issue a request for a proposal that defines
the organization's specific system needs, including operating platform and
network requirements. In other cases, our sales team determines the scope of the
organization's specific needs. In either case, the national sales manager
determines the in-house product which best meets the needs of the entertainment
organization and assigns the relevant product team to lead the process. We
complement our sales force with our software support group that is also
responsible for the installation and technical support of each in-house system.

Our outsourcing ticketing services sales team is segmented by geographical
regions. Leads for outsourcing services are generally generated through requests
for proposals, trade shows, and industry contacts. The sales process includes a
full demonstration of our system capabilities and service offerings as well as
visits to our telephone sales centers by representatives of the entertainment
organizations. The entire sales process is a coordinated effort between sales
representatives and members of our operations and technology groups.

Along with our in-house systems and outsourcing services, we also sell our
online distribution capabilities to organizers of special or one-time events, as
well as organizers of general admission events. Leads for such opportunities are
generally generated by our sales force or through our promotional and public
relations efforts. In such cases, we work with event organizers to promote our
brand and our web site as an online sales and distribution channel for
information and tickets for the event.

In addition to the services we offer entertainment organizations, we market
our web site and other advertising vehicles to corporate advertisers and
sponsors who are interested in reaching the entertainment consumer. Currently,
our advertising and sponsorship sales for our web site and other vehicles are
done internally by our own staff, as well as being outsourced to Latitude 90, an
advertising representation firm.

STRATEGIC ALLIANCES AND ADVERTISING RELATIONSHIPS

We have entered into a number of strategic alliances and advertising
agreements with technology, marketing and online companies in an effort to
maximize our inventory of available tickets, develop our brand in the
marketplace, and to broaden our revenue sources.

11
<PAGE> 14

Excite@Home

In August 1999, we entered into a binding letter of intent with Excite,
Inc., a leading online content provider and wholly owned subsidiary of At Home
Corporation. At the same time, Excite acquired a minority equity interest in
Tickets.com. Under the terms of the letter of intent, we have created an event
information and ticketing functionality for Excite's web site and other web
sites that Excite has the right to program. In addition, we will design and
create ticketing web pages for Excite's network that will contain the ticketing
service, as well as feature or display links to various Excite community
products such as message boards, chat clubs and home pages. These web pages will
display both the Tickets.com and Excite brands. Under the terms of the letter of
intent, Excite will feature previews for the ticketing service and co-branded
web pages throughout the Excite web site and will be responsible for selling
advertising on these web pages. In addition, we will link to content and tools,
such as calendars, message boards and clubs, on the Excite web site. Excite will
pay us fees based upon revenues it generates from advertising on the co-branded
web pages and we will pay Excite commissions for ticket sales over the Internet
and revenues that we receive from Excite users from ticket auctions, sales of
travel and event packages and sales of merchandise. We will also pay Excite a
fee for a variety of services, such as e-mail delivery to users, e-mail response
tracking and database management and maintenance for registered users, and for
distribution on the Excite network. The letter of intent as amended on December
30, 1999 provided for the letter of intent to be restated and designated for all
purposes as the definitive agreement between Excite and Tickets.com. In
addition, the definitive agreement incorporated all of the terms of the letter
of intent, adjusted the timing of the parties' obligations under the agreement
to accommodate for a delay in the launch of the co-branded web pages, and
extended the agreement to December 31, 2002.

Cox Interactive Media, Inc.

In August 1999, we entered into a content and distribution agreement with
Cox Interactive Media, Inc., a wholly owned subsidiary of Cox Enterprises, Inc.
At the same time, Cox Interactive acquired a minority equity interest in
Tickets.com. Under the terms of the agreement, we have created a ticketing
functionality for web sites operated by Cox Enterprises or entities affiliated
with Cox Enterprises, including Cox Interactive and MP3Radio.com. These web
pages will display both the Tickets.com and Cox Enterprises and Cox Interactive
brands. We will also provide Cox Interactive with event and venue information
for display in the event guide sections of Cox Interactive's web sites as well
as other areas of the Cox Enterprises network. We will also assist Cox
Interactive with the integration of our ticketing functionality and content into
Cox Interactive's local event listings and calendars. In return, Cox Interactive
has agreed to create a link to a ticket buying tool on each home page for a city
site. Cox Interactive will also feature the event listing and calendars on the
entertainment page of each city site. Cox Interactive has also agreed to provide
us with a minimum of 125 million advertising impressions, including placement of
our content on its web site, links to the co-branded web pages or the
www.tickets.com web site and promotions of the co-branded web pages and our web
site. In addition, Cox Interactive will be responsible for selling advertising
on the co-branded web pages. We will link to content and tools, such as
calendars, message boards and classifieds, on the Cox Interactive web site. Cox
Interactive will pay us a fee based upon revenues it generates from advertising
on the co-branded web pages and we will pay Cox Interactive commissions for
ticket sales over the Internet and revenues that we receive from Cox users from
ticket auctions, sales of travel and event packages and merchandise sales. We
have also agreed to purchase a specified minimum amount of advertising on Cox
Interactive and other Cox Enterprises web sites, radio stations, newspapers and
cable. The content and distribution agreement has a term of five years, but may
be terminated by either Cox Interactive or us if the other party breaches the
agreement and the breach remains uncured for a period of 90 days.

MP3.com

In March 2000, we entered into an agreement with MP3.com, Inc., a leading
music-oriented destination site on the Internet. Under the terms of the
Agreement, subject to other functionality incorporated by MP3.com, we will serve
as the exclusive provider of music event ticketing services featured, promoted
and displayed on the MP3 Events Calendar, which is a calendar of events
displayed on the MP3 web site and

12
<PAGE> 15

distributed to registered users of the MP3 site via regular email campaigns, for
up to up to 21 million impressions per month. The MP3 Events Calendar will
incorporate the Tickets.com Music Events Database, which is a proprietary
database developed and maintained by Tickets.com consisting of, among other
things, a national listing of live musical events, corresponding venues and
other relevant information. In addition, the MP3 Events Calendar will be
incorporated into the Tickets.com Events Guide, which is displayed on the
Tickets.com web site and distributed to affiliated web sites. Upon the launch of
the MP3.com Concert Update Service, which is a user and region targeted email
service, MP3 will discontinue the MP3 Events Calendar email campaigns and
incorporate the Tickets.com Events Calendar into the MP3 Concert Update Service
for up to 21 million impressions per month. The MP3 Concert Update Service will
be prominently co-branded with the Tickets.com logo and the MP3.com logo. The
agreement has a term of two years.

Shubert Ticketing Services

In March 2000, we entered into a 3-year agreement with Shubert Ticketing
Services, a provider of automated ticketing solutions, specializing in Broadway
events. Under the terms of the agreement, we will create a special promotional
section on our web site to feature events that are ticketed by Shubert. Upon
reaching certain minimum performance levels, we will receive commissions on each
ticket sold through our site or any affiliate sites which feature our ticketing
functionality.

Encryptix

In February 2000, we made a strategic investment in Encryptix, Inc., a
provider of secure, authenticated online printing technologies for live events,
movie, travel and financial service industries. As a result of this investment,
we expect to enter into an operating arrangement with Encryptix, whereby we will
offer ticket buyers the ability to print tickets on their desk-top printer, in
exchange for certain revenue-sharing arrangements with Encryptix.

E.C.V., LLC

In January 2000, we entered into a marketing rights and ticketing services
commission agreement with E.C.V., LLC, a manager and promoter of race car
drivers, whereby we will receive certain marketing and promotional rights.
Pursuant to the agreement, we will be the "Title Partner" for Galles -- ECR
Racing and Al Unser, Jr., Galles -- ECR Racing's driver, in return for certain
marketing and sponsorship fees. E.C.V. has the obligation to secure for us
certain ticketing services agreements with various raceways.

We have the option to terminate the agreement at the end of the first year,
if E.C.V. fails to meet certain performance milestones. Conversely, if certain
other performance milestones are met by E.C.V., it will have the opportunity to
extend the agreement, at its option, for an additional two-year term.

RealNames

In July 1999, we entered into an agreement with RealNames Corporation, the
provider of the RealNames subscriber-based Internet addressing system. Under the
terms of the agreement, we have been granted an exclusive license to use the
terms "ticket", "tickets" and "tickets.com", in the RealNames service for the
term of the agreement. Under the terms of the agreement, RealNames may withdraw
any name granted to Tickets.com at any time, but may not reallocate a withdrawn
name to any other company during the term of the agreement. As a result of the
agreement, Internet users conducting searches on search engines that use the
RealNames service will be provided a direct link to our home page or such other
location as we may reasonably specify. Our agreement with RealNames provides for
payments of quarterly fees by Tickets.com to RealNames, and a per-referral fee
for each referral in excess of prescribed minimums. The agreement terminates on
June 30, 2001, and will be automatically renewed for successive one-year terms,
unless either party notifies the other of its intention not to renew within 30
days of the termination date. In addition, if RealNames removes one of our
RealName terms, we have the right to terminate the agreement or if RealNames
becomes subject to liability because of the use of one of our RealName terms, it
may terminate the agreement.

13
<PAGE> 16

ACQUISITIONS DURING 1999

TicketStop, Inc. In March 1999 California Tickets.com entered into a stock
purchase agreement with TicketStop, Inc. and the shareholders of TicketStop to
purchase all of the outstanding common stock of TicketStop. The purchase was for
cash consideration equaling approximately $2.3 million, consisting of an initial
cash payment of $2.2 million. Additional consideration, in the form of a
contingent cash payment of up to approximately $400,000, was subject to
TicketStop attaining a targeted number of active clients. In September 1999,
California Tickets.com entered into an amendment with the shareholders of
TicketStop whereby the parties agreed to remove the contingency behind the
remaining cash payment, which resulted in a cash payment of approximately
$400,000 and an equal amount of additional goodwill. The operating results of
TicketStop have been included in our consolidated financial statements from the
date we acquired California Tickets.com.

TicketsLive Corporation In April 1999 we purchased all of the outstanding
capital stock of TicketsLive Corporation. The aggregate purchase price was $26.0
million. The acquisition of TicketsLive added a suite of in-house systems
products, licensed and sold in the United States, Europe and Australia, to our
family of in-house systems products. In addition, we acquired our
system-to-system interface, the Transaction Application Gateway, that
facilitates our ability to sell tickets on our web site from a variety of
sources. We also acquired client relationships with several well-known
entertainment organizations, including the Lincoln Center for the Performing
Arts, the New York Philharmonic, the Carrier Dome, Pennsylvania State University
and the National Air & Space Museum, among others. The operating results of
TicketsLive Corporation have been included in our consolidated financial
statements from the date of the acquisition.

California Tickets.com, Inc. Effective April 1999 we completed the
acquisition of California Tickets.com, and in May 1999 we changed the name of
our company to Tickets.com, Inc. The aggregate purchase price was $41.5 million.
The acquisition of California Tickets.com added some of our most significant
brand assets, including our web site address (www.tickets.com) as well as our
1-800-TICKETS telephone number. The operating results of California Tickets.com
have been included in our consolidated financial statements from the date of the
acquisition.

dataCulture Ltd. In August 1999 we purchased all of the outstanding
capital stock of dataCulture Ltd. The acquisition of dataCulture added another
in-house systems product to our family of in-house systems products, an expanded
presence in the United Kingdom, and client relationships with several well-known
entertainment organizations in the United Kingdom, including Chelthenham
Racecourse, Widmore Hall London and The Lyric Theatre, among others. The
aggregate purchase price was L4 million, or the equivalent of approximately $6.5
million at August 23, 1999. The operating results of dataCulture have been
included in our consolidated financial statements from the date of acquisition.

Lasergate Systems, Inc. In December 1999 we completed the acquisition of
Lasergate Systems, Inc., The aggregate purchase price was $3.7 million. The
acquisition of Lasergate added a suite of in-house systems products to our
family of in-house systems products, as well as approximately 95 new client
relationships. The new client relationships include Foxwoods Casino and Boston
Museum of Science, among others. The operating results of Lasergate have been
included in our consolidated financial statements from the date of the
completion of the acquisition in December 1999.

14
<PAGE> 17

COMPETITION

The market for automated ticketing solutions is intensely competitive, and
we expect competition to increase in the future. We believe that the principal
competitive factors that we must address include:

- greater brand recognition of some of our competitors' brands;

- longer operating histories of some of our competitors;

- the size of ticket inventories maintained by our competitors; and

- greater financial and other resources available to our competitors.

Our specific concerns include the following:

- an inability to gain access to our competitors' existing clients who may
currently have lengthy contracts;

- difficulties associated with gaining national recognition, as well as
penetrating specific regional clients; and

- the current consolidation of the ticketing industry into a few large
conglomerates with lengthy operating histories and stronger brand
recognition.

Although we believe that we compete favorably with respect to these
factors, we expect we will be continually challenged by current competitors who
may have significantly greater financial, marketing, customer service,
distribution, technical and other competitive resources, as well as by new
entrants into the industry. Our principal competitors include two large national
providers of outsourcing services, smaller regional providers of outsourcing
services, entertainment organizations that operate and maintain in-house
ticketing systems, software companies that license in-house systems and a
variety of Internet competitors.

On a national level, we primarily compete with two national providers of
online and offline automated ticketing solutions, Ticketmaster Corporation and
its online partner Ticketmaster Online-CitySearch, Inc., which have operations
in multiple locations throughout the United States. Ticketmaster
Online-CitySearch has an exclusive license to perform all of the online
ticketing for Ticketmaster Corporation. Ticketmaster has a widely recognized
brand name in the live event ticketing business, a longer operating history in
the ticketing industry generally, and in Internet ticketing specifically, and
has greater financial and other resources than we do. We seek to distinguish
ourselves from these national ticketing companies in the following ways, among
others:

- Increasing the number of our software licensees who can sell tickets over
the Internet -- currently only approximately 1,200 of our 4,100
entertainment organizations can sell tickets real-time over the Internet.
By increasing the number of the entertainment organizations that can sell
tickets over the Internet, we can increase the amount of ticket inventory
and content available through the Tickets.com website. The result is an
ability to grow our revenue base and improve the consumer experience by
providing a broad range of ticketed events.

- Focus on growth in traditionally underserved markets -- traditionally,
the ticketing needs of night clubs, minor league sports teams, auto
racing leagues and other entertainment organizations have been
underserved. Our software presence and sales and marketing resources
targeted at these segments provide us an opportunity to grow through
focusing on these high potential segments.

- International expansion -- we believe that the ticketing industries in
many international regions, including Europe and Asia, are fragmented and
underserved and entertainment organizations are generally not bound by
exclusive long-term contracts. By combining our software presence with a
strong brand and distribution capability overseas we can rapidly develop
the international marketplace.

Further, we believe we can distinguish ourselves through the versatility
and functionality of our ticketing system, as well as our ability to capture and
manage data regarding ticketing transactions and consumer purchasing habits.

15
<PAGE> 18

On a regional level, we compete with smaller providers of outsourcing
services that may have longer operating histories, greater name recognition and
a broader established client base in the geographic areas in which they operate
than we do. We believe, however, that many regional providers of outsourcing
services are at a competitive disadvantage because they have not developed their
own ticketing software applications, have geographically restricted license
arrangements with in-house systems providers, and, in some instances, are
controlled by a major entertainment organization which may prevent them from
contracting with that organization's competitors.

Finally, we also face competition from independent companies that license
in-house systems to regional providers of outsourcing ticketing services and
individual entertainment organizations. These companies may develop more
effective in-house systems than ours that could render our products obsolete.

On the Internet, we compete with online ticketing companies, as well as
online providers of entertainment information, merchandise and related services
whose suites of services overlap with our target markets. In addition, because
barriers to entry are relatively low, we may face competition from companies in
other areas of e-commerce that can launch new web sites using commercially
available software. These potential Internet competitors may have competitive
advantages including strong brand recognition, fully developed e-commerce
functionality, comprehensive information and an established presence on the
Internet. Strategic relationships with these and other Internet portals may
allow potential as well as existing competitors to expand their operations and
information technology.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

We regard our proprietary technology and other intellectual property as
critical to our success. We rely on trademark, trade secret and copyright law to
protect our technology and our brand. We also rely on confidentiality and/or
license and other agreements with employees, customers and others to protect our
proprietary rights. We have no patents. Despite our efforts to control access to
our proprietary information, it may be possible for a third party to copy or
otherwise obtain and use our products, technologies or other intellectual
property without authorization.

We have applied to register the tradename "Tickets.com" and the stylized
trademark, "1.800.TICKETS," and we have registered the service mark "Advantix"
and other trademarks in the United States. We have also applied to register the
tradename "Tickets.com" in various foreign countries.

We have licensed in the past, and expect to license in the future, various
proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our brands is maintained
by our licensees, we cannot be certain that our licensees will not take actions
that might materially adversely affect the value of our proprietary rights or
reputation.

Although we believe we have valid proprietary rights to all of our
intellectual property, the possibility exists that other parties will assert
infringement claims or claims related to our business practices against us. We
could be subject to claims of alleged infringement as a result of our actions or
the actions of our licensees. We could be subject to claims of alleged trademark
infringement by parties whose corporate names are similar to ours.

Any litigation over intellectual property rights or business practices
raises the possibility of substantial damages. Such litigation may also result
in injunctive or other equitable relief that could block our ability to market
or license our products in the United States or elsewhere. We could also lose
the rights to technologies necessary to operate portions of our business.
Moreover, sustained intellectual property litigation is costly and could
adversely affect our operating results.

Litigation may be necessary in the future to, among other things:

- enforce our intellectual property rights;

- protect our trade secrets;

- determine the validity and scope of the proprietary rights of others; or

- defend against claims of infringement or invalidity.

16
<PAGE> 19

Any litigation, regardless of the outcome, could result in substantial
costs and diversion of managerial resources.

We currently hold the Internet domain names "tickets.com," "protix.com,"
"bass-tix.com," "basstickets.com," "fantastix.com" and others. The acquisition
and maintenance of domain names generally is regulated by governmental agencies
and their designees.

GOVERNMENT REGULATION

Our products and services are regulated by federal and state governments.

Ticket Sales and Auctions

Many states and municipalities have adopted statutes regulating the sale of
tickets within their jurisdictions and requiring that ticket sellers obtain a
license. We believe that we are not required to qualify to do business in any
state other than California, which does not require a license. One or more
states or municipalities, however, could take the position that a telephonic or
electronic ticket sale to one of their residents is a sufficient basis for
application of that jurisdiction's reseller statute.

Government agencies or authorities could also argue that other state or
local licensing or "ticket scalping" statutes apply to our activities. Some
state and local regulations establish maximum service and handling fees on
tickets for sporting and other entertainment events which are subject to these
regulations. In addition, many states, including California, have laws and
regulations governing the conduct of auctions. It is not yet clear whether or to
what extent such laws and regulations apply to online auctions.

Internet Commerce

We are subject to regulations applicable to businesses generally and laws
or regulations directly applicable to Internet commerce. Currently, we believe
there are few laws and regulations directly applicable to the Internet and
e-commerce services; however, it appears likely that this area will be
increasingly regulated in the future. These laws may impose additional burdens
on companies conducting business online and may decrease the growth of the
Internet or e-commerce services.

In addition, it is unclear whether some existing laws governing issues such
as property ownership, sales and other taxes, libel and personal privacy are
applicable to the Internet and e-commerce services. For example, tax authorities
in a number of states are currently reviewing the appropriate tax treatment of
companies engaged in e-commerce. New state tax regulations may subject us to
additional state sales and income taxes. These and other similar issues may take
years to resolve.

Consumer Protection and Related Laws

Many of our services may be subject to federal and state consumer
protection laws and regulations prohibiting unfair and deceptive trade
practices. Although there are very few laws and regulations directly applicable
to the protection of consumers in an online environment, it is possible that
legislation will be enacted in this area. New legislation could cover such
topics as permissible online content and user privacy, including the collection,
use, transmission and retention of personal information provided by online
users. The growth and demand for online commerce may also result in more
stringent consumer protection laws that impose additional compliance burdens and
costs on businesses that engage in e-commerce.

For additional information and risks concerning possible future laws and
regulation governing consumer rights and our use of information about Internet
users, see "Management's Discussion and Analysis of Financial Condition and
Results Of Operations -- Forward Looking Information under the Private
Securities Litigation Reform Act of 1995 -- We May Become Subject To More
Restrictive E-Commerce Regulation That Could Adversely Affect Our Ability To
Increase Internet Sales and -- We May Be Affected By Changes In Laws And
Standards Relating To Data Collection And Use Practices And The Privacy Of
Internet Users".

17
<PAGE> 20

EMPLOYEES

As of December 31, 1999, we had a total of 885 employees including 595
full-time and 290 part-time employees. The vast majority of our part-time
employees serve as operators at our three telephone sales centers. None of our
employees is represented by a labor union. We have not experienced any work
stoppages and believe our relationship with our employees to be good.

ITEM 2. PROPERTIES

Our principal administrative offices total approximately 40,000 square feet
and are located in Costa Mesa, California under a lease that expires on
September 30, 2005. Our telephone sales center in Concord, California is housed
in an approximately 25,176 square-foot facility, 22,211 square feet of which are
under a lease that expires on March 2, 2007. The remaining space is leased
month-to-month. Our telephone sales center in Cleveland, Ohio is located in an
approximately 9,500 square-foot facility under a lease that expires on December
31, 2001. Our telephone center in Fairfax, Virginia is housed in an
approximately 5,764 square-foot facility under a lease that expires on March 31,
2001. We also maintain other regional offices for technical development, sales
and support services. We recently announced plans to cease ticket sales
activities at our Cleveland, Ohio telephone sales center. We expect to redirect
the ticket sales activities to our Concord, California telephone sales center by
the end of the second quarter of 2000. We will maintain sales, technical and
client support functions in Cleveland for our clients within that region. We do
not expect to reduce the amount of space that we lease for this facility.

We believe that our existing facilities are adequate to meet our current
needs and that suitable additional space will be available in the future, if
necessary, on commercially reasonable terms. We do not own any real estate.

ITEM 3. LEGAL PROCEEDINGS

Ascott Group, Inc. vs. Tickets.com, Inc. On February 28, 2000 we were
served with a complaint filed by Ascott Group, Inc., in the Superior Court of
the State of California, County of San Diego, alleging, among other things, that
we wrongfully refused to transfer shares of Tickets.com Common Stock to the
plaintiff pursuant to a stock purchase agreement between the plaintiff and
certain of our shareholders. The complaint seeks actual damages in the amount of
$7.5 million as well as exemplary damages. We intend to vigorously defend the
complaint.

Ticketmaster Litigation. On July 23, 1999, Ticketmaster Corporation and
Ticketmaster Online-CitySearch filed a lawsuit against us in the United States
District Court for the Central District of California seeking unspecified
damages and a court order to prohibit us from, among other things, linking
Internet consumers to internal pages within Ticketmaster's web site. In
addition, the suit alleges that we have engaged in other wrongful acts, such as
providing false and misleading information on our web site regarding the
availability of tickets and related information on the Ticketmaster web site and
taking copyrighted information from the Ticketmaster web site for use on our own
web site. The suit seeks an injunction to prohibit us from further engaging in
any alleged unlawful activity, treble damages, attorneys' fees and other
unspecified damages. In response to our Motion to Dismiss, Ticketmaster
Corporation and Ticketmaster Online-CitySearch filed on January 7, 2000, a First
Amended Complaint which modified their previous allegations and added two claims
alleging violations of the Lanham Act. We filed a Motion to Dismiss the Amended
Complaint. On March 27, 2000 the Court dismissed four of the six claims in the
Amended Complaint. Ticketmaster has ten days from March 27, 2000 in which to
file a Second Amended Complaint. Ticketmaster Corporation and Ticketmaster
Online-CitySearch have also filed a Motion for Preliminary Injunction seeking an
order precluding us from, among other things, providing links to Ticketmaster
pages. We have filed an opposition and the Court has scheduled a hearing to take
place on April 17, 2000. If Ticketmaster Corporation and Ticketmaster
Online-CitySearch successfully assert their claims against us, our web site
could be severely impacted. Any injunction could, among other things, eliminate
our ability to directly refer consumers to tickets to events sold by
Ticketmaster at Ticketmaster's web site. The Ticketmaster suit could result in
limitations on how we implement our e-commerce strategy, delays and costs
associated with redesigning our

18
<PAGE> 21

web site and substantial payments to Ticketmaster Corporation and Ticketmaster
Online-CitySearch. In addition, the litigation could result in significant
expenses and diversion of our management's time and other resources.

We currently are not a party to any other material litigation, nor are we
aware of any pending or threatened litigation that would have a material adverse
effect on us or our business.

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

Our stockholders executed two Actions by Written Consent dated October 29,
1999 approving the matters described below. At the time of such approvals we had
five classes of preferred stock outstanding, as well as our common stock. The
information regarding shares voted for each of these matters includes shares of
preferred stock on an as converted to common stock basis.

1. Amendment of the Tickets.com Certificate of Incorporation to effect a
.44444445-for-1 reverse stock split of our common stock and changing
the definition of the term "Qualified Public Offering" as used in the
Certificate of Incorporation, the filing of an Amended and Restated
Certificate of Incorporation following our initial public offering, and
the amendment and restatement of Tickets.com's Bylaws following our
public offering. Stockholders holding a total of 30,503,024 shares, out
of a total of 45,436,335 such shares outstanding, executed the Action
by Written Consent.

2. Approval of our 1999 Stock Incentive Plan and 1999 Employee Stock
Purchase Plan. Stockholders holding a total of 30,503,024 shares, out
of a total of 45,436,335 such shares outstanding, executed the Action
by Written Consent.

PART II.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

MARKET INFORMATION

Tickets.com common stock has traded on The Nasdaq National Market under the
symbol "TIXX" since November 4, 1999. The following table sets forth the range
of high and low intra-day sales prices reported on The Nasdaq National Market
for Tickets.com common stock for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1999
Fourth Quarter (beginning November 4, 1999)............... 32.00 14.00
FISCAL 2000
First Quarter (through March 15, 2000).................... $19.00 $9.625
</TABLE>

RECENT SHARE PRICES

The following table sets forth the closing sales prices per share of
Tickets.com common stock on The Nasdaq National Market on (i) December 31, 1999
and (ii) March 15, 2000.

<TABLE>
<CAPTION>
TICKETS.COM
COMMON STOCK
------------
<S> <C>
December 31, 1999........................................... $14.313
March 15, 2000.............................................. $12.438
</TABLE>

HOLDERS

As of March 15, 2000, there were 368 stockholders of record who held
57,247,195 shares of Tickets.com common stock.

19
<PAGE> 22

DIVIDEND POLICY

Tickets.com has not declared or paid any cash dividends on its capital
stock since inception and does not expect to pay any cash dividends for the
foreseeable future. Tickets.com currently intends to retain future earnings, if
any, to finance the expansion of its business. In addition, Tickets.com's line
of credit arrangement prohibits it from paying dividends without the lender's
prior consent.

RECENT SALES OF UNREGISTERED SECURITIES

[None]

USE OF PROCEEDS FROM SALES OF REGISTERED SECURITIES

On November 8, 1999 Tickets.com completed the initial public offering of
its Common Stock, $0.000225 par value per share. The principal underwriters in
the offering were Morgan Stanley Dean Witter, Credit Suisse First Boston, SG
Cowen, Morgan Stanley Dean Witter Online, E*Offering and Wit Capital Corporation
(the "Underwriters"). The shares of Common Stock sold in the offering were
registered under the Securities Act of 1933, as amended, on a Registration
Statement on Form S-1 (the "Registration Statement") (Reg. No. 333-79709) that
was declared effective by the SEC on November 3, 1999. All 7,638,333 shares of
Common Stock registered under the Registration Statement were sold at a price of
$12.50 per share. The Underwriters exercised their over-allotment option of
938,333 shares on November 17, 1999. The aggregate price of the offering amount
registered and sold by Tickets.com was $89,923,612. In connection with the
offering, we paid an aggregate of $6,294,652 in underwriting discounts and
commissions to the Underwriters. In addition, the following table sets forth the
other material expenses incurred in connection with the offering.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 25,500
NASD filing fee............................................. 10,500
Nasdaq National Market listing fee.......................... 97,048
Printing and engraving expenses............................. 782,151
Legal fees and expenses..................................... 734,985
Accounting fees and expenses................................ 252,461
Consulting fees and roadshow expenses....................... 173,169
Director and officer insurance.............................. 631,845
Miscellaneous............................................... 25,796
----------
Total............................................. $2,733,455
==========
</TABLE>

After deducting the underwriting discounts and commissions and the offering
expenses described above, we received net proceeds from the initial public
offering of $80,895,505. As of February 29, 2000, Tickets.com has used the net
proceeds from its initial public offering to pay off $14.1 million of bank debt,
$5.7 million of shareholder debt, $1.7 million for the purchase of Lasergate,
$1.0 million to invest in preferred stock of a strategic alliance and $58.4
million to invest in interest bearing investment grade instruments and has used
its previously existing cash balances to fund Tickets.com's general operations.
The remaining proceeds from the initial public offering will be used for working
capital and general corporate purposes and may be used for future acquisitions.
None of Tickets.com's net proceeds of the initial public offering were paid
directly or indirectly to any director, officer, general partner of Tickets.com
or any of their associates, persons owning 10% or more of any class of equity
securities of Tickets.com, or an affiliate of Tickets.com.

20
<PAGE> 23

ITEM 6. SELECTED FINANCIAL DATA

TICKETS.COM, INC.

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and related notes as well
as "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K. The
consolidated statement of operations data presented for the period from May 31,
1996 (Inception) to December 31, 1996 and the years ended December 31, 1997,
1998 and 1999 and the consolidated balance sheet data as of December 31, 1996,
1997, 1998 and 1999 are derived from our audited consolidated financial
statements, which have been audited by Arthur Andersen LLP, our independent
public accountants. The consolidated statements of operations data for the years
ended December 31, 1997, 1998 and 1999 and the consolidated balance sheet data
as of December 31, 1998 and 1999 are included elsewhere in this Annual Report on
Form 10-K. The selected consolidated financial data for Tickets.com, Inc. and
its subsidiaries includes the historical financial data for Bay Area Seating
Service, Inc., ProTix, California Tickets.com, TicketsLive, dataCulture, and
Lasergate from the dates of the acquisitions. Please be advised that historical
results are not necessarily indicative of the results to be expected in the
future.

BAY AREA SEATING SERVICE, INC. (PREDECESSOR TO TICKETS.COM, INC.)

The selected financial data for Bay Area Seating Service, Inc., which we
acquired on September 26, 1997, are also included. Under the rules and
regulations of the Securities and Exchange Commission, Bay Area Seating Service
is deemed to be a predecessor of Tickets.com. The statement of operations data
presented for the years ended March 31, 1995, 1996 and 1997 and the selected
balance sheet data as of March 31, 1995, 1996 and 1997 are derived from Bay Area
Seating Service's audited financial statements, which were audited by Burr,
Pilger & Mayer, Inc., Bay Area Seating Service's independent public accountants.
The statement of operations data for the period from April 1, 1997 to September
26, 1997, the date we acquired Bay Area Seating Service, are derived from the
audited financial statements for that period and were audited by Arthur Andersen
LLP, our independent public accountants.

21
<PAGE> 24

TICKETS.COM, INC. AND SUBSIDIARIES(A)

<TABLE>
<CAPTION>
MAY 31, 1996
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1996 1997 1998 1999
-------------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Ticketing services.................................. $ 119 $ 9,686 $ 26,558 $ 27,819
Software services and other......................... 1,123 1,961 2,982 18,098
------- ------- -------- --------
Total revenues.................................... 1,242 11,647 29,540 45,917
------- ------- -------- --------
Cost of services:
Ticketing services.................................. 816 7,702 17,155 20,685
Software services and other......................... 614 711 1,551 9,415
------- ------- -------- --------
Total cost of services............................ 1,430 8,413 18,706 30,100
------- ------- -------- --------
Gross profit (loss)............................... (188) 3,234 10,834 15,817
------- ------- -------- --------
Operating expenses:
Sales and marketing................................. 154 2,096 7,339 34,722
Technology development.............................. 690 2,233 6,417 12,548
General and administrative.......................... 2,071 3,182 9,204 18,541
Amortization of goodwill and intangibles............ -- 712 2,082 7,268
Impairment of long-lived assets..................... -- -- 17,026 --
Purchased in-process research and development....... -- -- 1,600 5,340
------- ------- -------- --------
Total operating expenses.......................... 2,915 8,223 43,668 78,419
------- ------- -------- --------
Loss from operations.................................. (3,103) (4,989) (32,834) (62,602)
Other expenses(b)..................................... 146 1,110 2,027 915
------- ------- -------- --------
Net loss before extraordinary item.................... (3,249) (6,099) (34,861) (63,517)
Extraordinary item(c)................................. -- -- -- (3,083)
Net loss.............................................. $(3,249) $(6,099) $(34,861) $(66,600)
======= ======= ======== ========
Basic and diluted net loss per share before
extraordinary item.................................. $ (.65) $ (1.17) $ (6.08) $ (3.38)
Basic and diluted net loss per share from
extraordinary item.................................. -- -- -- (0.17)
Basic and diluted net loss per share.................. $ (.65) $ (1.17) $ (6.08) $ (3.55)
Weighted average common shares outstanding............ 5,000 5,199 5,734 18,781
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------
1996 1997 1998 1999
-------------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets..................................... $ 6,090 $47,922 $ 38,512 $235,780
Working capital (deficit)........................ (2,163) (1,538) (8,179) 92,318
Total long-term debt(d).......................... 4,968 23,493 20,232 2,117
Redeemable common stock and warrants............. 2,500 3,599 4,506 --
Total stockholders' equity (deficit)............. (4,396) 2,186 (11,929) 201,077
</TABLE>

- ---------------
(a) Includes historical financial data for Bay Area Seating Service, ProTix,
California Tickets.com, TicketsLive, dataCulture and Lasergate from the
dates of acquisition.

(b) Other expenses include principally interest expense, net of interest income,
and to a lesser degree, minority interest and provision for income taxes.

(c) The extraordinary item reflects the non cash interest expense recorded
related to the write off of unamortized note discount in connection with the
early retirement of approximately $14.1 million in long-term debt.

(d) Amounts classified as long-term debt consist of long-term debt and capital
lease obligations, net of current portion.

22
<PAGE> 25

BAY AREA SEATING SERVICE, INC. (PREDECESSOR)

<TABLE>
<CAPTION>
APRIL 1, 1997
YEAR ENDED MARCH 31, TO
----------------------------- SEPTEMBER 26,
1995 1996 1997 1997
------- ------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Ticketing services revenues..................... $20,704 $18,752 $20,561 $10,858
------- ------- ------- -------
Cost of services................................ 8,776 7,381 7,866 4,203
Gross profit.................................... 11,928 11,371 12,695 6,655
General and administrative expenses............. 11,704 11,322 12,212 6,301
------- ------- ------- -------
Income from operations.......................... 224 49 483 354
Other income (expense), net(a).................. 270 402 356 261
Provision for income taxes...................... (338) (162) (278) (211)
------- ------- ------- -------
Net income...................................... $ 156 $ 289 $ 561 $ 404
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets................................................ $11,099 $12,818 $14,443
Working capital............................................. 1,080 1,591 749
Total long-term debt(b)..................................... 22 6 1
Retained earnings........................................... 1,608 1,897 2,407
Total shareholders' equity.................................. 2,557 2,846 3,355
</TABLE>

- ---------------
(a) Other income (expense), net includes principally interest income net of
interest expense and other miscellaneous income and expenses.

(b) Amounts classified as long-term debt consist of long-term debt and capital
lease obligations, net of current portion.

23
<PAGE> 26

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion of the financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes to such financial statements included elsewhere
in this Annual Report on Form 10-K. The following discussion contains
forward-looking statements that involve risks and uncertainties. The statements
are based on current expectations and actual results could differ materially
from those discussed herein. Factors that could cause or contribute to the
differences are discussed in this section of this Annual Report on Form 10-K.

OVERVIEW

Tickets.com is a leading source of entertainment tickets, event
information, and related products and services. We sell tickets and provide
these services through the Internet, telephone sales centers, interactive voice
response systems and retail stores. We provide automated ticketing solutions to
over 4,100 entertainment organizations and venues such as stadiums, performing
arts centers, museums and professional sports franchises. In 1999 we sold
approximately 5.4 million tickets for which we received service fees from ticket
buyers. We have two operating segments, ticketing services and software services
and other.

RECENT EVENTS

In February 2000, we signed a letter of intent to acquire all of the
outstanding capital stock of First Call International, Ltd., a privately held
outsourcing services and in-house systems provider based in the United Kingdom.
Under the terms of the letter of intent, we will commence a public offering
registered with the Securities and Exchange Commission to exchange between 7.6
million and 9.3 million shares of our common stock for all of First Call's
outstanding capital stock. Under the letter of intent, our common stock issued
in the transaction will be valued at the average closing price over a 30-day
period prior to the effective date of the registration statement relating to the
offer.

In addition to standard closing conditions, the proposed acquisition is
subject to the negotiation and execution of a definitive agreement providing for
the transaction, and the subsequent acceptance of the exchange offer by holders
of First Call shares. We anticipate that the acquisition will be accounted for
as a purchase.

ACQUISITION HISTORY

We were originally organized as The Entertainment Express, Inc. under the
laws of the State of Delaware on January 25, 1995. Our operations commenced in
May 1996 with the acquisition of the assets of Hill Arts and Entertainment
Systems, Inc., which included a proprietary in-house system used by a wide
variety of entertainment organizations. In December 1996, we acquired the
telephone sales center and outsourcing services operations of the Advantix
division of Playhouse Square Foundation, an Ohio-based performing arts center
and outsourcing services provider, at which time we changed our name to
Advantix, Inc. We have grown principally through acquisitions of regional
outsourcing services providers and of in-house systems providers. A significant
component of our future growth prospects will depend on our ability to complete
future acquisitions, and our operating results will be largely dependent on our
ability to integrate the operations and administrative functions of acquired
companies. There can be no assurance that we will be able to identify suitable
acquisition candidates or that if we do, that we will be successful in
negotiating an acquisition agreement on mutually beneficial terms. If we are
unsuccessful in completing future acquisitions, our growth prospects may be
materially and adversely affected.

1997 Acquisitions

Fantastix Ticket Company, LLC. In August 1997, we acquired the assets of
Fantastix Ticket Company, LLC, a Buffalo, New York-based outsourcing services
provider. The purchase price was $852,000. Prior to the acquisition, Fantastix
was a licensee of our in-house systems which Fantastix used in providing
outsourcing services. By acquiring Fantastix, we acquired outsourcing services
contracts with several prominent entertainment organizations in western New
York, including Marine Midland Arena and the Buffalo Sabres
24
<PAGE> 27

professional hockey franchise. Upon completion of the acquisition, the
outsourcing services operations of Fantastix' business were relocated from its
Buffalo, New York facility to our Cleveland, Ohio facility, and all
administrative functions were consolidated into our corporate offices. The
operating results of Fantastix have been included in our consolidated financial
statements from the date of the acquisition.

Bay Area Seating Service, Inc. In September 1997, we acquired Bay Area
Seating Service, Inc., a Concord, California-based outsourcing services
provider. At the time of the acquisition, Bay Area Seating Service was the
largest outsourcing services provider serving the Northern California and
Northern Nevada markets. As a result of our acquisition of Bay Area Seating
Service, we acquired contracts with the San Francisco Giants and Oakland
Athletics professional baseball franchises, the San Francisco 49'ers and Oakland
Raiders professional football franchises, Concord Pavilion and the Arena at
Oakland, among others. The aggregate purchase price recorded was $24.8 million
which included costs of the acquisition and contingent consideration payments.
The operating results of Bay Area Seating Service have been included in our
consolidated financial statements from the date of the acquisition.

1998 Acquisition

ProTix, Inc. Effective September 1998, we acquired ProTix, Inc., a
Madison, Wisconsin-based outsourcing services provider and developer of in-house
systems. The aggregate purchase price was $9.7 million, which includes costs of
the acquisition. The acquisition of ProTix added another in-house systems
software product to our family of in-house systems products, as well as several
important client relationships including those with Merriweather Post Pavilion,
Wolf Trap Filene Center, the Texas Rangers and Milwaukee Brewers professional
baseball franchises, and International Speedway Corp., among others. The
operating results of ProTix have been included in our consolidated financial
statements from the date of the acquisition.

1999 Acquisitions

TicketStop, Inc. In March 1999 California Tickets.com purchased all of the
outstanding common stock of TicketStop. The purchase was for cash consideration
equaling approximately $2.3 million, consisting of an initial cash payment of
$2.2 million. Additional consideration, in the form of a contingent cash payment
of up to approximately $400,000, was subject to TicketStop attaining a targeted
number of active clients. In September 1999, California Tickets.com entered into
an amendment with the shareholders of TicketStop whereby the parties agreed to
remove the contingency behind the remaining cash payment, which resulted in an
additional cash payment of approximately $400,000 and an equal amount of
additional goodwill. The operating results of TicketStop have been included in
our consolidated financial statements from the date we acquired California
Tickets.com.

TicketsLive Corporation. In April 1999 we purchased all of the outstanding
capital stock of TicketsLive Corporation. The aggregate purchase price was $26.0
million. The acquisition of TicketsLive added a suite of in-house systems
software products licensed in the United States, Europe and Australia, to our
existing family of in-house systems products. In addition, we acquired our
system-to-system interface, the Transaction Application Gateway, that
facilitates our ability to sell tickets on our web site from a variety of
sources. We also acquired client relationships with several well-known
entertainment organizations, including the Lincoln Center for the Performing
Arts, the New York Philharmonic, the Carrier Dome, Pennsylvania State University
and the National Air & Space Museum, among others. The operating results of
TicketsLive Corporation have been included in our consolidated financial
statements from the date of the acquisition.

dataCulture Ltd. In August 1999 we purchased all of the outstanding
capital stock of dataCulture Ltd. The acquisition of dataCulture added another
in-house systems software product to our family of in-house
25
<PAGE> 28

systems products, an expanded presence in the United Kingdom, and client
relationships with several well-known entertainment organizations in the United
Kingdom, including Chelthenham Racecourse, Widmore Hall London and The Lyric
Theatre, among others. The aggregate purchase price was L4.0 million, or the
equivalent of approximately $6.5 million at August 23, 1999. The operating
results of dataCulture have been included in our consolidated financial
statements from the date of the acquisition.

Lasergate Systems, Inc. In December 1999 we completed the acquisition of
Lasergate Systems, Inc. The aggregate purchase price was $3.7 million. The
acquisition of Lasergate added a suite of in-house systems products to our
family of in-house systems products, as well as approximately 95 new client
relationships. The new client relationships include Foxwoods Casino and Boston
Museum of Science, among others. The operating results of Lasergate have been
included in our consolidated financial statements from the date of the
completion of the acquisition in December 1999.

SOURCES OF REVENUE

Ticketing Services

We primarily generate our ticketing services revenue from per ticket
service fees charged directly to consumers who purchase tickets through the
Internet, our telephone sales centers, interactive voice response systems and
retail stores. In addition, we charge a per order handling fee to consumers for
all tickets we sell, other than through retail stores. In 1999 we derived
approximately 60.6% of our revenues from ticketing services. The sale of the
tickets for an event often commences several months prior to the scheduled date
of the event. Ticketing services revenues relating to these sales are recognized
when the tickets are sold. If an event is cancelled, an allowance is established
for potential convenience charge refunds. The amount of the service fees we
charge varies from client to client, depending upon a number of factors,
including the nature of the services to be rendered to the client, the amount
and cost of equipment to be installed in the client's box office, the amount of
advertising and promotional allowances provided, the type of event and the
distribution channels used. The service fee for each client is determined by us
and our clients through arms-length negotiations during the contract process. We
generally do not purchase these tickets from our clients for resale to the
public.

In 1999 we began to Internet enable several of our software licensees. This
technology allows our licensees to sell their tickets over the Internet on
either the www.tickets.com web site or on their own web site. We generate
revenues on the sale of tickets to events for these Internet enabled licensees
from service fees on a per ticket basis, similar to our traditional ticketing
services clients. We generally are not involved in the delivery of these tickets
and therefore we do not generate revenue from handling fees for these ticket
sales.

We also generate ticketing services revenues through the auction of venues'
and performers' tickets on our web site. We have recently entered into
arrangements with several performers to provide online ticket auctions for their
live concerts. Under these current arrangements, the performer's tickets are
allocated to us for auction on our web site and certain amounts collected above
face value are donated to a charity of the performer's choice. We plan to
continue this type of online auction activity in the future. Under these types
of arrangements, we generally have agreed to purchase, at face value, any unsold
tickets that were allocated to us for auction. If we are unable to sell tickets
that we have agreed to purchase, or sell them at less than face value, we will
incur losses on the tickets purchased. The gross value of the sale of these
tickets is recorded as revenues. The amount paid for the tickets, the amount
donated to charity and the cost of delivering the tickets to the consumers are
recognized as cost of services for the related auction ticketing services.

Our ticketing services clients determine all face values for tickets sold
through our services. These clients also generally determine when tickets for
their events will be sold to the public and the number and type of tickets that
will be available for sale through us. We usually sell only a portion of our
clients' total tickets. The number of tickets that our clients sell in-house
varies from client to client and varies as to any single client from year to
year. Tickets allocated by our clients to us are sold to the public directly
through our distribution network. For outsourcing clients and software licensees
who are enabled to sell tickets on our web site, their entire ticket inventory
is generally available on the www.tickets.com web site.

26
<PAGE> 29

If an event is cancelled, we will refund the per ticket convenience fee
directly to consumers. However, our ticketing service clients are responsible
for funding all refunds of ticket prices for a cancelled event. To the extent
that the funds we are holding on behalf of a client are insufficient to cover
all refunds, the client is contractually required to provide us with additional
funds within a specified period of time, typically 24 to 72 hours, of
cancellation. Historically, our clients have fulfilled these obligations.

Software Services and Other

We generate a portion of our revenue from license and support fees charged
to licensees of our in-house systems products. We recognize these revenues in
accordance with contracts we enter into with our licensees when they license our
in-house systems and purchase maintenance and other support services. Our
support and maintenance contracts have terms ranging from one to five years with
automatic one-year renewals. Our licensees generally pay a one-time license fee
for the right to use our software and annual fees for support and maintenance.
We also do long-term custom programming for certain clients with special
ticketing needs. The revenue and costs associated with these long-term contracts
are generally recognized on the percentage of completion method.

We also generate revenues from advertising on our web site,
consumer-to-consumer auctions and travel and package sales, which may include
travel, hotel, tickets to an event and related merchandise. Revenues for
advertising are recognized when the ads are placed on our web site.
Consumer-to-consumer auction revenues are derived from a fee paid by the seller
and are recognized when the transactions are complete. The majority of our
travel revenues are commissions received from our travel services provider.
Packages are purchased for sale in advance or are sold through our travel
service provider. Sales of packages purchased in advance are recognized at the
gross sales value of the package when the package is sold; therefore, if a
package is left unsold or sells for less than the aggregate cost of the package,
we incur losses on those packages. We receive commissions for packages sold
through our travel service provider.

During 1999 we entered into a long-term barter transaction. Revenues and
expenses from this barter transaction are valued at the fair market value based
on the amount that would be charged on a cash basis and has been verified by an
independent third party. Revenues and expenses from barter transactions are
recognized in accordance with the established guidelines related to the type of
the underlying revenue or expense.

COST STRUCTURE

Cost of Services. Cost of services associated with ticketing services
primarily includes expenses related to the distribution and delivery of tickets.
These expenses primarily include telephone sales center and distribution
payroll, telecommunications and data communications, commissions paid on tickets
distributed through outlets and our clients' share of service fees. Ticket
auction costs of services are comprised of the face value of the ticket and the
cost of processing the orders and delivery of the ticket. In addition, under
current arrangements with performances, the cost of ticket auctions also include
certain amounts, above the face value of the tickets, that are donated to a
charity of the performer's choice. Cost of services associated with software
services and other include primarily costs related to the installation and
support of our in-house systems mainly consisting of payroll and travel services
related costs, the cost of hardware and software that we resell to our licensees
and the cost of packages purchased for resale which may include, hotel costs,
merchandise costs and the face value of the event tickets related to auctions
for which we agree to purchase unsold tickets.

Operating Expenses. Our operating expenses are comprised of three primary
categories: sales and marketing, technology development and general and
administrative expenses. Sales and marketing expenses are expensed as incurred
and consist principally of personnel expenses, consulting fees, advertising,
trade shows and conventions, and promotional expenditures. Technology
development expenditures are generally expensed as incurred and consist
primarily of personnel and related compensation costs, contract labor to support
software development, and configuration and implementation of our ticketing
systems, telecommunications, web site and connectivity and support system
infrastructure. General and administrative expenses consist of personnel
expenses for management, accounting and administrative personnel, recruiting,
profes-

27
<PAGE> 30

sional services, facilities and other administrative expenses. Amortization of
goodwill and intangibles is recorded on a straight-line basis over various
estimated useful lives primarily ranging from three to 25 years. Covenants not
to compete are amortized on a straight-line basis over the corresponding
contract period of three years. Our corresponding intangibles consist primarily
of the portion of the purchase price of businesses acquired allocated to
existing technology, client relationships, tradenames, assembled workforce and
covenants not to compete. Goodwill represents the excess of cost over the fair
value of identified net assets acquired in business combinations accounted for
under the purchase method.

SEASONALITY

Our operations and revenues from ticketing services are largely seasonal in
nature, with second and third quarter revenues generally being higher than first
and fourth quarter revenues. Several of our largest clients are outdoor venues
or promoters of musical concerts, which schedule a significant number of events
during the summer months and typically do not generate substantial activities in
the late fall, winter and early spring. Therefore, the seasonality of our
business causes a significant variation in our quarterly operating results. To
the extent we do not broaden our revenue base to offset seasonality, we expect
that this seasonality will continue to cause significant variations in our
future quarterly operating results.

RESULTS OF OPERATIONS

General

Our historical operations consist primarily of (1) the provision of
outsourcing and related services to clients such as performing arts centers,
amphitheaters, professional sports franchises, and concert promoters and (2) the
licensing, maintenance and support of our proprietary in-house systems. The
following discussion should also be read in connection with the audited
consolidated financial statements and the related notes included elsewhere in
this document.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

Revenues

Ticketing Services. Revenues from ticketing services increased 4.7% to
$27.8 million for the year ended December 31, 1999 from $26.6 million for the
year ended December 31, 1998. The increase in revenues was primarily due to an
increase in total tickets sold of 2.7% to 5.4 million for the year ended
December 31, 1999 from 5.3 million for the year ended December 31, 1998. Our
acquisition of ProTix contributed approximately 1.1 million tickets and $4.5
million of total ticketing services revenues for the year ended December 31,
1999. Excluding acquisitions, tickets sold decreased by 980,000 tickets and
ticketing services revenues decreased by $3.2 million, primarily because of the
impact during the year of contract terminations by clients obtained through our
acquisition of Bay Area Seating Service in September 1997. From March 1998 to
July 1998, two of Bay Area Seating Service's largest clients terminated their
contracts with us after entering into agreements with an alternative ticketing
services provider. Additionally, one other Bay Area Seating Service client
elected not to renew its contract. As of December 31, 1998, we had ceased
providing services to these clients. The decrease in our ticket volume from
these terminations resulted in approximately a $4.4 million decrease in
revenues. The loss of these revenues was partially offset by $1.2 million of
incremental revenues from our charity ticket auctions and service fees from our
licensees who have been upgraded to sell tickets on our web site. Also
contributing to the offset was an increase in the average service and handling
fees of $300,000.

Software Services and Other. Revenues from software services and other
increased 506.9% to $18.1 million for the year ended December 31, 1999 from $3.0
million for the year ended December 31, 1998. Acquisitions contributed the
majority of the increase. Net of acquisitions, software sales and other
increased by $1.2 million, which is attributable to web advertising,
consumer-to-consumer auctions and packages. As a result of our acquisitions and
the loss of revenue from the three terminated ticketing services client
contracts in the last half of 1998, the year ended December 31, 1999 included a
higher proportion of software services and other revenues to total revenues, as
compared to the year ended December 31, 1998.

28
<PAGE> 31

Cost of Services

Ticketing Services. Cost of services for ticketing services increased
20.6% to $20.7 million for the year ended December 31, 1999 from $17.2 million
for the year ended December 31, 1998. The increase was mainly attributable to
the acquisition of ProTix, which accounted for $2.8 million of the increase.
Costs of services related to our charity ticket auctions accounted for an
additional $1.2 million of the increase. This increase was partially offset by
net decreases of approximately $500,000 associated with decreased ticket sales,
mainly related to a decrease in our clients' share of service charges. As a
percentage of ticketing services revenues, total cost of ticketing services
increased to 74.3% from 64.6%, primarily due to the high cost of sales
associated with our ticketing auctions, in addition to the significant decrease
in ticket sales. We reduced personnel and related costs as a result of the loss
of ticket volume; however, the timing of the reduction lagged behind the loss of
ticketing revenues. Additionally, there was an increase in credit card fees
related to transactions processed on behalf of our clients, which were not
processed in our telephone sales centers.

Software Services and Other. Cost of services for software services and
other increased 507.0% to $9.4 million for the year ended December 31, 1999 from
$1.5 million for the year ended December 31, 1998 mainly related to our
acquisitions. As a percentage of software services and other revenues, costs of
software services and other remained constant in 1999 as compared to 1998 at
52.0%.

Operating Expenses

Sales and Marketing. Sales and marketing expenses increased 373.1% to
$34.7 million for the year ended December 31, 1999 from $7.3 million for the
year ended December 31, 1998. Acquisitions accounted for $5.5 million of the
increase. As a percentage of revenues, sales and marketing expenses increased to
75.6% from 24.8%. In an effort to continue the development of the sales and
marketing infrastructure, develop the Tickets.com brand, and to support our
growth plans and to increase consumer awareness, we have increased our sales and
marketing expenses significantly. Excluding acquisitions, we have increased
advertising, promotions and trade show expenses by $11.5 million, professional
services by $6.7 million and personnel and related expenses including facilities
and travel by $3.4 million. The increase in professional services reflects an
aggregate of $3.9 million of non-cash expense we recorded in the third and
fourth quarters of 1999, in connection with options and warrants issued to
various entertainment organizations and entertainers.

Technology Development. Technology development expenses increased 95.5% to
$12.5 million for the year ended December 31, 1999 from $6.4 million for the
year ended December 31, 1998. Of this increase, $2.5 million was related to
acquisitions. As a percentage of revenues, technology development expenses
increased to 27.3% from 21.7%. We invested approximately $3.6 million to
develop, enhance and expand our web site reflecting increased personnel and
related costs of $1.5 million, professional services of $1.6 million and
computer equipment expenses of $500,000. We will continue to expand our
technology development to enhance system functionality and broaden reporting
capabilities and service delivery methods. Additionally, we have developed an
aggressive schedule to complete the Internet connections for our software
licensees to enable them to sell tickets on our web site as well as their own
web sites.

General and Administrative. General and administrative expenses increased
101.4% to $18.5 million for the year ended December 31, 1999 from $9.2 million
for the year ended December 31, 1998. Our acquisitions accounted for $5.5
million of the increase. As a percentage of revenues, general and administrative
expenses increased to 40.4% from 31.2%. The increase was primarily due to
increased payroll and related expenses including facilities, travel, supplies
and equipment of $3.3 million due to our continued investment in our managerial
and administrative infrastructure commensurate with and to facilitate our
growth. In addition, professional services increased by $200,000 related
primarily to legal and accounting fees.

Amortization of Intangibles. Amortization expense increased 249.1% to $7.3
million for the year ended December 31, 1999 from $2.1 million for the year
ended December 31, 1998. The increase was primarily due to our acquisitions
during 1999, which increased our amortization expense by $6.3 million for the
year ended December 31, 1999. The increase from our acquisitions was partially
offset by the decrease in amortization expense due to the write-off from the
impairment of long-lived assets including the acquisition of Bay Area

29
<PAGE> 32

Seating Service in 1997. The net decrease in amortization related to Bay Area
Seating Service totaled $1.1 million.

Purchased In-Process Research and Development. The purchased in-process
research and development charges recorded during the year ended December 31,
1999 were recorded in conjunction with the acquisitions of California
Tickets.com and TicketsLive. The amounts recorded, $3.5 million for California
Tickets.com and $1.8 million for TicketsLive, represented the estimated fair
value related to incomplete projects reflecting the risk-adjusted cash flows and
the state of completion. At the date of acquisition, the projects associated
with the in-process research and development efforts had not yet reached
technological feasibility and had no alternative future uses. Accordingly, these
costs were expensed. TicketsLive was conducting development activities
associated with the completion of the next generation of Select, TicketsLive's
automated ticketing system. The projects under development were to increase
speed and expand functionality, flexibility and reporting. California
Tickets.com was in the process of completing customization and development of
its web site and transaction processing systems. Since we already had these
systems in place, the projects, which were in varying stages of completion, were
of no continuing value to us.

In making our purchase price allocation, we considered present value
calculations of income, an analysis of project accomplishments and completion
costs, an assessment of overall contributions, as well as project risks. The
values assigned to in-process research and development were determined by
estimating the costs to develop the purchased technology into commercially
viable products, estimating the resulting net cash flows from each project,
excluding the cash flows related to the portion of each project that was
incomplete at the acquisition date, and discounting the resulting net cash flows
to their present value. Each of the project forecasts was based upon future
discounted cash flows, taking into account the state of development of each
in-process project, the costs to complete that project, the expected income
stream, the life cycle of the product ultimately developed, and the associated
risks.

Aggregate revenue attributable to the in-process research and development
projects was estimated to peak, as a percentage of total revenue, in 2001 for
California Tickets.com and 2002 for TicketsLive, and decline thereafter through
the end of the life of the in-process research and development in 2003 for
California Tickets.com and 2005 for TicketsLive as new product technologies were
expected to be introduced. For California Tickets.com, the costs to complete the
in-process research and development efforts were expected to be as follows:
$50,000 for ticketing transaction systems and $83,000 for web site development.
For TicketsLive, the cost to complete the in-process research and development
efforts were expected to be $596,000. For California Tickets.com, the
risk-adjusted discount rate used for ticketing transactions systems projects and
web site development was 35% to discount projected cash flows. For each of the
projects for TicketsLive, a risk-adjusted discount rate of 25% was used to
discount projected cash flows.

Total Other (Income) Expense. Total other (income) expense consists
principally of interest income and interest expense. Interest income is
generated primarily from cash and cash equivalents held in interest bearing
accounts. Interest income increased 151.6% to $2.2 million for the year ended
December 31, 1999 from $878,000 for the year ended December 31, 1998. The
increase is mainly due to higher cash balances that resulted from our financing
activities. Interest expense remained constant at $2.9 million for the years
ended December 31, 1999 and December 31, 1998.

Net Loss

For the year ended December 31, 1999, our net loss before extraordinary
item was $63.5 million or $3.38 per share. For the year ended December 31, 1998,
our net loss before extraordinary item was $34.9 million or $6.08 per share. The
increase in the net loss before extraordinary item was primarily due to:

- Net decreases in ticketing services revenues of $3.2 million, net of
acquisition revenues;

- The increase in the write-off of purchased in-process research and
development of $3.7 million;

- Increased amortization expense of $5.2 million;

- Increased operating expenses net of acquisitions, most significantly:

30
<PAGE> 33

- Personnel and related expenses of $8.2 million;

- Advertising, public relations and trade shows of $11.6 million related
to increased promotions and the development of our brand; and

- A non-cash expense of $3.9 million recognized from the issuance of
options and warrants to certain entertainment organizations and
entertainers;

- Professional services of $4.5 million.

- Losses from acquisitions of $5.8 million.

These factors contributing to our increase in net loss before extraordinary
item, were offset by the following factors:

- An increase in software services and other revenues in 1999, net of
acquisitions, of $1.2 million and,

- The 1998 net loss reflects a write-off resulting from the impairment of
long lived assets acquired in our 1997 acquisition of Bay Area Seating
Service of $17.0 million.

The decrease in the net loss per share reflects the increase in our basic
and diluted weighted average shares of 13.0 million. This increase is due to the
conversion of our preferred shares to 29.6 million shares of common and our
initial public offering totaling 7.6 million shares that was completed in
November 1999. The convertible preferred stock and other potentially dilutive
securities (including stock options) were antidilutive and therefore excluded
from the calculation of diluted loss per share.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues

Ticketing Services Revenues. Revenues from ticketing services increased
174.2% to $26.6 million in 1998 from $9.7 million in 1997. The increase was
primarily due to a $17.3 million increase in ticketing revenues as a result of
an additional nine months of revenue in 1998 from Bay Area Seating Service
operations and three months of ProTix operations resulting from the timing of
the respective acquisitions. Specifically, the number of service chargeable
tickets sold in 1998 increased 194.4% to 5.3 million in 1998 from 1.8 million in
1997 due to the acquisitions. An additional nine months of Bay Area Seating
Service ticket sales accounted for 3.3 million of the increase, and ProTix
contributed an additional 200,000 of the increase. Excluding acquisitions,
tickets sold decreased by 56,000 which resulted in a decrease in ticketing
services revenues of $200,000 and the decrease in the average per ticket service
fee resulted in a $240,000 decrease in ticketing services revenues during the
period.

From March 1998 to July 1998, three of our largest ticketing services
clients, which we acquired during the acquisition of Bay Area Seating Service,
terminated their contracts. As a result, our 1999 annualized revenues were
reduced by approximately $4.4 million and annualized ticket sales volume were
reduced by approximately 1.0 million tickets commencing January 1999. In
November 1998, our largest client notified us of its intent not to renew its
contract with us at the end of its term on December 31, 1999. We expect our
annualized revenues will be reduced by an additional amount of approximately
$3.5 million commencing in fiscal 2000 due to the loss of this client and
annualized ticket sales volume to be reduced by approximately 700,000 tickets.

Software Services and Other. Revenues from software services and other
increased 52.1% to $3.0 million in 1998 from $2.0 million in 1997. ProTix
contributed $500,000 of the increase. The remaining amount of the increase was
primarily due to an increase in the number of licensees of our software systems
and the related support fees derived therefrom.

Cost of Services

Ticketing Services. Cost of services for ticketing increased $9.5 million
or 122.7% to $17.2 million in 1998 from $7.7 million in 1997. An additional nine
months of Bay Area Seating Service operations accounted

31
<PAGE> 34

for virtually all of the increase. As a percentage of revenues, cost of
ticketing services decreased to 64.6% in 1998 from 79.5% in 1997. The decrease,
as a percentage of revenues, was primarily attributable to the increase in
ticket sales as a result of nine additional months of Bay Area Seating Service
operations. Costs of services do not vary directly with tickets sold after a
certain level of infrastructure has been established. The increased ticket sales
enabled us to take advantage of economies of scale.

Software Services and Other. Cost of services for software services and
other increased 118.1% to $1.6 million in 1998 from $700,000 in 1997. The
increase of $900,000 was primarily due to cost of services of $600,000
recognized in connection with the acquisition of ProTix in October 1998 and, to
a lesser degree, costs involved with support services provided to new software
support clients in 1998. As a percentage of revenues, costs of software services
and other increased to 52.0% from 36.3%.

Operating expenses

Sales and Marketing. Sales and marketing expenses increased 250.1% to $7.3
million in 1998 from $2.1 million in 1997. As a percentage of revenues, sales
and marketing increased to 24.8% from 18.0%. The higher sales and marketing
expenses in 1998 were partially due to $2.9 million incurred as a result of an
additional nine months of Bay Area Seating Service operations and three months
of ProTix operations. Excluding acquisitions, sales and marketing expenses
increased $2.3 million. In 1998, we began to increase sales and marketing
expenditures significantly in an effort to continue the development of the sales
and marketing infrastructure to support our growth plans and to increase
consumer awareness. The increase primarily represents increased payroll and
consulting expenses of $1.5 million, advertising expenses of $200,000, and trade
show expenses and travel related expenses of $230,000.

Technology Development. Technology development expenses increased 187.4%
to $6.4 million in 1998 from $2.2 million in 1997. The increase was partially
due to the additional nine months of Bay Area Seating Service operations in 1998
and three months of ProTix operations, which contributed $1.6 million of the
increase. Also, in 1998 we increased technology development expenses to enhance
system functionality, broaden our reporting capabilities and service delivery
methods to clients and stabilize our systems. As a percentage of revenue,
technology development expenses increased to 21.7% from 19.2%.

General and Administrative. General and administrative expenses increased
189.3% to $9.2 million in 1998 from $3.2 million in 1997. The increase in
general and administrative expenses was primarily due to $3.0 million of general
and administrative expenses as a result of an additional nine months of Bay Area
Seating Service operations and three months of ProTix operations. In addition,
from January 1998 to June 1998, we converted Bay Area Seating Service from a
competitor's ticketing system to one of ours. The nonrecurring costs of the
conversion we recorded totaled $600,000. We also incurred $700,000 in legal fees
associated with acquisition and litigation activities. Additionally, we invested
approximately $1.5 million in an effort to continue to develop our managerial
and administrative infrastructure, commensurate with and to facilitate our
growth. As a percentage of revenues, general and administrative expenses
increased to 31.2% from 27.3%.

Amortization of Intangibles. Amortization of intangibles increased 192.4%
to $2.1 million in 1998 from $700,000 in 1997. The increase in amortization is
directly related to the increase in goodwill and intangibles recorded due to our
acquisitions of Fantastix in August 1997, Bay Area Seating Service in September
1997 and ProTix in October 1998.

During the fourth quarter of 1998, we recorded a noncash impairment charge
of $17.0 million. During 1998, Bay Area Seating Service was given notice of
termination by four of its clients, its largest client giving notice during the
fourth quarter of 1998. All of these clients were clients of Bay Area Seating
Service at the time we acquired Bay Area Seating Service. During 1998, estimated
revenues attributable to these four clients totaled approximately $9.2 million
or 31.1% of our total 1998 revenues. The loss of these clients prompted an
assessment of the carrying value of the long-lived assets associated with the
acquisition of Bay Area Seating Service. Based upon this assessment, we
determined that some of the intangible assets resulting from the Bay Area
Seating Service acquisition, principally goodwill and noncompete agreements, met
the test for impairment. Accordingly, we have reduced the carrying value of the
related long-lived assets to their estimated fair value.
32
<PAGE> 35

The impairment charge had no impact on our 1998 cash flows or our ability
to generate cash flows in the future. As a result of the charge, amortization
expense related to these assets will decrease in future periods. Additionally,
in conjunction with the review for impairment, the remaining estimated lives of
some long-lived assets were shortened, which resulted in the acceleration of
amortization expense for some intangible assets.

Purchased In-Process Research and Development. The 1998 charge for
purchased in-process research and development was recorded in conjunction with
the acquisition of ProTix. The allocation of the $1.6 million represents the
estimated fair value related to incomplete projects and reflected the
risk-adjusted cash flows and the stage of completion. At the date of the
acquisition, the projects associated with the in-process research and
development efforts had not yet reached technological feasibility and had no
alternative future uses. Accordingly, these costs were expensed. At the
acquisition date, ProTix was conducting development activities associated with
the completion of future generations of ProTix' automated ticketing solutions
and regional ticketing services. The projects under development, at the
valuation date, were expected to address requirements in the areas of greater
scalability, significant new functionality, and greater speed.

In making our purchase price allocation, we considered present value
calculations of income, an analysis of project accomplishments and completion
costs, an assessment of overall contributions, as well as project risks. The
values assigned to in-process research and development were determined by
estimating the costs to develop the purchased technology into commercially
viable products, estimating the resulting net cash flows from each project,
excluding the cash flows related to the portion of each project that was
incomplete at the acquisition date, and discounting the resulting net cash flows
to their present value. Each of the project forecasts was based upon future
discounted cash flows, taking into account the state of development of each
in-process project, the costs to complete that project, the expected income
stream, the lifecycle of the product ultimately developed, and the associated
risks.

Aggregate revenue attributable to the in-process research and development
projects was estimated to peak, as a percentage of total revenue, in 2001, and
decline thereafter through the end of the life of the in-process research and
development as new product technologies are expected to be introduced by ProTix.
The costs to complete the in-process research and development efforts are
expected to be as follows: $402,000 for automated ticketing solutions and
$108,000 for regional ticketing services. For both of the project categories, a
risk-adjusted discount rate of 20% was used to discount projected cash flows.

Total Other (Income) Expense. Total other (income) expense consists
primarily of interest income and expense. Interest income increased 326.2% to
$878,000 in 1998 from $206,000 in 1997. The increase in interest income in 1998
is due to higher cash balances that resulted from our financing activities and
the increase in our ticketing services revenues during 1998. Interest expense
increased 124.5% to $3.0 million in 1998 from $1.3 million in 1997. The increase
in interest expense is due to the impact of carrying the long-term debt raised
in 1997 for the full 1998 year.

Net Loss

For the year ended December 31, 1998, our net loss was $34.9 million or
$6.08 basic and diluted net loss per share. For the year ended December 31,
1997, our net loss was $6.1 million or $1.17 basic and diluted net loss per
share. The increase in the net loss was due to:

- The write off of the goodwill and intangibles related to the acquisition
of Bay Area Seating Service;

- Increased operating expenses; and

- Increased interest expense.

The convertible preferred stock and other potentially dilutive securities
(including stock options) were antidilutive and therefore excluded from the
calculation of diluted loss per share.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our activities through a series of
private placements of convertible preferred stock, and through debt and credit
facilities. Prior to November 9, 1999, we had raised net proceeds
33
<PAGE> 36

of $132.7 million from equity and debt instruments. Additionally, in conjunction
with acquisitions, we issued 19,997,128 shares of our common and preferred stock
for a total value of $80.5 million. On November 9, 1999, we completed an initial
public offering of our common stock of 6.7 million shares plus 938,333 shares
issued from an over allotment by our underwriters. Of the 6.7 million shares,
444,444 were offered by a selling stockholder. We raised gross proceeds of $89.9
million. Net proceeds after deducting underwriter commissions and other expenses
were $80.9 million.

From December 31, 1998 to December 31, 1999, cash and cash equivalents
increased by $82.2 million. The increase resulted mainly from $29.9 million in
net proceeds from the issuance of 13,333,335 shares of Series D and $81.8
million in net proceeds from the issuance of 9,444,446 shares of Series E
convertible preferred stock, net of issuance costs and $80.9 million in net
proceeds from our initial public offering. The increase in cash was primarily
offset by net cash used in operating activities of $72.0 million, acquisitions,
net of cash acquired of $11.8 million, purchases of property and equipment of
$4.7 million and principal payments on and early retirement of long-term debt of
$25.6 million. Cash used in operating activities was primarily for the funding
of losses before depreciation, amortization and in-process research and
development of $41.0 million, increases in accounts receivable and prepaid
expenses and other assets including a $25.0 million payment to Excite@Home for
advertising and promotions and the development of a co-branded web site in
connection with a strategic partnership over the next three years (see
"Strategic Alliances and Advertising Relationships" in the Business section of
this Annual Report on Form 10-K) and the final contingent consideration payment
to former shareholders of Bay Area Seating Service totaling $2.8 million. These
decreases were partially offset by net increases in accounts payable and other
liabilities and deferred revenues.

In 1998, cash and cash equivalents increased by $7.6 million. This increase
resulted primarily from $20.0 million in proceeds from the issuance of
11,597,114 shares of Series C convertible preferred stock, net of issuance
costs. In addition, cash and cash equivalents increased from the liquidation of
$6.8 million of marketable securities available for sale, the reduction of
restricted cash and investments by $1.5 million and from the issuance of
long-term debt totaling $700,000. These sources of the increase in cash were
partially offset by cash used in the acquisition of ProTix of $3.7 million net
of cash acquired, cash used in operating activities of $10.0 million,
expenditures for property and equipment of $3.9 million, debt principal payments
of $1.1 million and the reduction to zero of the December 31, 1997 bank
overdraft of $2.7 million.

In April 1998, we entered into an amended and restated credit agreement
with The Provident Bank which, among other things, amended financial covenants
and provided for a waiver of default under various provisions of the credit
agreement. Additionally, the amended and restated credit agreement provided for
deferral of payments under the notes to Playhouse Square Foundation and the
former shareholders of Bay Area Seating Service until December 31, 1998.

As of December 31, 1998, we were not in compliance with some of our
financial and non-financial covenants that we were required to satisfy under our
amended and restated credit agreement with The Provident Bank. As a result, we
were not permitted to make the October 1, 1998 and January 1, 1999 interest and
principal payments totaling $1.1 million due to Playhouse Square Foundation and
the former shareholders of Bay Area Seating Service under their respective
promissory notes which are subordinated to the amended and restated credit
agreement. On March 17, 1999, we entered into a first amendment to the amended
and restated credit agreement which, among other things, amended financial
covenants and provided for a waiver of all instances of default under the
provisions of the amended and restated credit agreement. This amendment also
required us to pay down $2.0 million of our indebtedness with the Provident Bank
in March 1999. Additionally, this amendment permitted the payment of the
aforementioned past due interest and principal payments to Playhouse Square
Foundation and the former shareholders of Bay Area Seating Service, which were
made in March 1999. In November 1999, subsequent to our initial public offering,
we paid off all of our outstanding bank debt. We additionally paid off all of
our debt issued to the former owners of our acquired companies. Our current
outstanding debt is primarily related to the financing of our Director and
Officer's liability insurance and capital lease obligations for equipment.

34
<PAGE> 37

In connection with the acquisition of ProTix in September 1998, we issued
an aggregate of $1.3 million of promissory notes to the former shareholders of
ProTix. The notes bore interest at prime plus one percent payable semiannually
and were paid in full after the closing of our initial public offering.

Through December 31, 1999, we issued 60,775,587 shares of various series of
convertible preferred stock at prices ranging from $.49 to $9.00 per share,
which were converted into an aggregate of 29,613,770 shares of common stock at
our initial public offering. The convertible preferred shares were issued for
purposes of raising capital or for the acquisition of several companies since
May 1996. As of December 31, 1999 all convertible preferred shares of stock were
converted to common.

TAX MATTERS

Net Operating Loss Carryforwards

From inception to December 31, 1999, we have incurred net tax operating
losses of approximately $71.1 million. We have provided a full valuation
allowance on the deferred tax asset of $29.0 million because of the uncertainty
of its realization. We account for deferred income taxes under Statement of
Financial Accounting Standards (SFAS) No. 109, which involves the evaluation of
a number of factors concerning the realizability of deferred income taxes. In
concluding that a full valuation allowance was required, we primarily considered
such factors as our history of losses from operations, expected future losses,
and limitations on the amount of net operating losses that we may utilize in any
one year. For further information about our net operating loss carryforwards,
see the notes to the consolidated financial statements included elsewhere in
this document.

Under the Tax Reform Act of 1986, the benefits from net operating losses
carried forward may be impaired or limited in some circumstances. Events which
may cause limitations in the amount of net operating losses that we may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50.0% over a three-year period. At December 31, 1998, we were
subject to such limitations, in the amount of approximately $24,200,000 per
year. The impact of any additional limitations that may be imposed for future
issuances of equity securities, including issuances with respect to
acquisitions, has not been determined.

Non-Qualified Stock Options

As of March 15, 2000, we had outstanding non-qualified stock options to
purchase 5,091,255 shares issued to various employees, consultants and directors
under our stock options plans. Each option entitles its holder to purchase a
share of common stock at a weighted average exercise price of approximately
$5.70. On exercise of an option, we will be entitled to an income tax deduction
equal to the difference between the exercise price of the option and the then
fair market value of the common stock. As the exercise of the options is at the
sole discretion of the holder of the options, the timing of the corresponding
income tax deduction is outside of our control.

FORWARD LOOKING INFORMATION UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. The Act was designed to encourage
companies to provide prospective information about themselves without fear of
litigation. The prospective information must be identified as forward looking
and must be accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those projected in the statements. The statements about our plans, strategies,
intentions, expectations and prospects contained throughout the document are
based on current expectations. These statements are forward looking and actual
results may differ materially from those predicted as of the date of this report
in the forward looking statements, which involve risks and uncertainties. In
addition, past financial performance is not necessarily a reliable indicator of
future performance and investors should not use historical performance to
anticipate results or future period trends. Stockholders are also directed to
the other risks discussed in our Registration Statement on Form S-1 (No.
333-79709, as amended, as filed with the Securities and Exchange Commission.)
Tickets.com does not undertake to update publicly any forward-

35
<PAGE> 38

looking statements for any reason, even if new information becomes available or
other events occur in the future.

FORWARD LOOKING INFORMATION REGARDING REVENUE GROWTH AND EXECUTION OF OUR
BUSINESS PLAN

In November 1998 our largest client, which was obtained through our
acquisition of Bay Area Seating Service, notified us of its intent not to renew
its contract with us at the end of its term on December 31, 1999. We believe
that the non-renewal was the result of the acquisition of this client by an
entertainment organization that entered into a master agreement with one of our
competitors. The loss of this client is expected to reduce annualized revenues
by approximately $3.5 million commencing in fiscal 2000 based upon the average
revenues we recognized from this client during the past three fiscal years. We
are expecting to offset the loss of these revenues by increased sales from our
existing outsourcing services clients, new ticket sales from new outsourcing
services clients and the continued upgrading of our licensees to Internet
connectivity to enable them to sell tickets on our web site and their own web
sites. We expect our software licensing and other revenues to increase as a
result of additional software sales, and increased non-ticketing Internet sales,
including primarily advertising, package sales and consumer-to-consumer ticket
auction sales.

Outlined below are certain factors that may preclude us from meeting our
revenue expectations and fulfilling our business strategy.

Because Of Our Limited Operating History And Limited Internet Experience,
Our Revenues Are Unpredictable, Which May Cause Significant Fluctuations In Our
Operating Results. Our limited operating history makes it difficult for us to
predict future results of operations and difficult for you to evaluate us or our
prospects. We believe that period-to-period comparisons of our operating results
are not meaningful and that the results for any period should not be relied upon
as an indication of future performance. Our operating results may fall below the
expectations of market analysts or investors in some future quarter. If this
occurs, the price of our common stock would likely decrease. The emerging nature
of the markets in which we compete makes forecasting more difficult and
potentially unreliable. Our current and future expense levels are based
predominantly on our operating plans and estimates of future revenues, and are
to a large extent fixed. We may be unable to adjust spending in a timely manner
to compensate for any unexpected shortfall in revenues. Accordingly, if our
revenues in any particular quarter are lower than anticipated, our operating
results would likely fall short of market expectations.

The Seasonality Of The Live Entertainment Industry Could Cause Our
Quarterly Operating Results To Fall Below The Expectations Of Market Analysts
And Investors, Which Could Adversely Affect The Market Price Of Our Common
Stock. Many popular live entertainment events are held during the warm weather
months. In addition, ticket sales for such events generally commence several
months prior to the event date. Because of these factors, our business generally
has lower revenues in the first and fourth fiscal quarters. These seasonality
issues could cause our quarterly operating results to fall below market
expectations, and adversely affect the market price of our common stock. Other
related seasonality issues that could cause our quarterly operating results to
fluctuate in the future include:

- the dates event tickets are released for sale by our clients;

- the decisions of one or more clients to cancel or postpone events;

- the timing of large, nonrecurring events; and

- the concentration of events in any given quarter.

If We Fail To Retain Clients Of Acquired Companies, We May Experience A
Loss Of Revenue. In order to achieve our intended growth and market presence,
we must satisfy our current clients' needs, as well as the needs of clients of
acquired companies. If we fail to do so, we may lose significant clients and the
revenue we generate from those clients, as in the case of Bay Area Seating
Service discussed earlier in this section.

We May Lose Key Personnel Of Acquired Companies, Which Could Adversely
Affect Our Relationships With Major Clients Or Strategic Partners And Impair The
Effectiveness Of Our Operations. Key personnel of acquired companies may choose
not to continue their employment with us after an acquisition for reasons
36
<PAGE> 39

including compensation, location, and the perception of career opportunities
with us, our competitors, or in other industries. If we lose key personnel of
any acquired companies, our relationships with major clients or strategic
partners who had close relationships with these personnel may be impaired. In
addition, if we are unable to replace any key personnel that we may lose, we may
suffer a disruption of operations and a decline in revenue.

Because We Have A Limited Operating History As A Consolidated Business, We
Have An Unproven Business Model That Requires A Substantial Move Into
E-Commerce. Since 1996, we have completed nine acquisitions of companies with
diverse backgrounds in the ticketing industry. We have a limited history
operating as a consolidated business, and, accordingly, an unproven business
model that is substantially dependent on the growth of revenues from increased
ticket sales and related products and services on the Internet. To date, our
revenues generated from Internet sales have not been significant. Internet
related revenues comprised 20.3% and 11.0% of the fourth quarter and fiscal year
1999 total revenues, respectively. We cannot be certain that we will be
successful in increasing our Internet sales in future periods. If we are not,
our revenues will not grow in accordance with our business model and may fall
short of expectations of market analysts and investors, which could negatively
affect the price of our common stock.

We Have Limited Experience In Offering E-Commerce Services To Consumers And
May Not Be Able To Generate Substantial Revenues From Internet Sales. We began
online ticket sales in the third quarter of 1997. Historically, we have sold
tickets primarily through retail stores and telephone sales centers. In order to
generate substantial revenues from online ticket sales, we must significantly
increase the number of clients who use our online ticketing services. We cannot
be certain that a substantial number of our clients will be able or choose to
use our on-line ticketing services. The majority of our clients license our
in-house systems for internal use and do not use any of our other outsourcing
services. These clients generally use software systems that do not enable ticket
sales over the Internet without a specific software upgrade. We have only
recently begun to offer this software upgrade, and as a result, most of these
clients have not yet acquired the necessary software upgrade. Accordingly, to
date, only a small portion of our clients are able to use our Internet ticketing
services.

If We Are Unable To Continually Develop New Services To Adapt To The
Evolving Internet Market, Our Reputation And Our Brand May Be Harmed. In order
to implement our business model, we must actively develop and launch new
services and products to attract consumers to our web site. Expansion of our
services may require significant additional expenditures and strain our
management, financial and operational resources. New services that are not
favorably received by consumers could damage our reputation and our brand.

We do not have web site linking arrangements in place with other ticket
sellers. Because we sometimes provide links to other online ticket sellers,
without having a contractual arrangement in place to do so, it is possible that
one or more of these ticket sellers could prevent us from linking consumers to
certain pages within their website. For example, Ticketmaster Group and
Ticketmaster Online-CitySearch, Inc. have sued us to, among other things,
prevent us from linking consumers from our web site to web pages within the
Ticketmaster web site. For a detailed discussion of this lawsuit, please see
Item 3. "Legal Proceedings." We have recently entered into an agreement with
Shubert Ticketing Services, whereby we receive up-to-date event information and
direct web site links from them, in return for promoting Shubert's events on our
site and receiving referral fees for certain tickets sold on Shubert's site.

As More Of Our Clients Use Our Online Services, We May Encounter
Technological Difficulties That Could Impair Our Ability To Increase Online
Revenues. In order for most of our clients to use our online ticketing
capabilities, we must develop and install additional software to make their
systems compatible with ours. This process can be a difficult one and we may
encounter technological difficulties that may inhibit us from servicing our
clients online, which may cause one or more of our clients to terminate or fail
to renew its contract with us. Because we have a broad portfolio of in-house
systems products, we must either create separate Internet interfaces for each of
these products or consolidate our in-house systems products. We may experience
difficulties in consolidating our portfolio of in-house systems products into a
few comprehensive in-house systems and in developing links from our clients'
various software and hardware systems to our ticketing

37
<PAGE> 40

systems and databases. Due to these potential technological difficulties, some
clients may be averse to change and may require a lengthy sales cycle before
they will upgrade to Internet ticketing on our system.

Ticketmaster Corporation And Ticketmaster Online-Citysearch Have Filed A
Lawsuit Against Us Which Could Impair Our Ability To Implement Our Business
Model And Result In Substantial Payments To Them. The Ticketmaster suit could
result in limitations on how we implement our e-commerce strategy, delays and
costs associated with redesigning our web site and substantial payments to
Ticketmaster Corporation and Ticketmaster Online-CitySearch. In addition, the
litigation could result in significant expenses and diversion of our
management's time and other resources. (See Item 3 "Legal Proceedings")

Infringement Or Other Claims Could Adversely Affect Our Ability To Market
Our Products, Limit Our Rights To Certain Technology And Harm Our Results Of
Operations. Although we believe we have valid proprietary rights to all of our
intellectual property, we could be subject to claims of alleged trademark,
patent or other infringement as a result of our actions or the actions of our
licensees. For example, as in the Ticketmaster claim, we may in the future be
sued because we link consumers directly to an internal page within other ticket
sellers' web sites and have included the trademarks of these ticket sellers on
our web site. Any litigation over intellectual property rights or business
practices could result in:

- payment by us of substantial damages;

- injunctive or other equitable relief that could block our ability to
market or license our products; and

- the loss of rights to technologies necessary to operate portions of our
business.

Any litigation, regardless of the outcome, could result in substantial
costs and diversion of managerial and other resources.

Our Proprietary Technology And Intellectual Property May Be Inadequately
Protected, Which Could Harm Our Competitive Position. We regard our proprietary
technology and other intellectual property as critical to our success. We rely
on trademark, trade secret and copyright law to protect our technology and our
brand. We also rely on confidentiality and/or license and other agreements with
employees, customers, and others to protect our proprietary rights. We have no
patents. Despite our efforts to control access to our proprietary information,
it may be possible for a third party to copy or otherwise obtain and use our
products, technologies or other intellectual property without authorization. In
addition, effective copyright, trademark, trade secret and patent protection may
be unavailable or limited in foreign countries that do not offer protection
comparable to that provided by United States laws. Internet technologies are
evolving rapidly, and third parties may also develop similar or superior
technologies independently. Any unauthorized use of our proprietary information
could result in costly and time-consuming litigation to enforce our proprietary
rights. In addition, any third party development of similar or superior
technologies could impede our ability to compete effectively in the ticketing
industry.

Ineffective Protection Of Our Trademarks And Service Marks Could Reduce The
Value Of Our Brands. We are depending on the broad recognition of our
"Tickets.com" and "1-800-TICKETS" brands for our business to grow. We cannot be
certain that the steps we have taken and will take to protect our brands will be
adequate, and such steps may require considerable expenditures. Nor can we be
certain that third parties will not infringe or misappropriate the copyrights,
trademarks, trade dress and similar proprietary rights that currently protect
our brands. Ineffective protection of these rights could reduce the value of our
brands. We have applied to register the tradename "Tickets.com" and the stylized
trademark "1.800.TICKETS" and we have registered the service mark "Advantix" and
other trademarks in the United States. We have also applied to register the
tradenames "Tickets.com" in various foreign countries. Effective trademark,
service mark, copyright and trade secret protection will not be available or
sought in every country in which our products and services are available online
or by telephone. We may not be able to obtain effective trademark or service
mark registration until the prolonged use of our marks has generated secondary
meaning for purposes of trademark and service mark law. In addition, there are
other parties who have corporate names or brand names very similar to ours, and
whose names may also include the term "tickets," and who may, as a result, bring
claims against us for trademark infringement or challenge our rights to register
the tradename "Tickets.com," the stylized trademark "1.800.TICKETS," or both.
38
<PAGE> 41

Our Licensees Could Diminish The Quality Of Our Brands And Adversely Affect
Our Reputation. We have licensed in the past, and expect to license in the
future, proprietary rights such as trademarks or copyrighted material to third
parties. While we attempt to ensure that the quality of our brands is maintained
by these licensees, we cannot be certain that these licensees will not take
actions that might materially and adversely affect the value of our proprietary
rights or reputation.

If We Are Not Able To Preserve Our Domain Names We May Not Be Able To
Compete Effectively On The Internet. We currently hold the Internet domain
names "tickets.com," "ProTix.com," "bass-tix.com," "basstickets.com,"
"fantastix.com" and others. We may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or otherwise decrease
the value of our trademarks and other proprietary rights. Any such inability
could impair our ability to compete effectively on the Internet. The acquisition
and maintenance of domain names generally is regulated by governmental agencies
and their designees. The regulation of domain names in the United States and in
foreign countries is subject to change. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, there can be no
assurance that we will be able to acquire or maintain relevant domain names in
all countries in which we conduct or intend to conduct business. In addition,
the relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear.

Online Security Breaches Could Result In A Loss Of Consumer Confidence In
E-Commerce, Which Could Impair Our Ability To Implement Our Business Model. The
secure transmission of confidential information over the Internet is essential
in maintaining consumer and supplier confidence in our services. Any publicized
security problems affecting us or other e-commerce companies could inhibit the
growth of e-commerce and, accordingly, the growth of our Internet sales revenue
as contemplated in our business model. We rely on licensed encryption and
authentication technology to effect secure transmission of confidential
information, including credit card numbers. We cannot be certain that our
security measures will prevent security breaches, including break-ins, viruses
or disruptions by consumers or others. A party that is able to circumvent our
security systems could steal proprietary information, damage our database or
communications lines or otherwise cause interruptions in our operations.
Security breaches also could damage our reputation and expose us to a risk of
loss or litigation and possible liability. Our insurance policies carry coverage
limits that may not be adequate to reimburse us for losses caused by security
breaches.

System Failures Could Damage Our Reputation And Result In The Loss Of
Customers And Clients. Our business is almost entirely dependent on our
telephone sales centers, computer systems and telecommunications systems. Heavy
stress placed on our systems during peak periods could cause our systems to
operate at unacceptably low speeds or fail altogether. Any significant
degradation or failure of our systems or any other systems in the ticketing
process, including telephone or telecommunications services, even for a short
time, could cause consumers to suffer delays in ticket purchases. The resulting
inconvenience to consumers could damage our reputation with the public, cause
consumers to purchase tickets from other sources and deter repeat customers.
Delays in services could also cause substantial losses for clients, which could
result in claims against us. These delays could also result in the termination
or non-renewal of our existing service agreements. We have experienced system
failures and degradation in the past, including a number of failures during the
first half of 1998. We could also experience system failures and degradations in
the future.

In the future, increased volume due to growth, if any, may require us to
expend substantial funds to expand and further upgrade our technology,
transaction processing systems and network infrastructure. Any inability to add
additional software and hardware on a timely basis to accommodate increased
traffic on our web site may cause unanticipated system disruptions and result in
slower response times. In addition, substantially all of our server equipment is
currently located in California in areas that are susceptible to earthquakes. We
do not presently have fully redundant systems, a formal disaster recovery plan
or alternative providers of hosting services, nor do we carry sufficient
business interruption insurance to compensate us for all of the possible losses
that we may incur. In addition, our clients' in-house systems also may be
subject to failures and degradations that could interrupt ticket sales both
through clients' systems and on our web site. Unanticipated problems may cause a
significant system outage or data loss, and result in the loss of clients.

39
<PAGE> 42

The Process Of Integrating Technologies From Our Current and Future
Acquisitions Could Disrupt Our Ticketing Systems And Damage Our Relationships
With Our Clients. The process of integrating the various technologies of
acquired companies into one interactive system has caused, and may in the future
cause, system downtime and other system disruptions. We expect to integrate and
consolidate several of our in-house systems over the next several years. We may
experience system failures in the future as a result of this integration, which
could impair our relationships with our clients. For example, in connection with
the conversion of the information and telecommunications systems of Bay Area
Seating Service to our system, our Concord, California telephone sales center
experienced a number of system failures during the first half of 1998. Each of
these system failures resulted in the temporary interruption of ticketing
functions for entertainment organizations serviced by that telephone sales
center. Any system failures could cause one or more of our clients to terminate
its contract or fail to renew its contract with us.

We May Not Be Able To Maintain Or Improve Our Competitive Position Because
Of The Intense Competition In The Ticketing Industry. Intense competition in
the ticketing industry presents significant challenges to management, marketing
and technical personnel. We believe competition will become more challenging as
the market for tickets expands and technology advances. We have specifically
identified two competitors, but foresee the possibility of additional and
increased competition in the future. Our primary competitors on a national level
are Ticketmaster Corporation and Ticketmaster Online-CitySearch, Inc., which
have operations in multiple locations throughout the United States. Ticketmaster
Online-CitySearch has an exclusive license to do all of the online ticketing for
Ticketmaster Corporation. Ticketmaster has a widely recognized brand name in the
live event ticketing business, a longer operating history in the ticketing
industry generally and in Internet ticketing specifically, more extensive
ticketing inventory and greater financial and other resources than we do. We
commenced our operations in May 1996 and did not begin to sell tickets on the
Internet until October 1997. Because of our limited operating history, we have
not yet gained the same level of brand recognition or accumulated as broad a
ticketing inventory as Ticketmaster and Ticketmaster Online-CitySearch. In
addition, because we have developed through the acquisition of smaller, regional
outsourcing services providers and in-house systems developers, we are still in
the early stages of developing a strong national presence.

Our competitors also include:

- a number of smaller, regional outsourcing services providers;

- entertainment organizations that handle their own ticket sales and
distribution through online and other distribution channels;

- international, national and local outsourcing services providers, which
may or may not currently offer online transactional capabilities; and

- Internet-based live event ticketing companies.

Many of these competitors have greater brand recognition, longer operating
histories and a greater number of well-established client relationships than we
do in the geographic regions in which they operate. Because of our relatively
short operating history and presence in a limited number of geographic regions
prior to our move into e-commerce, we have not yet established a significant
competitive position in a number of geographic areas.

In Order To Maintain Our Competitive Position In The Ticketing Industry, We
Must Be Able To Attract New Clients And Ticket Inventory, And We Cannot Be
Certain That We Will Be Able To Do So. If we cannot attract new clients and
ticket inventory, or if we lose clients to other outsourcing services providers
or otherwise, we may not be able to maintain our competitive position in the
ticketing industry. In recent years, the live entertainment industry has been
moving toward consolidation. As a result, contracts for outsourcing services are
often negotiated on a multi-venue basis, and large ticket inventories are
concentrated in the hands of a few entertainment conglomerates. Because
outsourcing services contracts are often multi-year contracts and there are
fewer potential new clients, competition for their business is especially
intense. Historically, we have grown our business primarily through
acquisitions. Industry consolidation has reduced the number of viable
acquisition candidates and, accordingly, limited future acquisition
opportunities. In order to increase our
40
<PAGE> 43

client base and ticket inventory, we may need to attract clients who currently
have relationships with other outsourcing services providers. At the same time,
other outsourcing services providers will likely attempt to attract our current
clients to their outsourcing services providers. In addition, our clients may
terminate their contracts for a variety of reasons, or may not renew their
contracts at the end of their terms.

We May Also Face Competition From Companies With An Established Internet
Presence Who Decide To Offer Products And Services Similar To Ours. Because
barriers to entry in e-commerce are relatively low, we may face competition from
companies in other areas of e-commerce who may seek to exploit their market
presence by offering live entertainment event information and related ancillary
products and services that are competitive with ours. These potential
competitors may have a number of advantages over us, including:

- strong brand recognition;

- an established presence on the Internet and an established base of users;

- greater financial and marketing resources; and

- complementary lines of business and existing business relationships.

In addition, some Internet portals direct Internet traffic to particular
web sites and may also channel users to services that compete with ours. Some or
all of the products and services offered by competitors may achieve greater
market acceptance than ours. We cannot be certain that we will be able to
successfully compete against these potential competitors.

Our Reliance On Third Party Software And Hardware Makes Us Vulnerable To
Changes In Our Suppliers' Products And Services, Which Could Adversely Affect
Our Ability To Service Our Clients In A Timely Manner. Our automated ticketing
solutions incorporate software products and use computer hardware and equipment
developed by other entities. Our reliance on third party software and hardware
makes us vulnerable to changes in our suppliers products and services and any
such changes may impair our ability to provide adequate outsourcing services and
in-house systems to our clients in a timely manner. For example, we cannot be
certain that all of our suppliers will remain in business or will continue to
support the product lines that we use. Nor can we be certain that their product
lines will remain viable or will otherwise continue to be available to us. Our
current suppliers could significantly alter their pricing in a manner adverse to
us. If any of these entities ceases to do business, abandons or fails to enhance
a particular product line, or significantly raises its prices, we may need to
seek other suppliers. We cannot be certain that other suppliers will be able to
provide us with necessary products at favorable prices, or at all.

We Depend On Retail Stores, Advertising Agreements And Strategic
Relationships To Reach Consumers, And If We Cannot Maintain These Relationships
And Establish New Relationships, Our Ticket Sales Would Be Adversely
Affected. A significant portion of our ticket sales are generated through
arrangements with retail stores. Our contracts with these retail stores are
generally for a one-year term, and subject to periodic negotiations regarding
sales commissions, customer service and other matters. These stores cater to
consumers who are likely to purchase tickets for sporting and entertainment
events, and are attractive to other ticketing services. In addition, our
relationships with other companies such as Excite, Cox Interactive, MP3.com,
Shubert Ticketing Services, RealNames Corporation and others can provide us with
access to consumers. If we cannot maintain good retail, strategic and
advertising relationships and continue to establish new relationships, our
ability to reach consumers and generate sufficient ticket sales could be
materially and adversely affected.

We May Become Subject To More Restrictive E-Commerce Regulation That Could
Adversely Affect Our Ability To Increase Internet Sales. We are subject to
regulations applicable to businesses generally and laws or regulations directly
applicable to e-commerce. Currently we believe that there are few laws and
regulations directly applicable to the Internet and online ticketing services.
It is likely, however, that a number of laws and regulations may be adopted with
respect to the Internet or commercial online services that could affect our
online ticketing services. Any new legislation or regulation, or the application
of existing laws and regulations to the Internet and commercial online services
could restrict our ability to grow our business according to our plan.

41
<PAGE> 44

Laws regulating e-commerce might cover matters such as, among other things,
user privacy and the use of our consumer database for email marketing purposes,
limitations on ticket service fees, the content of our web site, taxation by
states where we sell tickets, copyright protection for us and competing
ticketing services, distribution, direct linking, antitrust and consumer
protection laws.

In addition, the applicability of a variety of existing laws in various
jurisdictions to the Internet and commercial online services may take years to
resolve. These issues may include property ownership, sales and other taxes,
libel and personal privacy, among others. For example, tax authorities in a
number of states are currently reviewing the appropriate tax treatment of
companies engaged in e-commerce. New state tax regulations may subject us to
additional state sales and income taxes.

We May Be Affected By Changes In Laws And Standards Relating To Data
Collection And Use Practices And The Privacy Of Internet Users. Recent growing
public concern regarding privacy and the collection, distribution and use of
information about Internet users has led to increased federal and state scrutiny
and legislative and regulatory activity concerning data collection and use
practices. Various federal and state governments and agencies have recently
proposed limitations on the collection and use of information regarding Internet
users. In October 1998, the European Union adopted a directive that limits the
collection and use of information regarding Internet users in Europe. In
addition to government activity, a number of industry and privacy advocacy
groups are considering various new, additional or different self-regulatory
standards. This focus, and any legislation, regulations or standards
promulgated, may impact us. Although our compliance with applicable federal and
state laws, regulations and industry guidelines has not had a material adverse
effect on us, governments, trade associations and industry self-regulatory
groups may enact more burdensome laws, regulations and guidelines, including
consumer privacy laws, affecting us and our customers. Since many of the
proposed laws or regulations are just being developed, and a consensus on
privacy and data usage has not been reached, we cannot yet determine the impact
these regulations may have on our business. However, these regulations and
guidelines could adversely affect our business.

FORWARD LOOKING INFORMATION REGARDING COST OF SERVICES

As ticketing volume increases on the www.tickets.com web site, costs of
ticketing services are expected to decrease as a percentage of total ticketing
services revenue. Services provided via the Internet are less costly than
traditional methods of providing ticketing services. Our cost of services
associated with software services and other as a percentage of revenue
percentage is expected to decrease slightly as we consolidate codelines and
expand and enhance our non-ticketing online sales and services.

Factors which may inhibit us from meeting our expectations related to
decreased costs of services are outlined below.

We May Be Required To Purchase Tickets That Are Allocated For Our Online
Auctions That We May Not Be Able To Sell. We have recently entered into
arrangements with several performers to provide online ticket auctions for their
live concerts, and we plan to increase this type of online auction activity in
the future. Under those types of arrangements, concert tickets are allocated by
performers for auction on our web site and all amounts collected above the
minimum bid are donated to a charity of the performer's choice. To date, we have
generally agreed in advance with the performers to purchase at face value any
unsold tickets that were allocated for auction on our web site. If we are unable
to sell tickets that we have agreed to purchase, or must sell them at less than
face value, we will incur losses on the tickets purchased.

We May Become Subject To State Regulation Of Ticket Sales And Auctions,
Which Could Impose Restrictions On The Manner And Pricing Of Our Ticket Sales
And The Conduct Of Our Auctions. Many states and municipalities have adopted
statutes regulating ticketing transactions within their jurisdictions. We cannot
be certain whether any of these laws and regulations may be determined to be
applicable to our business or whether new laws and regulations potentially
adverse to our business will be adopted. If we become subject to additional laws
and regulations, the manner and pricing of our ticket sales and the conduct of
our auctions may be restricted, which could have an adverse effect on our
revenues. Some states and municipalities require that ticket sellers obtain a
resellers license. One or more states or municipalities could take the position
that a telephonic or electronic ticket sale to one of their residents is a
sufficient basis for
42
<PAGE> 45

application of that jurisdiction's reseller statute. Because we believe these
statutes to be inapplicable to our activities, we may not be in compliance with
these statutes. Governmental agencies or authorities could also argue that other
state or local licensing or "ticket scalping" statutes apply to our activities.
These statutes, among other things, limit the amount of service charges and
other fees that may be charged in connection with ticket sales. Other state and
local regulations establish maximum service fees on tickets for certain sporting
and other events. In addition, many states, including California, have laws and
regulations governing the conduct of auctions.

FORWARD LOOKING INFORMATION REGARDING OPERATING EXPENSES

We expect sales and marketing expenses to remain constant or increase for
the beginning of 2000 as a percentage of revenues as we continue our aggressive
advertising campaign to increase consumer awareness and build the brand equity
of our web site and then decrease as a percentage of sales toward the end of the
year as we complete the expansion of our sales and marketing infrastructure. We
expect technology development expenses to increase in future periods as we
further expand our technical staff, develop new technologies, continue to
enhance our web site and augment existing technologies. We expect general and
administrative expenses to remain relatively consistent or increase slightly as
a percentage of revenues in future periods as we continue to expand our staff
and as we incur additional costs related to the growth of our business and
reporting as a public company.

Risks that may impede our ability to stabilize and decrease our operating
costs are outlined below.

If We Cannot Effectively Integrate Our Numerous Recent And Potential Future
Acquisitions, We May Experience Increased Costs, Operating Inefficiencies,
System Disruptions And The Loss Of Customers. In addition to our recent
acquisitions, we plan to continue to acquire businesses as opportunities arise
in the future, and our ability to grow our business will depend in part on our
ability to complete future acquisitions. The integration of acquired companies
into a cohesive business requires the combination of different business models,
financial, accounting and other internal systems, varied technologies and
personnel who have dissimilar expertise and backgrounds. It also requires the
management of companies or operating units that are geographically dispersed
throughout the United States and internationally. We cannot be certain that we
will be able to successfully integrate the operations, personnel or systems of
these acquired companies in a timely fashion, if at all. If we fail to integrate
operations and personnel effectively, we will experience duplication of costs
and operating inefficiencies. If we are unable to integrate technologies
successfully, we may experience system disruptions or failures that could result
in the dissatisfaction or loss of customers. We also cannot be certain that we
will achieve value from our acquisitions commensurate with the consideration
paid. If we are unable to generate sufficient revenue from any acquired
companies, we will experience an unanticipated shortfall in revenue and may fail
to meet the expectations of investors. If this occurs, the market price of our
common stock would likely decline.

The process of integrating our recent acquisitions has placed and will
continue to place a significant burden on our management team. Integration is
complex, and presents numerous risks and uncertainties in addition to those set
forth above, including the following:

If We Cannot Attract And Retain Qualified Personnel In A Cost Effective And
Timely Manner, We May Not Be Able To Execute Our Growth Strategy. The
significant growth of our business over the past two years due to our
acquisition of eight companies has placed substantial demands on our management
and other personnel. Our future growth, if any, will depend in part on our
ability to attract, motivate and retain skilled technical, sales, management and
marketing personnel. Competition for these personnel is intense, and we expect
it to increase as e-commerce expands. We cannot be certain that we will be able
to retain our existing personnel or attract additional qualified personnel in
the future. In addition, a significant portion of our workforce is comprised of
telephone sales representatives. We compete with telemarketing firms, among
others, for telephone sales personnel and sometimes must pay premium hourly
wages to attract and retain them. In addition, their high turnover rate
increases our recruiting and training costs. We cannot be certain that we will
be able to continue to hire and retain qualified personnel to support our
planned growth in a cost effective or timely manner. If we cannot, our ability
to execute our growth strategy could be impaired.

43
<PAGE> 46

The Loss Of Personnel Could Require Us To Provide Costly Severance
Packages, Which Could Adversely Affect Our Operating Results. Although we have
employment agreements with several of our executive officers, including our
Chief Executive Officer and our President, our executive officers and key
employees may terminate their employment at any time for any reason. In some
circumstances, termination of their employment could result in substantial
payments by us for severance benefits under these employment agreements.

Acquisitions Will Create Charges To Earnings That Could Adversely Affect
Our Operating Results And, Accordingly, The Market Price Of Our Common
Stock. As a result of past acquisitions, we have recorded a significant amount
of goodwill that will adversely affect our operating results for the foreseeable
future. As of December 31, 1999, we had goodwill and other intangible assets of
$86.8 million, which must be amortized in the future and will result in a
reduction of our earnings. If the amount of recorded goodwill or other
intangible assets is increased or we have future losses and are unable to
demonstrate our ability to recover the amount of goodwill, the amount of
amortization could be increased or the period of amortization could be
shortened. This would increase annual amortization charges or result in a
write-off of goodwill in a one-time non-cash charge, which could be significant
based on our acquisitions to date. If the acquisition of First Call
International, Ltd. (see Recent Events earlier in this section) is completed,
the purchase will result in substantial goodwill to us, which would
significantly increase the amount of amortization expense of goodwill and
intangible assets and have an adverse effect on our results of operation. Any
future acquisitions could also result in amortization expense related to
goodwill and other intangible assets. If any of these events should occur, our
results of operations would be adversely affected. In that event, we may fail to
meet the expectations of market analysts and investors, which could adversely
affect the market price of our common stock. In addition, we incurred charges to
earnings of $5.3 million in the second quarter of 1999 for the recognition of
purchased in-process research and development in connection with the
acquisitions of California Tickets.com and TicketsLive. Future acquisitions,
including the acquisition of First Call could result in similar charges.

We May Face Liability For Online Content That May Not Be Covered By Our
Insurance. Because we are disseminating information, we may face liability for
the nature and content of the materials on our web site or on sites to which we
have links. These liability claims could include, among others, claims for
defamation, negligence, indecency, fraud from secondary sales, and copyright,
patent and trademark infringement. These claims have been brought, and sometimes
successfully pressed, against online services. Although we intend to maintain
general liability insurance coverage, it may not cover claims of these types. It
also may not be adequate to indemnify us for any liability that may be imposed.
Any imposition of liability, particularly liability that is not covered by
insurance or is in excess of insurance coverage, could have a material adverse
effect on our reputation and our ability to effectively operate our web site.

FORWARD LOOKING INFORMATION REGARDING LIQUIDITY AND CAPITAL RESOURCES

We believe that our existing cash and cash equivalents, and other financing
sources will be sufficient to meet our operating needs for at least the next 12
months. Future acquisitions or higher than expected losses from operations may
require additional borrowings on our line of credit, issuance of other debt, or
issuance of additional equity. Additional borrowings on our line of credit or
issuance of other debt will result in higher interest expense and principal
payments. Our ability to pay these amounts and other long-term debt will be
dependent upon generating cash flows from operations or issuances of equity. We
cannot be sure that we will be able to generate sufficient cash flow.

We Expect To Continue To Incur Significant Net Operating Losses. We
incurred net operating losses of approximately $66.6 million for the year ended
December 31, 1999. At December 31, 1999, we had an accumulated deficit of
approximately $115.9 million. We expect to continue to incur significant losses
on a quarterly and annual basis, and we cannot be certain that we will achieve
or sustain profitability. To the extent that our expenses grow faster than our
revenues, our operating results will be adversely affected and anticipated net
losses in a given quarter may be greater than expected. If this occurs, the
market price of our common stock is likely to decline. Because we expect to
continue to experience negative cash flow, we may need additional financing in
the future, which may not be available or may require us to issue additional
equity
44
<PAGE> 47

securities that could lead to substantial dilution to our stockholders. We have
experienced negative cash flow from operations since our inception. We expect to
continue to experience significant negative cash flow from consolidated
operations for the foreseeable future. We believe that our existing capital
resources, including the proceeds from our recent initial public offering, will
be sufficient to meet our presently anticipated cash requirements through at
least the next 12 months. However, we may have to raise additional financing
prior to such time if we experience unanticipated revenue shortfalls or
encounter unanticipated acquisitions or other business opportunities. We cannot
be certain that additional financing will be available on acceptable terms if
and when we need it. If financing is not available when required or is not
available on acceptable terms, we may be unable to develop new services or
enhance our present services, take advantage of business opportunities or
respond to competitive pressures. If additional funds are raised through the
issuance of equity securities, our stockholders may experience significant
dilution. If we cannot obtain additional financing on satisfactory terms when we
need it, our results of operations could be materially and adversely affected.

Further factors which put our liquidity and capital resources at risk are
as follows:

Our Stock Price Is Likely To Be Very Volatile, Which May Make Us A Target
Of Securities Class Action Litigation. The market price of our common stock is
likely to be highly volatile and could be subject to wide fluctuations. In the
past, securities class action litigation often has been brought against
companies following periods of volatility in the market price of their
securities. In the future we may be the target of similar litigation. Securities
litigation could result in substantial costs and divert our management's
attention and resources.

The market prices for stocks of Internet-related and technology companies,
particularly following an initial public offering, may increase to levels that
bear no relationship to the operating performance of such companies. Such market
prices may not be sustainable and are subject to wide variations. If our common
stock trades to such levels it likely will thereafter experience a significant
decline. Other factors, some of which are beyond our control, that could cause
the market price of our common stock to fluctuate include:

- operating results that vary from the expectations of securities analysts
and investors;

- changes in securities analysts' and investors' expectations as to our
future financial performance;

- changes in market valuations of other Internet or online services
companies;

- announcements by us or our competitors of technological innovations, new
services, significant contracts, acquisitions, strategic partnerships,
joint ventures or capital commitments;

- loss of a major venue or client;

- announcements by third parties of significant claims or proceedings
against us or developments in those proceedings; and

- future sales of our common stock.

Lasergate Is A Defendant In A Securities Class Action Suit, And Any
Liabilities In Excess Of Lasergate's Insurance Would Become Liabilities Of Our
Business. Lasergate is one of several defendants in a consolidated class action
filed in the United States District Court for the Eastern District of New York.
If Lasergate loses this action, there could be significant damages awarded to
the plaintiffs. Although Lasergate maintains a liability insurance policy, we
cannot be certain that damages which may be awarded will be covered by
Lasergate's insurance. The complaint in this action alleges that Lasergate
failed to disclose, in a 1994 registration statement filed with the Securities
and Exchange Commission, that prior to the date of the offering of Lasergate
securities, Sterling Foster & Co., Inc., the underwriter of the offering, had
secretly agreed to release several shareholders from "lock-up" agreements for
the purpose of selling their shares to Sterling Foster at reduced prices. The
plaintiffs' claims allege that Lasergate violated Sections 11 and 12(2) of the
Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder and Section 349 of the New York General
Business Law, as well as made negligent misrepresentations. Lasergate believes
that it has defenses to the claims in this action and intends to vigorously
defend itself. On August 5, 1999 Lasergate filed a motion with the court to
dismiss the complaint against it. The motion to

45
<PAGE> 48

dismiss is still pending. Sterling, Foster & Co., Inc. and/or the class has
until April 7, 2000 to file a request for oral argument. As of March 29, 2000 no
request has been made. Damages awarded against Lasergate that are not covered by
or are in excess of the policy limits of Lasergate's insurance will be an
expense of our consolidated business and could have a material adverse effect on
our results of operations.

We Face Risks From International Operations That Could Adversely Affect Our
Cash Flow And Licensing Revenues. We have only recently commenced operations in
a number of international markets and a key component of our strategy is to
expand our business internationally. Our plans to expand internationally are
subject to inherent risks, including:

- Adverse Fluctuations In Currency Exchange Rates Could Expose Us To Losses
Because Some Of Our Contracts And Liabilities Are Payable In Foreign
Currencies. Payments due to our acquisition of dataCulture Ltd. are
payable in pounds sterling over 12 equal quarterly installments. In
addition, we are also exposed to foreign currency exchange rate risks
inherent in our assets and liabilities denominated in currencies other
than the United States dollar. If the United States dollar becomes weaker
against foreign currencies these payments will be greater in dollar terms
and our cash flow would be adversely affected.

- If We Cannot Adequately Enforce Our Intellectual Property Rights
Internationally, We May Lose Licensing Revenues. Many of our foreign
business relationships involve the licensing of our software products. If
we are unable to enforce our intellectual property rights because they
are not recognized under foreign laws, our customers could duplicate or
modify our software products without our consent and deprive us of
licensing revenues.

YEAR 2000 READINESS

As of March 15, 2000 we have not experienced any significant disruptions as
a result of the rollover from 1999 to 2000. However, the success to date of our
Year 2000 efforts cannot guarantee that a Year 2000 problem affecting third
parties, upon which we rely, will not become apparent in the future that could
harm our operations.

INFLATION AND FOREIGN CURRENCY RISK

Inflation has not had a significant impact on our operations during the
periods covered by the accompanying consolidated financial statements.
Additionally, we are not presently subject to significant foreign exchange risk
as international operations currently constitute a minor part of our operations.
However, some of the recent companies we have acquired have operations
internationally that could subject us to inflation and foreign currency risks in
the future. If we are affected by inflation or foreign currency fluctuations in
the countries where we will have operations, our business, financial condition
and results of operations could be adversely affected.

EFFECT OF RECENT ACCOUNTING CHANGES

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 137, which is effective for fiscal years beginning after June 15, 2000.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments. The statement requires that every derivative instrument be recorded
in the balance sheet as either an asset or liability measured at its fair value,
and that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. We do not have any
derivative instruments as of December 31, 1998 or 1999. We believe that the
adoption of SFAS No. 133 will not have a material effect on our consolidated
financial statements.

46
<PAGE> 49

recognize revenue. SAB No. 101 also addresses the question of gross vs. net
revenue presentation and financial statement and Management's Discussion &
Analysis (MD&A) disclosures related to revenue recognition. The adoption of SAB
No. 101 in the first fiscal quarter of 2000 is not expected to have a material
effect on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risks related to fluctuations in interest rates on
our fixed and variable rate debt. Currently, we do not utilize interest rate
swaps, forward or option contracts on foreign currencies or commodities, or
other types of derivative financial instruments. The purpose of the following
discussion is to provide a framework to understand our sensitivity to
hypothetical changes in interest rates as of December 31, 1999. You should be
aware that many of the statements contained in this section are forward looking
and should be read in conjunction with our disclosures under the heading
"Forward-Looking Statements."

For fixed rate debt, changes in interest rates generally affect the fair
market value of the debt instrument, but not our earnings or cash flows.
Conversely, for variable rate debt, changes in interest rates generally do not
impact fair market value of the debt instrument, but do affect our future
earnings and cash flows. We do not have an obligation to prepay fixed rate debt
prior to maturity, and as a result interest rate risk and changes in fair market
value should not have a significant impact on the fixed rate debt unless we
would be required to refinance that debt. The carrying value of our variable
rate debt approximates fair value due to the frequency of repricing of this
debt.

We do not believe that the future market risks related to the above
securities will have a material adverse impact on our financial position,
results of operations or liquidity.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the index included at "Item 14, Exhibits, Financial Statement Schedules
and Reports on Form 8-K".

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III.

Incorporated by reference in Items 10 to 13 below are certain sections of
Tickets.com's definitive proxy statement, to be filed pursuant to Regulation 14A
with the SEC within 120 days after December 31, 1999.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference in this Annual Report is the information required
by this Item 10 contained in the sections entitled "Election of Directors" and
"Executive Compensation and Other Information" contained in Tickets.com's
definitive proxy statement, to be filed pursuant to Regulation 14A with the SEC
within 120 days after December 31, 1999.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference in this Annual Report is the information required
by this Item 11 contained in the sections entitled "Executive Compensation and
Other Information" contained in Tickets.com's definitive proxy statement, to be
filed pursuant to Regulation 14A with the SEC within 120 days after December 31,
1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference in this Annual Report is the information required
by this Item 12 contained in the sections entitled "Ownership of Securities"
contained in Tickets.com's definitive proxy statement, to be filed pursuant to
Regulation 14A with the SEC within 120 days after December 31, 1999.
47
<PAGE> 50

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference in this Annual Report is the information required
by this Item 13 contained in the sections entitled "Related Party Transactions"
contained in Tickets.com's definitive proxy statement, to be filed pursuant to
Regulation 14A with the SEC within 120 days after December 31, 1999.

PART IV.

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

(a) Documents filed as part of this Report:

<TABLE>
<S> <C>
1. FINANCIAL STATEMENTS
"Financial Statements" are filed as part of this Form
10-K and are incorporated by reference................... F-1
2. FINANCIAL STATEMENT SCHEDULES.
Schedule II -- Valuation and Qualifying Accounts......... F-33
All other schedules have been omitted because they are
not applicable, not required, or the information is
included in the consolidated financial statements or
notes thereto.
3. EXHIBITS
An "Exhibit Index" is filed as part of this Form 10-K and
is incorporated by reference. ........................... E-1
</TABLE>

(b) Reports on Form 8-K:

None

48
<PAGE> 51

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Costa Mesa, State of California, on the 29th day of March, 2000.

TICKETS.COM, INC.

By: /s/ W. THOMAS GIMPLE
--------------------------------------
Name: W. Thomas Gimple
Title: Co-Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and
appoint John M. Markovich, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Report, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>

/s/ C. IAN SYM-SMITH Co-Chairman of the Board March 29, 2000
- ----------------------------------------
C. Ian Sym-Smith

/s/ W. THOMAS GIMPLE Co-Chairman of the Board and Chief March 29, 2000
- ---------------------------------------- Executive Officer (Principal
W. Thomas Gimple Executive Officer)

/s/ JOHN M. MARKOVICH Chief Financial Officer (Principal March 29, 2000
- ---------------------------------------- Financial Officer)
John M. Markovich

/s/ MICHAEL R. RODRIGUEZ Vice President and Corporate Controller March 29, 2000
- ---------------------------------------- (Principal Accounting Officer)
Michael R. Rodriguez

Director
- ----------------------------------------
William E. Ford

/s/ JAMES A. CACCAVO Director March 29, 2000
- ----------------------------------------
James A. Caccavo

/s/ GEORGE BELL Director March 29, 2000
- ----------------------------------------
George Bell
</TABLE>

49
<PAGE> 52

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ PETER CHERNIN Director March 29, 2000
- ----------------------------------------
Peter Chernin

/s/ NICHOLAS E. SINACORI Director March 29, 2000
- ----------------------------------------
Nicholas E. Sinacori

/s/ JANICE L. RICHTER Director March 29, 2000
- ----------------------------------------
Janice L. Richter

Director
- ----------------------------------------
Howard L. Morgan

/s/ CHRISTOS M. COTSAKOS Director March 29, 2000
- ----------------------------------------
Christos M. Cotsakos
</TABLE>

50
<PAGE> 53

TICKETS.COM, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1997, 1998 and 1999...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-7
Notes to Consolidated Financial Statements.................. F-9
</TABLE>

F-1
<PAGE> 54

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tickets.com, Inc.:

We have audited the accompanying consolidated balance sheets of
Tickets.com, Inc., (formerly Advantix, Inc.), a Delaware Corporation, and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows each of
the three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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 Tickets.com, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.

ARTHUR ANDERSEN, LLP

Orange County, California
February 11, 2000,
except for the matters described
in note 13 as to which the date is
March 27, 2000

F-2
<PAGE> 55

TICKETS.COM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 11,956 $ 94,173
Restricted cash and investments........................... 168 --
Accounts receivable, net of allowances of $255 and $439... 3,621 7,780
Prepaid expenses and other current assets................. 850 20,506
-------- ---------
Total current assets.............................. 16,595 122,459
Property and equipment, net................................. 8,411 11,163
Goodwill and intangible assets, net......................... 9,043 86,838
Other assets................................................ 4,463 15,320
-------- ---------
Total assets...................................... $ 38,512 $ 235,780
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 10,258 $ 18,250
Accrued liabilities....................................... 5,262 5,358
Current portion of long-term debt and capital lease
obligations............................................ 7,848 2,115
Deferred revenue and other current liabilities............ 1,406 4,418
-------- ---------
Total current liabilities......................... 24,774 30,141
Long-term debt and capital lease obligations, net of current
portion................................................... 20,232 2,117
Other liabilities........................................... 749 2,128
Minority interest........................................... 180 317
Redeemable common stock and warrants........................ 4,506 --
Commitments and contingencies (Note 10).....................
Stockholders' equity (deficit):
Series A, A1, B, C, D and E convertible preferred stock,
$.0001 par value; 90,000 shares authorized; 29,537 and
0 shares issued and outstanding, respectively.......... 3 --
Common stock, $.000225 par value; 270,000 shares
authorized; 6,328 and 57,082 shares issued and
outstanding, respectively.............................. 1 13
Additional paid-in capital................................ 36,859 317,378
Deferred compensation..................................... -- (350)
Accumulated deficit....................................... (48,792) (115,944)
Cumulative other comprehensive loss....................... -- (20)
-------- ---------
Total stockholders' equity (deficit).............. (11,929) 201,077
-------- ---------
Total liabilities and stockholders' equity
(deficit)....................................... $ 38,512 $ 235,780
======== =========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 56

TICKETS.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Revenues:
Ticketing services........................................ $ 9,686 $ 26,558 $ 27,819
Software services and other............................... 1,961 2,982 18,098
------- -------- --------
Total revenues.................................... 11,647 29,540 45,917
------- -------- --------
Cost of services:
Ticketing services........................................ 7,702 17,155 20,685
Software services and other............................... 711 1,551 9,415
------- -------- --------
Total cost of services............................ 8,413 18,706 30,100
------- -------- --------
Gross profit................................................ 3,234 10,834 15,817
------- -------- --------
Operating expenses:
Sales and marketing....................................... 2,096 7,339 34,722
Technology development.................................... 2,233 6,417 12,548
General and administrative................................ 3,182 9,204 18,541
Amortization of goodwill and intangibles.................. 712 2,082 7,268
Impairment of long-lived assets........................... -- 17,026 --
Purchased in-process research and development............. -- 1,600 5,340
------- -------- --------
Total operating expenses.......................... 8,223 43,668 78,419
------- -------- --------
Loss from operations........................................ (4,989) (32,834) (62,602)
------- -------- --------
Other (income) expense:
Interest income........................................... (206) (878) (2,209)
Interest expense.......................................... 1,315 2,952 2,958
Minority interest......................................... -- (53) 137
------- -------- --------
Total other expense, net.......................... 1,109 2,021 886
------- -------- --------
Loss before provision for income taxes and extraordinary
item...................................................... (6,098) (34,855) (63,488)
Provision for income taxes................................ 1 6 29
------- -------- --------
Net loss before extraordinary item.......................... (6,099) (34,861) (63,517)
Extraordinary item -- loss on early retirement of debt.... -- -- (3,083)
Net loss.................................................... $(6,099) $(34,861) $(66,600)
======= ======== ========
Basic and diluted net loss per share before extraordinary
item...................................................... $ (1.17) $ (6.08) $ (3.38)
Basic and diluted net loss per share from extraordinary
item...................................................... -- -- (0.17)
Basic and diluted net loss per share........................ $ (1.17) $ (6.08) $ (3.55)
Weighted average common shares outstanding.................. 5,199 5,734 18,781
======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 57

TICKETS.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- --------------- PAID-IN DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
------- ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996................................ 6,141 $ 1 5,000 $ 1 $ 3,021 $ --
Exercise of common stock options........................ -- -- 14 -- 13 --
Exercise of common stock warrants....................... -- -- 178 -- 4 --
Issuance of common stock in payment of accrued interest
on note payable....................................... -- -- 226 -- 249 --
Issuance of common stock in connection with the
acquisition of Fantastix Ticket Company, LLC, net of
redeemable common stock............................... -- -- 105 -- 177 --
Issuance of common stock in payment of commissions on
issuance of convertible preferred stock............... -- -- 51 -- -- --
Issuance of Series A convertible preferred stock for
cash, net of issuance costs........................... 2,299 -- -- -- 1,081 --
Issuance of Series B convertible preferred stock for
cash, net of issuance costs........................... 9,500 1 -- -- 11,155 --
Net loss................................................ -- -- -- -- -- --
------- --- ------ ------ -------- -----
Balance, December 31, 1997................................ 17,940 2 5,574 1 15,700 --
Exercise of common stock options........................ -- -- 14 -- 14 --
Exercise of common stock warrants....................... -- -- 400 -- 9 --
Issuance of common stock in connection with the
acquisition of ProTix, Inc............................ -- -- 318 -- 1,072 --
Issuance of common stock for services................... -- -- 22 -- 75 --
Issuance of Series C convertible preferred stock for
cash, net of issuance costs........................... 11,597 1 -- -- 19,989 --
Accretion on redeemable common stock and warrants....... -- -- -- -- -- --
Net loss................................................ -- -- -- -- -- --
------- --- ------ ------ -------- -----
Balance, December 31, 1998................................ 29,537 3 6,328 1 36,859 --
Exercise of common stock options and warrants........... -- -- 1,886 1 1,204 --
Issuance of common stock warrants in connection with the
acquisition of ProTix, Inc. .......................... -- -- -- -- 2,150 --
Issuance of Series D convertible preferred stock for
cash, net of issuance costs........................... 13,333 1 -- -- 29,949 --
Issuance of stock in connection with the acquisition of
California Tickets.com, Inc. ......................... 8,461 1 3,928 1 41,463 --

<CAPTION>
CUMULATIVE
OTHER
ACCUMULATED COMPREHENSIVE
DEFICIT LOSS TOTAL
----------- ------------- --------
<S> <C> <C> <C>
Balance, December 31, 1996................................ $ (7,418) $ -- $ (4,395)
Exercise of common stock options........................ -- -- 13
Exercise of common stock warrants....................... -- -- 4
Issuance of common stock in payment of accrued interest
on note payable....................................... -- -- 249
Issuance of common stock in connection with the
acquisition of Fantastix Ticket Company, LLC, net of
redeemable common stock............................... -- -- 177
Issuance of common stock in payment of commissions on
issuance of convertible preferred stock............... -- -- --
Issuance of Series A convertible preferred stock for
cash, net of issuance costs........................... -- -- 1,081
Issuance of Series B convertible preferred stock for
cash, net of issuance costs........................... -- -- 11,156
Net loss................................................ (6,099) -- (6,099)
--------- ---- --------
Balance, December 31, 1997................................ (13,517) -- 2,186
Exercise of common stock options........................ -- -- 14
Exercise of common stock warrants....................... -- -- 9
Issuance of common stock in connection with the
acquisition of ProTix, Inc............................ -- -- 1,072
Issuance of common stock for services................... -- -- 75
Issuance of Series C convertible preferred stock for
cash, net of issuance costs........................... -- -- 19,990
Accretion on redeemable common stock and warrants....... (414) -- (414)
Net loss................................................ (34,861) -- (34,861)
--------- ---- --------
Balance, December 31, 1998................................ (48,792) -- (11,929)
Exercise of common stock options and warrants........... -- -- 1,205
Issuance of common stock warrants in connection with the
acquisition of ProTix, Inc. .......................... -- -- 2,150
Issuance of Series D convertible preferred stock for
cash, net of issuance costs........................... -- -- 29,950
Issuance of stock in connection with the acquisition of
California Tickets.com, Inc. ......................... -- -- 41,465
</TABLE>

F-5
<PAGE> 58
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- --------------- PAID-IN DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
------- ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of Series E convertible preferred stock for
cash, net of issuance costs........................... 9,444 1 -- -- 81,837 --
Issuance of common stock in connection with the
acquisition of TicketsLive Corporation................ -- -- 3,584 1 21,323 --
Issuance of common stock in connection with the
acquisition of Lasergate Systems, Inc. Series G
preferred stock....................................... -- -- 300 -- 1,349 --
Issuance of common stock in connection with the IPO, net
of issuance costs..................................... -- -- 7,194 2 80,894 --
Reclassification of redeemable common stock and warrants
in connection with the IPO............................ -- -- 1,920 -- 12,085 --
Issuance of common stock upon exercise of BASS
warrants.............................................. -- -- 946 -- 895 --
Conversion of Hill A&E note payable to common stock..... -- -- 809 -- 3,000 --
Release of common stock from escrow..................... -- -- 573 -- -- --
Conversion of preferred shares to common stock in
connection with the IPO............................... (60,775) (6) 29,614 7 (1) --
Deferred compensation with respect to employee stock
options, related to the acquisition of California
Tickets.com, Inc...................................... -- -- -- -- 423 (350)
Consulting expense recognized in connection with options
and warrants issued to entertainment organizations.... -- -- -- -- 3,948 --
Preferred dividends payable............................. -- -- -- -- -- --
Foreign currency translation............................ -- -- -- -- -- --
Accretion on redeemable common stock and warrants....... -- -- -- -- -- --
Net loss................................................ -- -- -- -- -- --
------- --- ------ ------ -------- -----
Balance, December 31, 1999................................ -- $-- 57,082 $ 13 $317,378 $(350)
======= === ====== ====== ======== =====

<CAPTION>
CUMULATIVE
OTHER
ACCUMULATED COMPREHENSIVE
DEFICIT LOSS TOTAL
----------- ------------- --------
<S> <C> <C> <C>
Issuance of Series E convertible preferred stock for
cash, net of issuance costs........................... -- -- 81,838
Issuance of common stock in connection with the
acquisition of TicketsLive Corporation................ -- -- 21,324
Issuance of common stock in connection with the
acquisition of Lasergate Systems, Inc. Series G
preferred stock....................................... -- -- 1,349
Issuance of common stock in connection with the IPO, net
of issuance costs..................................... -- -- 80,896
Reclassification of redeemable common stock and warrants
in connection with the IPO............................ -- -- 12,085
Issuance of common stock upon exercise of BASS
warrants.............................................. -- -- 895
Conversion of Hill A&E note payable to common stock..... -- -- 3,000
Release of common stock from escrow..................... -- -- --
Conversion of preferred shares to common stock in
connection with the IPO............................... -- -- --
Deferred compensation with respect to employee stock
options, related to the acquisition of California
Tickets.com, Inc...................................... -- -- 73
Consulting expense recognized in connection with options
and warrants issued to entertainment organizations.... -- -- 3,948
Preferred dividends payable............................. (105) -- (105)
Foreign currency translation............................ -- (20) (20)
Accretion on redeemable common stock and warrants....... (447) -- (447)
Net loss................................................ (66,600) -- (66,600)
--------- ---- --------
Balance, December 31, 1999................................ $(115,944) $(20) $201,077
========= ==== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 59

TICKETS.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $ (6,099) $(34,861) $(66,600)
Adjustments to reconcile net loss to net cash used in
operating activities:
Impairment of long-lived assets.......................... -- 17,026 --
Purchased in-process research and development............ -- 1,600 5,340
Depreciation............................................. 483 1,947 3,935
Amortization of goodwill and intangibles................. 712 2,082 7,268
Loss on disposal of property............................. -- 52 --
Noncash interest expense................................. 506 126 3,342
Noncash compensation expense............................. -- 75 73
Noncash consulting expense............................... -- -- 3,948
Minority interest........................................ -- (53) 137
Changes in operating assets and liabilities:
Accounts receivable...................................... 157 (131) (3,120)
Prepaid expenses and other current assets................ (345) (1,194) (13,819)
Other assets............................................. (378) 1,330 (16,071)
Accounts payable......................................... 849 483 3,310
Accrued liabilities...................................... 1,618 369 (1,753)
Deferred revenue and other liabilities................... 5 1,118 1,950
-------- -------- --------
Net cash used in operating activities................. (2,492) (10,031) (72,060)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........................ (2,056) (3,937) (4,703)
Contingent consideration paid in connection with an
acquisition.............................................. (5,324) -- --
Proceeds from sale of marketable securities................ 1,244 6,804 --
(Increase) decrease in restricted cash and investments..... (740) 1,474 168
Acquisitions, net of cash acquired......................... (13,460) (3,709) (11,805)
-------- -------- --------
Net cash (used in) provided by investing activities... (20,336) 632 (16,340)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank overdraft................................. (514) (2,678) --
Proceeds from issuance of long-term debt................... 17,075 717 2,318
Principal payments on long-term debt....................... (2,143) (1,078) (25,590)
Net proceeds from issuance of preferred stock.............. 12,237 19,990 111,788
Net proceeds from issuance of common stock through an
initial public offering.................................. -- -- 80,896
Proceeds from issuance of common stock options and
warrants................................................. 17 23 1,205
-------- -------- --------
Net cash provided by financing activities............. 26,672 16,974 170,617
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................. 3,844 7,575 82,217
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............. 537 4,381 11,956
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 4,381 $ 11,956 $ 94,173
======== ======== ========
</TABLE>

F-7
<PAGE> 60

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................ $ 94 $ 2,568 $ 2,603
======== ======== ========
Income taxes paid........................................ $ 1 $ 6 $ 29
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations entered into for equipment..... $ -- $ 1,307 $ 918
======== ======== ========
Accretion on redeemable common stock warrants issued in
connection with financing arrangements................ $ -- $ 414 $ 447
======== ======== ========
ACQUISITIONS:
1997 -- Acquired all the outstanding common stock of Bay
Area Seating Service, Inc., and certain assets of
Fantastix Ticket Company, LLC
1998 -- Acquired all the outstanding common stock of
ProTix, Inc. and subsidiaries
1999 -- Acquired all the outstanding capital stock of
California Tickets.com, Inc., TicketsLive Corporation,
dataCulture Ltd. and Lasergate Systems, Inc.
The following table outlines the assets acquired,
liabilities assumed and cash paid:
Fair value of assets acquired............................ $ 32,601 $ 9,618 $ 94,448
Cash advances to acquired companies...................... -- -- 6,980
Less:
Liabilities assumed................................... (11,433) (2,108) (16,702)
Promissory notes to sellers, net of discount.......... (5,996) (1,297) (1,606)
Cash payable on first anniversary of closing.......... -- (550) --
Preferred stock issued................................ (18,377)
Common stock issued................................... (177) (1,072) (45,761)
Redeemable common stock issued........................ (675) -- (4,676)
-------- -------- --------
Cash paid............................................. 14,320 4,591 14,306
Cash acquired......................................... (860) (882) (2,501)
-------- -------- --------
Cash paid, net of cash acquired....................... $ 13,460 $ 3,709 $ 11,805
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 61

TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. COMPANY BACKGROUND

Tickets.com, Inc. (formerly, Advantix, Inc.) and its wholly-owned
subsidiaries Bay Area Seating Service, Inc. ("BASS"), ProTix, Inc. ("ProTix"),
TicketsLive Corporation ("TicketsLive"), dataCulture, Ltd. ("dataCulture") and
Lasergate Systems, Inc. ("Lasergate"), collectively (the "Company"), is a
leading provider of entertainment ticket sales, event information, and related
products and services. The Company sells tickets and provides these services
through the Internet, telephone sales centers, interactive voice response
systems, and retail outlets. The Company provides automated ticketing solutions
to entertainment organizations such as stadiums, performing arts centers,
museums and professional sports franchises. The www.tickets.com web site enables
consumers to obtain information on entertainment organizations and sport and
entertainment events and performances, purchase tickets from multiple sources
and shop for related products. The Company also develops, licenses and supports
proprietary ticketing software.

The Company was originally organized as The Entertainment Express, Inc.
under the laws of the State of Delaware on January 25, 1995. The Company
commenced operations in May 1996 with the acquisition of Hill Arts and
Entertainment Systems, Inc. which had developed a proprietary ticketing software
system utilized primarily by performing arts centers, theater groups and
regional ticketing service providers. In December 1996, the Company acquired the
call center and ticketing operations of an Ohio-based performing arts center and
ticketing services provider, at which time the Company changed its name to
Advantix, Inc. In August 1997, the Company acquired the assets of Fantastix
Ticket Company, LLC, a regional ticketing services provider located in Buffalo,
New York, and in September 1997 the Company completed the acquisition of all of
the outstanding stock of BASS, a ticketing services provider in Northern
California and Nevada. In October 1998, the Company acquired all the outstanding
common stock of ProTix, a ticketing services provider and ticketing software
developer based in Madison, Wisconsin. In April 1999, the Company acquired all
the outstanding capital stock of California Tickets.com, Inc. ("CA
Tickets.com"), a web-based ticketing service provider, and TicketsLive, a
ticketing software developer based in Syracuse, New York. The Company then
changed its name to Tickets.com, Inc. These acquisitions were followed by the
purchase, in August 1999, of all the outstanding common stock of dataCulture, a
ticketing software developer located in the United Kingdom and in December 1999,
the Company completed its acquisition of all the outstanding stock of Lasergate,
a ticketing software developer located in Clearwater, Florida. For detailed
discussions of each business combination see Note 3.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements and related notes
include the accounts of Tickets.com, Inc. and its wholly owned subsidiaries. All
intercompany account balances and transactions have been eliminated in
consolidation. The results of operations of each acquired business have been
consolidated for all periods subsequent to the date of acquisition.

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 as of the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

F-9
<PAGE> 62
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COMPREHENSIVE INCOME (LOSS)

The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 "Reporting Comprehensive Income" in 1998. This statement requires that
all items that meet the definition of components of comprehensive income be
reported in a financial statement for the period in which they are recognized.
Components of other comprehensive income (loss) include amounts that under SFAS
No. 130 are included in comprehensive income (loss) but are excluded from net
income (loss). Differences between the Company's net income (loss), as reported
and comprehensive income (loss), as defined, are related to foreign currency
translation.

CASH EQUIVALENTS

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

RESTRICTED CASH AND INVESTMENTS

Restricted cash and investments consist primarily of certificates of
deposit with original maturities greater than 90 days held for the benefit of
certain clients.

CONCENTRATION RISK

The Company is subject to concentration of credit risk related to accounts
receivable. Accounts receivable are due principally from retail ticketing
outlets and credit card merchant processors and represent the face value of the
tickets sold plus convenience and handling fees, generally net of outlet
commissions. Concentrations of credit risk are mitigated due to the large number
of clients comprising the Company's base of accounts receivable. The Company's
largest client accounted for 16%, 11% and 4% of total net revenues during the
years ended December 31, 1997, 1998 and 1999, respectively.

LONG-LIVED ASSETS

Property and Equipment. Property and equipment is stated at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of three to five years or, for leasehold
improvements, over the term of the lease if shorter. When assets are retired or
otherwise disposed of, the cost and related accumulated depreciation are removed
and any gain or loss is reflected in results of operations.

Goodwill and Intangible Assets. Intangible assets consist primarily of the
portion of the purchase price of businesses acquired allocated to existing
technology, customer relationships, tradenames, assembled workforce, and
noncompete agreements. Goodwill represents the excess of cost over the fair
value of net identified assets acquired in business combinations accounted for
under the purchase method.

Impairment of Long-Lived Assets. The Company assesses the recoverability
of its long-lived assets on an annual basis or whenever adverse events or
changes in circumstances or business climate indicate that expected undiscounted
future cash flows related to such long-lived assets may not be sufficient to
support the net book value of such assets. If undiscounted cash flows are not
sufficient to support the recorded assets, impairment is recognized to reduce
the carrying value of the long-lived assets to the estimated fair value. Cash
flow projections, although subject to a degree of uncertainty, are based on
trends of historical performance and management's estimate of future
performance, giving consideration to existing and anticipated competitive and
economic conditions. Additionally, in conjunction with the review for
impairment, the remaining estimated lives of certain of the Company's long-lived
assets are assessed.

F-10
<PAGE> 63
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

The Company primarily generates ticketing services revenue from per ticket
service fees charged directly to consumers who order tickets through the
Company's web site, telephone sales centers, interactive voice response ("IVR")
or retail outlets. In addition, the Company charges a handling fee to consumers
for all tickets sold by the Company, other than through retail outlets. The
Company recognizes service fee and handling fee revenue from ticket sales at the
time the sale is made. The Company additionally generates ticketing services
revenues through the auction of venues' and performers' tickets on the Company's
web site. Under these types of arrangements, the Company generally purchases, at
face value, any unsold tickets that were allocated for auction on the Company's
web site. If the Company is unable to sell tickets that have been purchased, or
sell them at less than face value, losses are incurred on the tickets purchased.
The gross value of the sale of these tickets is recorded as revenues. The amount
paid for the tickets, amounts paid to performers venues or charities, and the
costs of delivering the tickets to the consumers are recognized as cost of
services. Pursuant to current ticket auction contracts with certain
entertainers, certain amounts collected above the face value are donated to a
charity of the performer's choice, the amounts donated are also included as cost
of services.

Software revenue is recognized on sales contracts when the following
conditions are met: a signed contract is obtained, delivery has occurred, the
total sales price is fixed and determinable, collectibility is probable, and any
uncertainties with regard to customer acceptance are resolved. Deferred revenue
consists primarily of deferred software license revenue related to the license
of the Company's software, and related fees under maintenance and support
contracts. Deferred support revenue is recognized as it is earned, over the term
of the related agreement. Additional revenue is generated from advertising on
the Tickets.com web site, consumer-to-consumer auctions and travel and package
sales, which may include travel, hotel, tickets to an event and merchandise.
Revenue for advertising is recognized when the ads are placed on the Tickets.com
web site. Consumer-to-consumer auction revenue is derived from fees paid by the
seller and is recognized when the transactions are complete. The majority of the
travel revenue is commissions received from the Company's travel service
provider. Sales of packages purchased in advance are recognized at the gross
sales value of the package when the package is sold; therefore, if a package is
left unsold or sells for less than the aggregate cost of the package, losses are
incurred on those packages. Packages are also sold through our travel service
provider, for which the Company receives a commission.

COST OF SERVICES

Cost of ticketing services includes expenses related to the distribution
and delivery of tickets. These expenses include primarily payroll related to
phone center and distribution personnel, telecommunications, data
communications, commissions paid on tickets distributed through outlets and the
clients' share of the convenience fee revenues. Ticketing auction costs of sales
are comprised of the face value of the ticket, amounts paid to performers,
venues or charities, and the cost of delivery of the ticket. Pursuant to current
ticket auction contracts with certain entertainers, certain amounts collected
above the face value are donated to a charity of the performer's choice, the
amounts donated are also included as cost of services. From time to time, the
Company enters into contracts with clients whereby it pays a portion of the
clients' share of convenience fees up front. When this occurs, the up front fees
are amortized over the period of the contract under the terms of the underlying
contracts.

Cost of services associated with software services and other include
primarily costs related to the installation of the software mainly consisting of
payroll and travel related costs and the cost of packages which may include,
hotel costs, travel ticket costs, merchandise costs and the face value of the
event tickets.

F-11
<PAGE> 64
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

The Company applies the asset and liability method in recording income
taxes, under which deferred income tax assets and liabilities are determined,
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using currently enacted tax rates and laws.
Additionally, deferred tax assets are evaluated and a valuation allowance is
established if it is more likely than not that all or a portion of the deferred
tax asset will not be realized.

NET LOSS PER SHARE

Basic loss per share is computed by dividing the net loss available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted loss per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or result in the issuance of common
stock that would then share in the earnings of the Company. Potentially dilutive
securities are excluded from the Company's calculation of diluted loss per share
since their inclusion would be antidilutive.

STOCK-BASED COMPENSATION

The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard, if fully adopted, requires the accounting for
employee stock-based compensation using a fair value methodology. For stock
options, fair value is determined using an option pricing model that takes into
account the stock price at the date of grant, the exercise price, the expected
life of the option, the volatility of the underlying stock, the expected
dividends and the risk-free interest rate. For stock-based compensation issued
to non-employees, the standard requires measurement based on the value of the
related services performed or the stock-based compensation issued, whichever is
more reliably measurable. The adoption of the accounting methodology of SFAS No.
123 related to employees is optional. The Company intends to continue to account
for employee stock options using the intrinsic value methodology in accordance
with the Accounting Principles Board Opinion No. 25 as permitted under SFAS No.
123. However, pro forma disclosures as if the Company adopted the accounting
methodology of SFAS No. 123 are presented in Note 12 "Employee Benefit Plans."

NEW ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which was
effective for fiscal years beginning after December 15, 1998. SOP 98-1 provides
guidance on accounting for the costs of computer software developed or obtained
for internal use and defines specific criteria that determine when such costs
are required to be expensed, and when such costs may be capitalized. The Company
generally expenses software development costs as incurred. The Company adopted
SOP 98-1, effective January 1, 1999. The adoption of SOP 98-1 did not have a
material effect on the Company's consolidated financial statements.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities," which was effective for fiscal years beginning after
December 15, 1998. SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs and require such costs to be expensed as
incurred. The Company adopted SOP 98-5, effective January 1, 1999. The adoption
of SOP 98-5 did not have a material effect on the Company's consolidated
financial statements.

F-12
<PAGE> 65
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

derivative instruments. The statement requires that every derivative instrument
be recorded in the balance sheet as either an asset or liability measured at its
fair value, and that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Management believes that the adoption of SFAS No. 133 will not have a material
effect on the Company's consolidated financial statements, as the Company does
not have any derivative financial instruments.

On December 3, 1999, the Securities Exchange Commission (SEC) staff
released Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition", as
amended by SAB No. 101A, to provide guidance on the recognition, presentation
and disclosure of revenue in financial statements. This SAB No. 101 explains the
SEC staff's general framework for revenue recognition, stating that certain
criteria need to be met in order to recognize revenue. SAB No. 101 also
addresses the question of gross vs. net revenue presentation and financial
statement and Management's Discussion & Analysis (MD&A) disclosures related to
revenue recognition. The adoption of SAB No. 101 in the first fiscal quarter of
2000 is not expected to have a material effect on the Company's consolidated
financial statements.

3. BUSINESS COMBINATIONS

HILL ARTS AND ENTERTAINMENT SYSTEMS, INC.

On May 31, 1996, the Company, which had no prior operations, acquired
substantially all of the business of Hill Arts and Entertainment Systems, Inc.
("Hill A&E"). Hill A&E and the Company were at that time under common control.
The Company acquired certain assets and assumed certain liabilities of Hill A&E
in exchange for a $3,000,000 promissory note, convertible into 808,625 shares of
the Company's common stock at the option of the holder. The transaction was
accounted for as a transfer between entities under common control, and as a
result, the assets and liabilities transferred were accounted for at historical
cost, in a manner similar to a pooling of interests. On November 11, 1999, the
holder of the promissory note converted the note into the 808,625 shares of
common stock in connection with the Company's IPO.

ADVANTIX, A DIVISION OF PLAYHOUSE SQUARE FOUNDATION

In December 1996, the Company acquired the assets of Advantix, a division
of Playhouse Square Foundation ("PSF"), a Cleveland, Ohio-based performing arts
center and ticketing services provider. The acquisition was accounted for as a
purchase. The purchase price consisted of a $2,000,000 promissory note at an
interest rate of 7% and the issuance of 481,068 shares of the Company's common
stock. The note was recorded at a discount of $257,000 that yielded an effective
interest rate of 10%, which approximates the Company's incremental borrowing
rate at the time of the acquisition. In connection with the purchase agreement,
the Company entered into a Stock Issuance Agreement with PSF. The agreement
provided that, if the Company did not complete an Initial Public Offering
("IPO") of its common stock prior to December 31, 1999, PSF may require the
Company to repurchase the stock at $5.20 per share. If the Company did complete
an IPO within the specified time, but for a price less than $5.20 per share, the
Company would issue additional shares of its common stock up to an aggregate
value of $2,500,000. The 481,068 shares of common stock were recorded as
redeemable common stock at their fair market value of $2,500,000 based on the
Company's redemption obligation. On November 8, 1999, the Company completed an
IPO at an offering price of $12.50. Accordingly, no additional shares of common
stock were issued to PSF and the 481,068 shares of redeemable common stock were
reclassified to common stock as of December 31, 1999. The operating results of
the acquired division have been included in the accompanying consolidated
financial statements from the date of acquisition. Goodwill is amortized on a
straight-line basis over its estimated useful life of 10 years.

FANTASTIX TICKET COMPANY, LLC

In August 1997, the Company acquired the assets of Fantastix Ticket
Company, LLC ("Fantastix"), a Buffalo, New York-based ticketing services
provider. The acquisition was accounted for as a purchase. The

F-13
<PAGE> 66
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

purchase price consisted of the issuance of 504,888 shares of the Company's
common stock. In connection with the purchase agreement, the Company entered
into a Repurchase Right Agreement with Fantastix. The agreement, as amended,
provides that if the Company did not complete an IPO prior to December 31, 1999,
the seller of Fantastix may require the Company to repurchase up to 400,000
shares of common stock at $4.21 per share for total consideration of $1,683,000.
The 400,000 shares of common stock were recorded as redeemable common stock
outside of equity at their fair market value of $675,000 on the acquisition
date. In the event that the seller of Fantastix exercises its repurchase right,
any additional consideration paid in connection with the repurchase right shall
be recorded as goodwill. Goodwill related to the repurchase, if any, will be
amortized prospectively from the date of capitalization over the remaining
amortization period. The remaining 104,888 shares were recorded at their fair
market value of $177,000. On November 8, 1999, the Company completed an IPO at
an offering price of $12.50. Accordingly, no additional consideration is due to
Fantastix and the 400,000 shares of redeemable common stock were reclassified to
common stock as of December 31, 1999. The operating results of Fantastix have
been included in the accompanying consolidated financial statements from the
date of acquisition. Goodwill is amortized on a straight-line basis over its
estimated useful life of 10 years.

BAY AREA SEATING SERVICE, INC.

In September 1997, the Company acquired BASS, a Concord, California-based
ticketing services provider. The acquisition was accounted for as a purchase.
The purchase price included $11,481,000 in cash and an aggregate of $5,996,000
in promissory notes bearing interest at 1.5% above the prime rate, as defined.
Additional consideration of up to approximately $5,900,000 was to be paid over a
three-year period should BASS net revenues, as defined, meet certain minimum
amounts.

The actual amount of the contingent payment was to be determined using an
agreed-upon formula based on quarterly net revenues, as specified in the
acquisition agreement. Such payments are recorded as goodwill as the payments
are made. Through December 31, 1999, contingent consideration of $5,279,000 has
been paid and recorded as goodwill. This amount is final and all required
payments have been made. Goodwill related to contingent consideration is
amortized prospectively from the date of capitalization over the remaining
amortization period.

In conjunction with the acquisition, the Company entered into noncompete
agreements with certain officers of BASS, which prohibits them from competing
with the business of the Company for a period of three years. Consideration for
the noncompete agreements totaled $1,000,000 paid at the closing of the
acquisition and an additional $1,000,000 paid over three years. Additionally,
under the terms of the acquisition agreement, a restricted cash account totaling
$1,500,000 was established for the payment of certain transition costs, as
defined, incurred by the Company. The funds were established in a restricted
cash account to be used for the payment of 50 percent of the total transition
costs incurred by the Company, up to $3,000,000, with unused funds returned to
the sellers of BASS and treated as additional purchase price. The Company
incurred in excess of the $3,000,000 in transition costs and as a result no
funds were returned to the sellers. Other terms of the agreement included
provisions for the establishment of several restricted cash accounts including
(i) $600,000 for the payment of an officer's salary over three years (ii)
$300,000 related to guaranteed levels of working capital subsequent to the close
of the acquisition, which pursuant to the terms of the agreement was remitted to
the sellers of BASS subsequent to December 31, 1998, and (iii) $750,000 relating
to possible license fees to be paid by the Company; an indemnification provision
in the acquisition agreement; and certain acquisition fees to be paid by the
sellers. From these restricted cash accounts $168,000 was returned to the
sellers in the third quarter of 1999 and there is no remaining restricted cash
at December 31, 1999.

Pursuant to the terms of the BASS acquisition agreement, the Company issued
warrants to the sellers of BASS for the purchase of 1,332,423 shares of common
stock at an exercise price of $4.50 per share. The Company also entered into a
three-year employment agreement with a former officer of BASS and a three-

F-14
<PAGE> 67
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

year consulting agreement with a former officer and shareholder of BASS. In
accordance with the agreement, the warrants expired on November 8, 1999 in
conjunction with the Company's completion of its IPO. As of December 31, 1999,
all warrants issued to the sellers of BASS have been exercised and are recorded
as common stock. The operating results of BASS have been included in the
consolidated financial statements from the date of acquisition.

As of December 31, 1999, the consideration paid in connection with the
acquisition of BASS, including contingent consideration, totaled $24,818,000.
Substantially all of the original goodwill and intangible assets related to the
acquisition of BASS have been written off (See Note 5). The remaining goodwill
of approximately $2.7 million at December 31, 1999, primarily representing the
contingent consideration, will be amortized on a straight-line basis over the
remaining life of the asset of approximately 10 years.

PROTIX, INC.

In September 1998, the Company acquired ProTix, a Madison, Wisconsin-based
ticketing services provider and ticketing systems developer. The acquisition was
accounted for as a purchase. The aggregate purchase price at the date of
acquisition was approximately $7,511,000, which includes costs of the
acquisition. The aggregate consideration includes the issuance of 317,768 shares
of the Company's common stock, $4,591,000 in cash, which includes a repayment of
approximately $2,900,000 of existing ProTix obligations, and an aggregate of
$1,297,000 in promissory notes bearing interest at 1.0% above the prime rate, as
defined. The note was paid in full by the Company in the fourth quarter of 1999.
Additional consideration in the form of warrants for the purchase of 637,964 of
the Company's common stock at an exercise price of $0.0225 per share were issued
to the sellers of ProTix that were to vest based upon the achievement of certain
revenue and profitability targets. The Company entered into an amendment with
ProTix whereby the parties agreed to vest 478,477 of the warrants and cancel the
remaining 159,487. The Company valued the vested warrants at their fair value as
of the effective date, which resulted in $2,150,000 of additional goodwill.
Goodwill related to vested warrants is being amortized prospectively from the
date of capitalization over the remaining amortization period. The 317,768
shares of common stock were recorded at their fair market value of $1,072,000 at
the date of acquisition. The operating results of ProTix have been included in
the accompanying consolidated financial statements from the date of acquisition.

In conjunction with the acquisition, the Company entered into a noncompete
agreement with a former officer of ProTix, which prohibits him from competing
with the business of the Company for a period of three years. Consideration for
the noncompete agreement totaled $162,000 to be paid over three years.

The Company has allocated the excess purchase price over the fair value of
net tangible assets acquired to the following identifiable intangible assets:
existing product technology, customer relationships, trade name, assembled
workforce, goodwill and in-process research and development ("IPR&D"). Goodwill
is amortized on a straight-line basis over its estimated useful life of 10
years. An allocation to IPR&D of $1,600,000 represents the estimated fair value
related to incomplete projects, which reflects the risk-adjusted cash flows and
the stage of completion. At the date of the acquisition, the projects associated
with the IPR&D efforts had not yet reached technological feasibility and had no
alternative future uses. Accordingly, these costs were expensed. At the
acquisition date, ProTix was conducting development activities associated with
the completion of the next generations of its automated ticketing solutions and
regional ticketing services. The projects under development, at the valuation
date, were expected to address requirements in the areas of greater scalability,
significant new functionality, and greater speed.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

date, and discounting the resulting net cash flows to their present value. Each
of the project forecasts was based upon future discounted cash flows, taking
into account the state of development of each in-process project, the cost to
complete that project, the expected income stream, the lifecycle of the product
ultimately developed, and the associated risks.

Aggregate revenue attributable to the IPR&D projects was estimated to peak,
as a percentage of total revenue, in 2001, and decline thereafter through the
end of the life of the IPR&D (2004) as new product technologies are expected to
be introduced by ProTix. The costs to complete the IPR&D efforts were estimated
to be as follows: $402,000 for automated ticketing solutions and $108,000 for
regional ticketing services. For both of the project categories, a risk-adjusted
discount rate of 20% was utilized to discount projected cash flows.

CALIFORNIA TICKETS.COM, INC.

In April 1999, the Company acquired all of the outstanding capital stock of
CA Tickets.com, and in May, 1999 the Company changed its name to Tickets.com,
Inc. The purchase price equaled approximately $41.5 million, consisting of the
issuance of 2,678,577, 5,782,241 and 3,928,386 shares of the Company's Series A1
convertible preferred stock, Series C convertible preferred stock and common
stock, valued at estimated fair value of $2.09, $2.21, and $4.50 per share,
respectively. The Company determined the estimated fair value based on recent
private placements of its Series D preferred stock (see Note 11). In addition,
the Company assumed all of the outstanding options to purchase CA Tickets.com
common stock by issuing to the holders of such options, options to purchase
1,507,341 shares of the Company's common stock. The acquisition was accounted
for as a purchase. In March 1999, the Company made a $3.7 million loan for
general working capital purposes to CA Tickets.com, primarily to fund the
purchase of TicketStop, Inc. This loan was incorporated as an element of the CA
Tickets.com purchase price upon the close of the acquisition. The operating
results of the acquired company have been included in the accompanying
consolidated financial statements from the date of acquisition.

The Company has allocated the excess purchase price over the fair value of
net tangible assets acquired to the following identifiable intangible assets:
existing product technology, domain names, and assembled workforce, goodwill and
IPR&D. Goodwill is amortized on a straight-line basis over its estimated useful
life of 10 years. An allocation to IPR&D of $3,540,000 represents the estimated
fair value related to incomplete projects, which reflects the risk-adjusted cash
flows and the stage of completion. At the date of the acquisition, the projects
associated with the IPR&D efforts had not yet reached technological feasibility
and had no alternative future uses. Accordingly, these costs were expensed. At
the acquisition date, California Tickets.com was in the process of completing
customization and development of its web site and transaction processing
systems. Since the Company already had these systems in place, the projects,
which were in varying stages of completion, were of no continuing value.

In making its purchase price allocation, the Company considered present
value calculations of income, an analysis of project accomplishments and
completion costs, an assessment of overall contributions, as well as project
risks. The values assigned to IPR&D were determined by estimating the costs to
develop the purchased technology into commercially viable products, estimating
the resulting net cash flows from each project, excluding the cash flows related
to the portion of each project that was incomplete at the acquisition date, and
discounting the resulting net cash flows to their present value. Each of the
project forecasts was based upon future discounted cash flows, taking into
account the state of development of each in-process project, the cost to
complete that project, the expected income stream, the lifecycle of the product
ultimately developed, and the associated risks.

Aggregate revenue attributable to the IPR&D projects was estimated to peak,
as a percentage of total revenue in 2001, and decline thereafter through the end
of the life of the in-process research and development in 2003 as new product
technologies were expected to be introduced. The costs to complete the IPR&D
efforts
F-16
<PAGE> 69
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

were estimated to be as follows: $50,000 for ticketing transaction systems and
$83,000 for web site development. The risk-adjusted discount rate used to
discount projected cash flows for both projects was 35%.

TICKETSTOP, INC.

In March 1999, CA Tickets.com acquired all of the outstanding common stock
of TicketStop. The purchase was for cash consideration equaling approximately
$2.3 million, consisting of an up front cash payment of $2.2 million. Additional
consideration, in the form of a contingent cash payment of up to approximately
$400,000, was subject to TicketStop attaining a targeted number of active
clients. In September 1999, California Tickets.com entered into an amendment
with the shareholders of TicketStop whereby the parties agreed to remove the
contingency behind the remaining cash payment, which resulted in approximately
$400,000 of additional goodwill. The acquisition was accounted for as a purchase
and the results of operations have been included in our financial statements
from the date of the CA Tickets.com acquisition. Goodwill is amortized on a
straight-line basis over the estimated useful life of approximately 10 years.

TICKETSLIVE CORPORATION

In March 1999, the Company acquired all of the outstanding capital stock of
TicketsLive. The purchase price equaled approximately $26.0 million, consisting
of the issuance of 5,195,779 shares of Company's common stock, valued at
estimated fair value of $4.50 per share. The Company determined the estimated
fair value based on recent private placements of its Series D preferred stock
(see Note 11). In accordance with the agreement, 573,057 of these shares were
held in escrow to be issued to certain recipients determined by the offering
price of an IPO. In addition, the Company assumed all of the outstanding options
to purchase TicketsLive common stock by issuing to the holders of such options,
options to purchase 581,998 shares of the Company's common stock. The agreement
provided that if the Company did not complete an IPO prior to August 31, 1999
and April 5, 2001, the majority shareholder of TicketsLive may require the
Company to repurchase up to 622,222 and 416,888 shares, respectively, of the
Company's common stock at $9.36 and $9.97 per share, respectively. The
acquisition was accounted for as a purchase. During March 1999, the Company made
a loan to TicketsLive of $1.0 million for general working capital purposes. This
loan was incorporated as an element of the purchase price of TicketsLive upon
the close of the acquisition. The operating results of TicketsLive have been
included in the accompanying consolidated financial statements from the date of
acquisition.

On November 4, 1999, the Company completed an IPO at an offering price of
$12.50. In accordance with the agreement, the 573,057 shares of the Company's
common stock were distributed to the proper recipients. In addition, the
repurchase obligation related to the 622,222 and 416,888 shares of common stock
was eliminated and as of December 31, 1999, these shares are recorded as common
stock at the estimated fair market value at the time of acquisition of $4.50.

The Company has allocated the excess purchase price over the fair value of
net tangible assets acquired to the following identifiable intangible assets:
existing product technology, customer relationships, trade name, assembled
workforce, goodwill and IPR&D. Goodwill is amortized on a straight-line basis
over its estimated useful life of 15 years. An allocation to IPR&D of $1,800,000
represents the estimated fair value related to incomplete projects, which
reflects the risk-adjusted cash flows and the stage of completion. At the date
of the acquisition, the projects associated with the IPR&D efforts had not yet
reached technological feasibility and had no alternative future uses.
Accordingly, these costs were expensed. At the acquisition date, TicketsLive was
conducting development activities associated with the completion of the next
generation of Select, TicketsLive's automated ticketing system. The projects
under development were to increase speed, expand functionality, flexibility and
reporting. Since the Company already had these systems in place, the projects,
which were in varying stages of completion, were of no continuing value.

F-17
<PAGE> 70
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate revenue attributable to the IPR&D projects was estimated to peak,
as a percentage of total revenue, in 2002, and decline thereafter through the
end of the life of the IPR&D in 2005 as new product technologies were expected
to be introduced. The cost to complete the in-process research and development
efforts were estimated to be $596,000. A risk-adjusted discount rate of 25% was
used to discount projected cash flows.

DATACULTURE LTD.

In August 1999, the Company purchased all of the outstanding capital stock
of dataCulture Ltd., a private limited company incorporated under the laws of
England. The total purchase price was L4.0 million, or the equivalent of
approximately $6.4 million as of the acquisition date. The purchase price is
payable L3.0 million at the closing of the acquisition and L1.0 million payable
in 12 equal quarterly installments commencing December 31, 1999. The acquisition
was accounted for as a purchase. Goodwill is amortized on a straight-line basis
over the estimated useful life of approximately 10 years. The operating results
of the dataCulture have been included in the accompanying consolidated financial
statements from the date of acquisition.

LASERGATE SYSTEMS, INC.

In June 1999, Tickets.com entered into a definitive agreement and plan of
merger with Lasergate Systems, Inc., a Florida corporation. On the same day, the
Company additionally entered into a stock purchase agreement with RBB Bank AG,
the majority shareholder of Lasergate, to purchase all of the outstanding shares
of Lasergate stock held by RBB. In June 1999 RBB sold the Company 5,700 shares
of Lasergate preferred stock convertible into 24,818,217 shares of Lasergate
common stock in exchange for 299,796 shares of Tickets.com common stock and
$754,000. In December 1999, under the terms of the definitive agreement, the
Company paid to the shareholders of record of Lasergate common stock, $0.10 per
share for an aggregate amount of $1,704,000 for 15,299,428 shares of common
stock and other closing fees. The acquisition is accounted for as a purchase and
the results of operations of Lasergate are included in the Company's financials
statements, as of the closing of the Merger in December 1999.

Between June 1999 and December 1999, the Company made advances aggregating
$2.3 million to Lasergate pursuant to various promissory notes. These loans were
incorporated as an element of the purchase price upon the close of the
acquisition.

The following pro forma consolidated results of operations for the years
ended December 31, 1998 and 1999 assume that the 1998 acquisition of ProTix and
the 1999 acquisitions of Lasergate, dataCulture, TicketsLive and CA Tickets.com
occurred as of January 1, 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Pro forma revenues.......................................... $ 51,991 $ 52,627
Pro forma net loss.......................................... (59,073) (71,232)
Pro forma basic and diluted loss per share.................. (4.07) (3.31)
</TABLE>

F-18
<PAGE> 71
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, the following pro forma consolidated results of operations for
the year ended December 31, 1997 and 1998 assumes that the ProTix and BASS
acquisitions occurred as of January 1, 1997 (in thousands, except per share
data):

<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Pro forma revenues.......................................... $34,415 $ 35,612
Pro forma net loss.......................................... (9,595) (36,526)
Pro forma basic and diluted loss per share.................. (1.73) (6.03)
</TABLE>

The pro forma results include interest expense on debt issued to finance
the purchases and amortization expense of intangible assets resulting from the
purchases. The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisitions had been completed as of January 1, 1997
and 1998, nor are they indicative of future consolidated results.

The estimated fair value of assets acquired and the liabilities assumed as
of the date of the acquisitions are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- ------------------------------------------------------
PROTIX CA TICKETS.COM TICKETSLIVE DATACULTURE LASERGATE
------- -------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Fair value of identified assets
acquired.............................. $ 3,307 $ 5,635 $ 3,825 $1,653 $ 512
Liabilities assumed..................... (2,108) (7,212) (4,867) (439) (4,184)
Goodwill at acquisition date............ 4,711 39,502 25,242 5,258 7,327
Purchased in-process research &
development........................... 1,600 3,540 1,800 -- --
------- ------- ------- ------ -------
Total consideration............ $ 7,510 $41,465 $26,000 $6,472 $ 3,655
======= ======= ======= ====== =======
</TABLE>

4. EXTRAORDINARY ITEM

In November 1999, the Company paid the balance of the outstanding debt with
a senior lender ("the Bank"). A discount was recorded against the balance of the
note based on the value of the warrants issued to the Bank on a periodic basis
(see Note 11). The amount of the discount was being amortized on a monthly basis
to interest expense. The amount of the discount that remained as of the date the
outstanding debt was paid in full was $3,083,000, which was written off in full
and reported as an extraordinary item for the quarter and year ended December
31, 1999.

5. IMPAIRMENT OF LONG-LIVED ASSETS

During the fourth quarter of 1998 the Company recorded a non-cash
impairment charge of $17,026,149. During 1998, BASS was given notice of
termination by four of its clients, its largest client giving notice during the
fourth quarter of 1998. The loss of these clients prompted an assessment of the
carrying value of the long-lived assets associated with the acquisition of BASS.
Based upon this assessment, the Company determined that certain of the
intangible assets resulting from the BASS acquisition met the test for
impairment, principally goodwill and the noncompete agreements. Accordingly, the
Company has reduced the carrying value of the related long-lived assets to their
estimated fair value. The Company also reviewed the estimated lives of certain
of the Company's long-lived assets which resulted in shortened lives and the
acceleration of amortization expense for certain intangible assets.

6. SEGMENT AND GEOGRAPHIC INFORMATION

The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 establishes new standards for
reporting operating segments of publicly held companies. This approach requires
the Company to present segment information externally the same way
F-19
<PAGE> 72
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

management uses financial data internally to make operating decisions and assess
performance. SFAS No. 131 also requires that all public business enterprises
report information about the revenues derived from the enterprise's products or
services (or groups of similar products and services), about the countries in
which the enterprise earns revenues and holds assets and about major customers
regardless of whether that information is used in making operating decisions.
The Company has two reportable segments: ticketing services and software
services and other. The Company derives revenues and gross profits mainly from
ticketing services and secondarily from software services and other. These
products and services are provided throughout the United States and
internationally to a similar customer base comprised mainly of stadiums,
performing arts centers, museums and professional sports franchises.

The Company provides ticketing services to its clients for the sale and
distribution of the clients' tickets through the Company's and venues' web
sites, telephone sales centers, retail outlets and interactive voice response
system. In addition, the Company can also connect its software licensees to its
web site whereby a licensee can sell its tickets on the Company's web site.
Revenues from ticketing services are derived primarily from convenience fees and
handling fees charged to the purchasers of the tickets.

Software services revenue is comprised mainly of license fees and support
fees for the use of the Company's ticketing software for the sale of tickets
through a clients' box office. Software services revenue additionally includes
revenue recognized in connection with the hardware, installation and training
related to the use of the ticketing software. The Company generates software
services revenue internationally.

The Company has sales to external customers only. There have been no
intersegment sales. The Company evaluates the performance of its operating
segments and allocates resources based on gross profit and therefore, segment
information has been provided at that level. Additionally, assets are not
allocated to specific products and, accordingly cannot be reported by segment.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------
TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL
------------------ ----------------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues................................. $ 9,686 $ 1,961 $ -- $11,647
Gross Profit............................. 1,984 1,250 -- 3,234
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------
TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL
------------------ ----------------- ------ -------
<S> <C> <C> <C> <C>
Revenues................................. $26,558 $ 2,982 $ -- $29,540
Gross Profit............................. 9,403 1,431 -- 10,834
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------------------------------
TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL
------------------ ----------------- ------ -------
<S> <C> <C> <C> <C>
Revenues................................. $27,819 $16,811 $1,287 $45,917
Gross Profit............................. 7,134 7,943 740 15,817
</TABLE>

The following table outlines the revenues and long-lived assets for the
year ended December 31, 1999 and as of December 31, 1999. Revenues and
long-lived assets from foreign operations were significantly less than 10% in
1997 and 1998. Revenues are attributed to countries based on the location of the
customer.

<TABLE>
<CAPTION>
GEOGRAPHIC LOCATION REVENUES LONG-LIVED ASSETS
- ------------------- -------- -----------------
(IN THOUSANDS)
<S> <C> <C>
United States............................................... $41,298 $113,054
Foreign countries........................................... 4,619 267
------- --------
Total............................................. $45,917 $113,321
======= ========
</TABLE>

F-20
<PAGE> 73
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. DETAIL OF SELECTED BALANCE SHEET ACCOUNTS

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of December 31, 1998
and 1999 (in thousands):

<TABLE>
<CAPTION>
USEFUL LIVES 1998 1999
------------ ------ -------
<S> <C> <C> <C>
Computer equipment................................... 3 years $7,714 $14,351
Furniture and fixtures............................... 3 years 990 2,549
Software............................................. 3 years -- 1,281
Leasehold improvements............................... 3 - 5 years 273 772
Vehicles............................................. 3 years 53 111
------ -------
9,030 19,064
Less -- accumulated depreciation..................... (619) (7,901)
------ -------
Property and equipment, net.......................... $8,411 $11,163
====== =======
</TABLE>

Total depreciation and amortization expense was $483,000, $1,947,000 and
$3,935,000 for the years ended December 31, 1997, 1998 and 1999, respectively.

GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets consisted of the following as of December
31, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
USEFUL LIVES 1998 1999
------------- ------- --------
<S> <C> <C> <C>
Goodwill......................................... 10 - 25 years $ 5,768 $ 68,249
Existing technology.............................. 5 years 3,110 11,410
Customer relationships........................... 10 years 650 6,060
Tradenames....................................... 20 years 1,200 7,740
Assembled workforce.............................. 10 years 169 2,337
Noncompete agreements............................ 3 years 887 887
------- --------
11,784 96,683
Less -- accumulated amortization................. (2,741) (9,845)
------- --------
Goodwill and intangible assets, net.............. $ 9,043 $ 86,838
======= ========
</TABLE>

OTHER ASSETS

Other assets consisted of the following as of December 31, 1998 and 1999
(in thousands):

<TABLE>
<CAPTION>
1998 1999
------ -------
<S> <C> <C>
Deposit for contingent consideration........................ $3,432 $ --
Deferred debt financing costs, net.......................... 240 122
Prepaid advertising......................................... -- 13,400
Other....................................................... 791 1,798
------ -------
Other assets................................................ $4,463 $15,320
====== =======
</TABLE>

F-21
<PAGE> 74
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deposit for contingent consideration represented cash held in an escrow
account to be used for payment to the former shareholders of BASS over a
three-year period if BASS net revenues met certain defined minimum targets (see
Note 3).

Prepaid advertising includes $6.7 million of advertising in connection with
an operating agreement entered into with Excite@Home. In connection with
Excite's investment in the Company in October and November 1999, the Company
entered into an agreement to prepay $25.0 million of fees for content and
distribution (see Note 10).

ACCOUNTS PAYABLE

Accounts payable consisted of the following as of December 31, 1998 and
1999 (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Accounts payable, clients................................... $ 8,621 $ 6,854
Accounts payable, other..................................... 1,637 11,396
------- -------
Accounts payable............................................ $10,258 $18,250
======= =======
</TABLE>

Accounts payable, clients represents primarily contractual amounts due for
tickets sold by the Company on behalf of the organizations that sponsor events.

ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of December 31, 1998 and
1999 (in thousands):

<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Payroll and payroll related................................. $1,240 $2,242
Accrued interest............................................ 1,232 31
Other....................................................... 2,790 3,085
------ ------
Accrued liabilities......................................... $5,262 $5,358
====== ======
</TABLE>

8. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consisted of the following as
of December 31, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Senior secured notes with interest rates ranging from prime
(8.50% at December 31, 1999) plus 1.0% to 12.0% fixed,
maturing between October 1, 2003 and October 1, 2004, net
of discount............................................... $15,140 $ --
Convertible note payable to Hill International (successor to
Hill A&E) at 8.0%, due and payable on May 31, 2001........ 3,000 --
Note payable to PSF at an effective rate of 10.0%; maturing
March 31, 2000............................................ 500 --
November 8, 1999 upon the completion of the Subordinated
BASS shareholder notes at prime (8.50% at December 31,
1999) plus 1.5%, secured by certain assets of the Company,
which matured upon the initial public offering............ 5,996 --
Subordinated ProTix shareholder notes at prime (at December
31, 1999) plus 1.0%, secured by certain assets of the
Company, maturing October 16, 1999........................ 1,297 --
</TABLE>

F-22
<PAGE> 75
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Obligations payable to former officers of BASS for
noncompete agreements, bearing interest at 10.0%, secured
by certain assets of the Company, due in equal quarterly
installments beginning December 1997, maturing December
2000...................................................... 583 250
Various capital lease obligations bearing interest ranging
from 8.7% to 29.0%, payable in monthly installments
totaling approximately $101, maturing at various dates
from June 1, 2000 to November 30, 2002.................... 1,365 2,040
Various installment payment agreements in connection with
the purchase of certain property and equipment, bearing
interest ranging from 11.1% to 14.0%, payable in quarterly
installments totaling $31 maturing at various dates from
April 30, 1999 to September 30, 2000...................... 199 89
Installment payment agreement in connection with directors'
and officers' liability insurance, bearing an interest
rate of 7.52%, payable monthly, maturing June 30, 2002.... -- 1,853
------- -------
28,080 4,232
Less -- current portion..................................... (7,848) (2,115)
------- -------
$20,232 $ 2,117
======= =======
</TABLE>

Annual maturities of long-term debt and capital lease obligations as of
December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
2000................................................ $2,026
2001................................................ 1,533
2002................................................ 556
2003................................................ 117
------
$4,232
======
</TABLE>

SENIOR SECURED NOTES

The Company has a Credit Agreement with the Bank, which provides for two
credit facilities aggregating $7.0 million, secured by certain assets of the
Company. The Credit Agreement expires October 1, 2004. The credit facilities
bear interest ranging from prime plus 1.0% to 12.0% fixed. The Credit Agreement
includes financial covenants related to a minimum current ratio, interest
coverage and fixed charge ratio, as defined, among others. As of December 31,
1998, the Company was not in compliance with certain of these financial
covenants. On March 17, 1999 the Company entered into a First Amendment to the
Amended and Restated Credit Agreement (the "First Amendment") with the Bank,
which among other things, amended financial covenants and provided for a waiver
of all instances of default under the provisions of the Credit Agreement. The
First Amendment also required the pay down of $2.0 million of the Senior Secured
Notes. In November 1999, subsequent to the Company's IPO, the Company paid off
the outstanding balance to the Bank (see Note 4). As of December 31, 1999 the
Company has available credit under the credit facilities totaling $7.0 million.

FORMER BASS SHAREHOLDERS

Under the terms of the BASS acquisition, the Company entered into separate
subordinated note agreements with each of the former shareholders of BASS,
aggregating $5,996,000. These notes are subordinated to the Senior Secured
Notes. The notes issued under the BASS purchase agreement are secured equally
and ratably by a security interest in substantially all of the assets of the
Company. The notes may be

F-23
<PAGE> 76
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

prepaid at the Company's option without penalty, and must be repaid upon the
earlier of the closing of an IPO or September 26, 2002. In November 1999,
subsequent to the Company's IPO, the Company paid in full all the notes to the
former BASS shareholders.

9. INCOME TAXES

The Company incurred taxable losses for federal and state purposes for the
years ended December 31, 1997, 1998 and 1999. Accordingly, the Company did not
incur any federal income tax expense for those fiscal years other than the
minimum required taxes for certain state and local jurisdictions. The Company is
subject to minimum income taxes in various states for each corporate entity,
which is reflected in the accompanying consolidated statements of operations.

The significant components of the Company's net deferred tax asset as of
December 31, 1998 and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- --------
<S> <C> <C>
Nondeductible reserves...................................... $ 513 $ 412
Net operating loss carryforwards............................ 7,813 24,306
Other....................................................... 1,130 4,292
Valuation allowance......................................... (9,456) (29,010)
------- --------
Deferred tax asset, net..................................... $ -- $ --
======= ========
</TABLE>

As of December 31, 1999, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $71,089,000, which can be used
to offset taxable income from operations through the year 2019. Additionally,
the Company has net operating loss carryforwards for California income tax
purposes of approximately $32,561,000, which can be used to offset taxable
income from operations through the year 2004.

Under the Tax Reform Act of 1986, the benefits from net operating losses
carried forward may be impaired or limited in certain circumstances. Events
which may cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a
cumulative ownership change of more than 50% over a three-year period. At
December 31, 1999, we were subject to such limitations, in the amount of
approximately $24,200,000 per year. The impact of any additional limitations
that may be imposed for future issuances of equity securities, including
issuances with respect to acquisitions, has not been determined.

A valuation allowance is provided for the deferred tax asset when it is
more likely than not that some portion of the deferred tax asset will not be
realized. The Company has established a full valuation allowance on the
aforementioned deferred tax asset due to the uncertainty of realization.

F-24
<PAGE> 77
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases office space and equipment under various operating
leases that expire at various dates through 2008. Total rent expense under these
operating leases was approximately $625,000, $1,708,000 and $2,578,000 for the
years ended December 31, 1997, 1998 and 1999, respectively. Future minimum
rentals on these operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
2000............................................... $ 3,265
2001............................................... 2,581
2002............................................... 2,444
2003............................................... 2,321
2004............................................... 3,849
-------
$14,460
=======
</TABLE>

OPERATING AGREEMENTS WITH EXCITE@HOME AND COX INTERACTIVE MEDIA.]

In connection with its investment in Tickets.com, (see Note 11) Excite
entered into a letter of intent with Tickets.com, and Cox Interactive Media
entered into a content and distribution agreement with Tickets.com. Under these
agreements, Tickets.com will integrate its event information and ticket
purchasing capabilities on web sites of Excite and Cox Interactive Media and
their affiliates. Pursuant to the letter of intent and in conjunction with the
closing of the sale and issuance of the 6,111,114 shares of Series E Convertible
Preferred Stock in October 1999, the Company paid Excite $25.0 million for
content, advertising and distribution, and must pay other additional fees to
Excite over a period of three years. The content and distribution agreement with
Cox Interactive Media provides that Tickets.com will purchase a minimum of $13.5
million in advertising from Cox Interactive Media over a period of three years.

LITIGATION

On July 23, 1999, Ticketmaster Corporation and Ticketmaster
Online-CitySearch filed a lawsuit against the Company in the United States
District Court for the Central District of California seeking unspecified
damages and a court order to prohibit the Company from, among other things,
linking Internet consumers to internal pages within Ticketmaster's web site. In
addition, the suit alleges that the Company has engaged in other wrongful acts,
such as providing false and misleading information on our web site regarding the
availability of tickets and related information on the Ticketmaster web site and
taking copyrighted information from the Ticketmaster web site for use on the
Tickets.com web site. The suit seeks an injunction to prohibit the Company from
further engaging in any alleged unlawful activity, treble damages, attorneys'
fees and other unspecified damages. In response to the Company's Motion to
Dismiss, Ticketmaster Corporation and Ticketmaster Online-CitySearch filed on
January 7, 2000, a First Amended Complaint which modified their previous
allegations and added two claims alleging violations of the Lanham Act. The
Company filed a Motion to Dismiss the Amended Complaint. Ticketmaster
Corporation and Ticketmaster Online-CitySearch have also filed a Motion for
Preliminary Injunction seeking an order precluding the Company from, among other
things, providing links to Ticketmaster pages. The Company has filed an
opposition and the Court has scheduled a hearing to take place on April 17,
2000. If Ticketmaster Corporation and Ticketmaster Online-CitySearch
successfully assert their claims against the Company, our web site could be
severely impacted. Any injunction could, among other things, eliminate the
Company's ability to directly refer consumers to tickets to events sold by
Ticketmaster at Ticketmaster's web site. The Ticketmaster suit could result in
limitations on how the Company implements its e-commerce strategy, delays and
costs associated with

F-25
<PAGE> 78
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

redesigning the Company's web site and substantial payments to Ticketmaster
Corporation and Ticketmaster Online-CitySearch. In addition, the litigation
could result in significant expenses and diversion of the Company's management's
time and other resources.

TICKETING SERVICE AGREEMENTS

The Company has entered into agreements with terms from one to five years
with clients to provide ticketing services. The terms of certain agreements
require the Company to make aggregate minimum annual payments or payments based
on the number of tickets sold or both. Certain of these agreements require that
the Company provide annual advertising allowances ranging from $5,000 to
$25,000. In addition, certain agreements require the Company's commitment to
purchase agreed-upon seating for events at certain facilities.

11. STOCKHOLDERS' EQUITY (DEFICIT)

On August 4, 1999 the Company amended and restated its certificate of
incorporation increasing the total number of authorized common shares to 270
million and increasing the total number of authorized preferred shares to 90
million.

STOCK SPLIT

In November 1999, the Company effected a 1-for-2.25 reverse stock split for
all common shares, options and warrants. All references in the accompanying
consolidated financial statements to the number of common shares, warrants and
options to purchase common shares, and the per share data have been restated to
reflect the effect of this action. Par value of all common shares was changed to
$.000225 per share. The conversion rate to common of the preferred shares gives
effect to the 1-for-2.25 split.

INITIAL PUBLIC OFFERING

On November 8, 1999 the Company completed its initial public offering of
its common stock $0.000225 par value per share for $12.50 per share. The shares
of common stock sold in the offering were registered under the Securities Act of
1933, as amended on a Registration Statement Form S-1, that was declared
effective on November 3, 1999. All 7,638,333 shares of common stock registered
under the Registration Statement were sold. Of the shares sold, 444,444 were
sold by a selling shareholder. Proceeds from the sale of those shares were not
paid to the Company. The aggregate price of the offering registered and sold by
the Company was $89,924,000. After deduction of underwriting fees and other
offering costs, net proceeds to the Company were $80,896,000.

REDEEMABLE COMMON STOCK

In connection with the Advantix and Fantastix acquisitions, the Company
issued 481,068 and 400,000 shares of common stock subject to redemption,
respectively (see Note 3). As redemption of the common stock was outside of the
control of the Company prior to the IPO, the value attributable to such common
stock in 1998 is presented outside of stockholders' equity. As of November 1999
and upon completion of the IPO, the redemption features were void and these
shares were reclassified to equity as of December 31, 1999.

CONVERTIBLE PREFERRED STOCK

From May 1996 to January 1997, the Company issued 8,440,002 shares of
Series A convertible preferred stock in a private placement to various investors
at $0.49 per share, for net proceeds after stock issuance costs of $4,091,000.
From March 1997 to October 1997 the Company issued 9,499,874 shares of Series B
convertible preferred stock in a private placement to various investors at $1.25
per share, for net proceeds after

F-26
<PAGE> 79
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock issuance costs of $11,156,000. In addition, in May 1998 the Company issued
11,597,114 shares of Series C convertible preferred stock in a private placement
to various investors at $1.75 per share, for net proceeds after stock issuance
costs of $19,990,000.

On March 22, 1999 the Company issued 9,477,655 shares of Series D
convertible preferred stock in a private placement with institutional investors
at $2.25 per share for total proceeds net of issuance costs of $21,280,000. On
May 17, 1999 the Company issued 3,855,680 shares of Series D convertible
preferred stock in a private placement for $2.25 per share for total proceeds
net of issuance costs of $8,670,000.

The Series A, Series B, Series C and Series D convertible preferred stock
had liquidation preferences, voting rights equivalent to, or for certain
matters, superior to, common stock, and did not accrue dividends unless declared
by the Company. At the option of the holder, each share of the Series A, Series
B, Series C and Series D convertible preferred stock could be converted into
.4444 of a share of common stock based on the 2.25 reverse split of the
Company's common stock. Such conversion was automatic upon the IPO. The
conversion rate is subject to adjustment under certain circumstances pursuant to
antidilution provisions. No dividends have been declared on convertible
preferred stock through December 31, 1999.

In August 1999, the Company issued and sold 3,333,332 shares of Series E
convertible preferred stock to Excite, Inc. ("Excite") and Cox Interactive
Media, Inc. ("Cox Interactive Media") for an aggregate purchase price of $30.0
million or $9.00 per share, pursuant to a stock purchase agreement. In October
1999 Excite and Cox Interactive Media purchased 6,111,114 additional shares of
the Company's Series E convertible preferred stock for an aggregate purchase
price of $55.0 million or $9.00 per share. The Series E convertible preferred
stock has a liquidation preference, voting rights equivalent to or for certain
matters, superior to, common stock, and does not accrue dividends unless
declared by the Company. Based on a 1-for-2.25 reverse split of the Company's
common stock and the Company's IPO price of $12.50 per share, each share of
Series E convertible preferred stock was converted into .72 of a share of common
stock.

As of the closing of the IPO, all shares of preferred stock were converted
into 29,613,770 shares of common stock.

COMMON STOCK WARRANTS

In connection with the Senior secured notes (see Note 8), the Company
issued warrants to the Bank to purchase 177,778 shares of the Company's common
stock at an exercise price of $0.0225 per share. The warrants were subject to
certain antidilution provisions and, as a result of such provisions, such
warrants totaled 334,588 and 615,220 as of December 31, 1998 and 1999,
respectively. The warrants expire eight years from the date of issuance or as of
the closing of an IPO, whichever is earlier. In November, 1999 concurrent with
the completion of the Company's IPO, the Bank notified the Company their intent
to exercise the warrants subject to the approval by both parties of the
calculation of the number of shares to be issued. On January 21, 2000 the Bank
614,426 shares stock. Under the terms of the warrants, the Bank is entitled to
receive warrants for the purchase of shares of common stock equivalent to
1.19725% of the outstanding common stock of the Company, as defined, which
includes securities convertible into common stock and common stock equivalents.
As a result of this provision, the Company was be required to issue additional
warrants to the Bank concurrent with any future issuances of common stock,
securities convertible into common stock, or common stock equivalents, subject
to certain exceptions as provided in the warrants. The warrants were also
subject to an adjustment by an additional 0.23945% of the outstanding common
stock of the Company, as defined, on each anniversary date of the warrant
through September 26, 2000 if the Company had not yet completed an IPO, and are
subject to a put option, whereby the Company would be required to repurchase the
warrants, or the related common stock should the warrants be exercised, at a
price of $11.25 per share. The put option was exercisable by the Bank beginning
on the sixth anniversary of the Agreement, and expires on the eighth anniversary
of the Agreement or as of an IPO, whichever is earlier. The warrants were
initially recorded at fair value, and the Company provides for accretion of the
warrants to the
F-27
<PAGE> 80
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

repurchase price through a periodic charge to retained earnings. The issuance of
the warrants in conjunction with the incurrence of the debt resulted in the
allocation of approximately $424,000 and $917,000 of value to the warrants and a
corresponding discount on the debt, as of December 31, 1997, 1998 and 1999,
respectively, which was to be amortized over the life of the related debt. In
November 1999, in conjunction with the early repayment of the Senior Secured
Notes, the remaining unamortized discount was written off and recorded as an
extraordinary item (see Note 4).

In connection with the acquisition of BASS, the Company issued warrants to
purchase 1,332,423 shares of the Company's common stock to the sellers of BASS
at an exercise price of $4.50 per share. The estimated fair value attributable
to the warrants was included in the purchase price calculation for BASS. The
warrants are fully vested, and all warrants were exercised upon the close of the
Company's IPO.

In connection with the acquisition of ProTix, the Company issued warrants
to purchase 637,964 shares of common stock to the sellers of ProTix at an
exercise price of $0.0225 per share. The Company entered into an amendment
subsequent to December 31, 1998, whereby 478,477 warrants were vested and the
remaining 159,487 warrants were cancelled. The warrants were recorded at fair
market value of the underlying common stock at the time of vesting of $4.50 per
share for a total value of $2,150,000. The value of the warrants was recorded as
additional purchase price related to the acquisition of ProTix.

In May 1999, the Company entered into an agreement with a significant
shareholder, whereby the shareholder agreed to purchase up to an aggregate of
5,333,334 shares of convertible preferred stock for an aggregate purchase price
of $12.0 million, under certain conditions. The shares would only be purchased
in the event that the Company requires additional capital to satisfy and
discharge its obligations as they become due. The agreement expired upon the
IPO. Pursuant to the agreement, the Company issued to the shareholder a warrant
for the purchase of up to 222,222 shares of common stock at an exercise price of
$5.06 per share, with a term of 10 years.

COMMON STOCK WARRANTS AND OPTIONS FOR SERVICES

In September and October 1999 the Company entered into various agreements
with entertainment organizations and entertainers to provide the Company with
tickets for sale on its web site. In connection with these arrangements, the
Company issued 332,778 warrants to purchase its common stock at $2.25 per share.
The warrants are fully vested and are first exercisable one year after date of
issue.

In October 1999 we issued options to purchase 167,333 shares of common
stock at an exercise price of $2.25 per share to various consultants in the live
entertainment industry. The options were issued in connection with their
services to promote our web site and assist in providing access to additional
tickets for sale on our web site. The options were fully vested and exercisable
at the date of issuance.

In connection with these options and warrants, we recorded noncash
consulting expense of $3,948,000 in 1999.

12. EMPLOYEE BENEFIT PLANS

In October 1996, the Board of Directors approved the 1996 Stock Option Plan
(the "1996 Plan"). The 1996 Plan authorized the issuance of up to 1,333,333
shares of common stock to various employees. The exercise price is determined by
the compensation committee of the Board of Directors and may not be less than
100 percent of the fair market value of the Company's common stock at the date
of grant.

Options to acquire an aggregate of 1,035,778 shares of common stock under
the 1996 Plan at an exercise price of $.90 per share were granted to employees
during the period from October 1996 through August 1997. The options generally
vest quarterly over a four-year period and have a term of 10 years.

F-28
<PAGE> 81
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In September 1997, the Board of Directors approved the 1997 Stock Option
Plan (the "1997 Plan"). The 1997 Plan authorized the issuance of up to 1,333,256
shares of common stock to various employees. The exercise price is determined by
the compensation committee of the Board of Directors and may not be less than
100% of the fair market value of the Company's common stock at the date of
grant.

Options to acquire an aggregate of 1,333,333 shares of common stock under
the 1997 Plan at an exercise price of $2.25 per share were granted to employees
during the period from October 1997 through June 1998. The options generally
vest quarterly over a four-year period and have a term of 10 years.

In September 1998, the Board of Directors approved the 1998 Stock Incentive
Plan (the "1998 Plan"). The 1998 Plan authorized the issuance of up to 4,395,280
shares of common stock to various employees. The exercise price is determined by
the compensation committee of the Board of Directors and may not be less than
100% of the fair market value of the Company's common stock at the date of
grant.

Options to acquire an aggregate of 2,155,622 shares of common stock under
the 1998 plan at an exercise price of $3.38 per share were granted to employees
during the period from July 1998 through December 1998. The options generally
vest quarterly over a four-year period and have a term of 10 years.

In September 1998, in connection with the approval of the 1998 Plan, the
reserve of 1,333,333 shares authorized for issuance under the 1997 Plan,
together with all outstanding options under the 1997 Plan, were transferred to
the 1998 Plan and the 1997 Plan was terminated.

In May 1999, the Board of Directors approved the 1999 Stock Incentive Plan.
The 1999 plan authorized the issuance of up to 10,506,313 shares of common stock
to various employees. The exercise price is determined by the Compensation
Committee of the Board of Directors and may not be less than 100% of the fair
market value of the Company's common stock at the date of grant.

Options to acquire an aggregate of 5,361,961 shares of common stock under
the 1999 plan at an exercise price ranging from $4.50 to $19.635 were granted to
employees during the period from April through December. The options generally
vest quarterly over a four-year period and have a term of 10 years.

In May 1999, in connection with the approval of the 1999 plan, a reserve of
10,506,313 was established which consists of the number of shares estimated to
be carried over from the Special Executive Stock Option Plan, 1998 plan, 1997
plan, 1996 plan and director's plan plus an additional increase of approximately
1,066,667 shares. The share reserve under the 1999 Stock Incentive Plan will
automatically increase on the first trading day in January each year, beginning
with calendar year 2000, by an amount equal to 3.5% of the total number of
shares of common stock outstanding on the last trading day of December in the
prior year, but in no event will this annual increase exceed 2,222,222 shares.
In addition, no participant in the 1999 Stock Incentive Plan may be granted
stock options or direct stock issuances for more than 444,444 shares of common
stock in any calendar year.

F-29
<PAGE> 82
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock option activity for the years ended December 31, 1997, 1998 and 1999
is as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
-------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Outstanding as of December 31, 1996.................... 888 $ .90
Granted.............................................. 1,406 2.12
Exercised............................................ (14) .90
Cancelled or expired................................. (95) .90
------ -----
Outstanding as of December 31, 1997.................... 2,185 1.69
Granted.............................................. 2,412 3.20
Exercised............................................ (14) .92
Cancelled or expired................................. (58) 1.76
------ -----
Outstanding as of December 31, 1998.................... 4,525 2.48
Granted.............................................. 5,412 9.23
Grants assumed in purchase of CA Tickets.com........... 1,507 0.59
Grants assumed in purchase of TicketsLive.............. 580 1.28
Exercised............................................ (1,307) 0.36
Cancelled or expired................................. (1,140) 7.55
------ -----
Outstanding as of December 31, 1999.................... 9,577 5.56
Options exercisable as of December 31, 1999............ 3,334 2.82
====== =====
</TABLE>

For pro forma purposes under SFAS 123 the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model.
For options granted prior to 1999 which would have vested prior to the Company's
IPO date weighted average assumptions used are: a dividend yield of 0.0%;
expected volatility of 0.0%; risk-free rate of 6.40% for 1997 and 6.23% for 1998
and expected lives of five years. Because the Company completed an IPO in 1999,
the weighted average assumptions used in the Black Scholes options pricing model
were modified on a prospective basis. The Company has not and does not intend to
pay dividends, therefore the dividend yield remained at 0.0%. Since the Company
is now public a volatility rate was now used in the model. Because the Company
has been public only a short time, volatility was calculated using a similar
company in the same industry. The calculated volatility rate used was 83.9%.
Employee behavior is expected to change dramatically now that the shares owned
by employees are available to trade on the open market. Therefore, the Company
modified the assumption used in the model for options issued in 1999 to a cliff
vesting approach with holding periods from 6 months to 2 years.

The pro forma effect of adopting the measurement principles prescribed
under SFAS No. 123 for the years ended December 31, 1997, 1998 and 1999 is as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Pro forma net loss.................................. $(6,189) $(35,568) $(72,748)
Pro forma basic and diluted EPS..................... (1.19) (6.20) (3.87)
</TABLE>

Pro forma results of operations costs may not be representative of that to
be expected in future years.

1999 EMPLOYEE STOCK PURCHASE PLAN

The 1999 Employee Stock Purchase Plan was approved by stockholders in
October 1999 and became effective on November 3, 1999. The plan is designed to
allow eligible employees (and eligible employees of

F-30
<PAGE> 83
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

our subsidiaries) to purchase shares of common stock at semi-annual intervals,
with their accumulated payroll deductions.

Initially, 666,667 shares of our common stock have been reserved for
issuance. This reserve will automatically increase on the first trading day in
January each year, beginning in calendar year 2000 by an amount equal to 1.0% of
the total outstanding shares of our common stock on the last trading day in
December of the prior year. In no event will the annual increase exceed 666,667
shares.

Employees who work more than 20 hours per week for more than five calendar
months per year are eligible. The plan consists of a series of 2-year offering
periods. Purchases occur on the last business day of January and July. Eligible
employees may enter the offering at the commencement of any new 6-month purchase
period.

A participant may contribute up to 10% of cash earnings through payroll
deductions. The price paid is equal to 85% of the fair value per share on the
participant's entry date into the offering period or, if lower, 85% of the fair
market value on the purchase date. On any purchase date, the maximum shares
which may be purchased by an employee is 533 shares and no more than 266,667
shares may be purchased in total by all participants. The plan terminates no
later than the last business day of July 2009.

401(k) PLAN

The Company maintains a defined contribution benefit plan (the "401(k)
Plan") covering substantially all of its employees. Company contributions to the
401(k) Plan are voluntary and at the discretion of the Company. There were no
matching Company contributions for each of the three years in the period ended
December 31, 1997, 1998 and 1999.

13. SUBSEQUENT EVENTS

FIRST CALL INTERNATIONAL, LTD. (UNAUDITED)

In February 2000, the Company signed a letter of intent to combine
operations with First Call International, Ltd., a privately held ticketing
services and software provider based in the United Kingdom. Under the terms of
the letter of intent, the Company will commence a public offering registered
with the Securities and Exchange Commission to exchange between 7.6 million and
9.3 million shares of Tickets.com's common stock for all of First Call's
outstanding capital stock. Under the letter of intent, the Company's common
stock issued in the transaction will be valued at the average closing price over
a 30-day period prior to the effective date of the registration statement
relating to the offer.

In addition to standard closing conditions, the exchange offer is subject
to the negotiation and execution of a definitive agreement providing for the
transaction, and the subsequent acceptance of the exchange offer by holders of
First Call shares. We anticipate that the acquisition would be accounted for
under the purchase method of accounting.

TICKETMASTER LITIGATION

On March 27, 2000 the Court dismissed four of the six claims in the Amended
Complaint. Ticketmaster has ten days from such date in which to file a Second
Amended Complaint.

ASCOTT GROUP, INC. LITIGATION

On February 28,2000 the Company was served with a complaint filed by Ascott
Group, Inc., in the Superior Court of the State of California, County of San
Diego, alleging, among other things, that it wrongfully refused to transfer
shares of Tickets.com Common Stock to the plaintiff pursuant to a stock purchase
agreement between the plaintiff and certain of our shareholders. The complaint
seeks actual

F-31
<PAGE> 84
TICKETS.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

damages in the amount of $7.5 million as well as exemplary damages. Management
believes the suit to be without merit and intends to vigorously defend the
complaint. The Company has not yet determined the likelihood of an unfavorable
outcome or an estimate of the amount or range of potential loss.

14. QUARTERLY INFORMATION FOR 1998 AND 1999

<TABLE>
<CAPTION>
1999
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- ----------- ------------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues...................................... $ 6,578 $ 12,700 $ 13,808 $ 12,831
Cost of services.............................. 4,475 8,067 8,730 8,828
------- ----------- -------- --------
Gross profit.................................. 2,103 4,633 5,078 4,003
Operating expenses............................ 7,344 21,260 19,717 30,098
------- ----------- -------- --------
Loss from operations.......................... (5,241) (16,627) (14,639) (26,095)
Other expenses(b)............................. 805 660 181 (731)
------- ----------- -------- --------
Net loss before extraordinary item............ (6,046) (17,287) (14,820) (25,364)
Extraordinary item(c)......................... -- -- -- (3,083)
------- ----------- -------- --------
Net loss...................................... $(6,046) $ (17,287) $(14,820) $(28,447)
======= =========== ======== ========
Basic and diluted net loss per share before
extraordinary item.......................... $ (.95) $ (1.52) $ (.96) $ (.63)
Basic and diluted net loss per share from
extraordinary item.......................... -- -- -- (.08)
Basic and diluted net loss per share.......... $ (.95) $ (1.52) $ (.96) $ (.71)
Weighted average common shares outstanding.... 6,333 11,357 15,413 40,045
</TABLE>

<TABLE>
<CAPTION>
1998
-------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- ------------ ------------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues...................................... $ 6,053 $ 7,821 $ 8,252 $ 7,414
Cost of services.............................. 3,333 5,123 4,897 5,353
------- ------- ------- --------
Gross profit (loss)........................... 2,720 2,698 3,355 2,061
Operating expenses............................ 4,735 5,419 6,393 27,121
------- ------- ------- --------
Loss from operations.......................... (2,015) (2,721) (3,038) (25,060)
Other expenses(b)............................. 603 532 403 489
------- ------- ------- --------
Net loss...................................... (2,618) (3,253) (3,441) (25,549)
Basic and diluted net loss per share.......... $ (.50) $ (.55) $ (.58) $ (4.25)
Weighted average common shares outstanding.... 5,199 5,917 5,969 6,013
</TABLE>

- ----------------
(a) Includes historical financial data for Bay Area Seating Service, ProTix,
California Tickets.com, TicketsLive, dataCulture and Lasergate from the
dates of acquisition.

(b) Other expenses include principally interest expense, net of interest income,
and to a lesser degree, minority interest and provision for income taxes.

(c) The extraordinary item reflects the non cash interest expense recorded
related to the write off of note discount in connection with the early
retirement of approximately $14.1 million in long-term debt.

F-32
<PAGE> 85

TICKETS.COM, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999
------------------ ------------------
<S> <C> <C>
Allowance for doubtful accounts............................ $ (284,343) $ (512,764)
Beginning Balance........................................ -- --
Additions.................................................. -- --
Charged to costs and expenses............................ (32,931) (149,854)
Charged to other accounts................................ (12,915) (17,331)
Deductions/write-offs.................................... 75,067 241,091
------------ ------------
Ending Balance............................................. $ (255,122) $ (438,858)
============ ============
</TABLE>

II-1
<PAGE> 86

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Company (previously filed as Exhibit 3.3 to the Company's
Registration Statement on Form S-1 declared effective
November 3, 1999 (File No. 333-79709) and incorporated by
reference herein)
3.2 Amended and Restated Bylaws of the Company (previously filed
as Exhibit 3.4 to the Company's Registration Statement on
Form S-1 declared effective November 3, 1999 (File No.
333-79709) and incorporated by reference herein)
4.1* Specimen certificate representing shares of common stock of
the Company
10.1* Form of Indemnification Agreement between the Company and
each of Howard L. Morgan, Janice L. Richter, James A.
Caccavo, Peter Chernin, John M. Markovich, W. Thomas Gimple,
Mardan M. Afrasiabi, Nicholas Sinacori, William E. Ford,
Thomas Pascoe and Michael R. Rodriguez
10.2* 1999 Stock Incentive Plan, together with form of Stock
Option Agreement (and related Notice of Exercise of Option),
Stock Issuance Agreement and Notice of Grant of Option
10.3* 1999 Employee Stock Purchase Plan
10.4* 1998 Stock Incentive Plan, together with form of Stock
Option Agreement, Stock Purchase Agreement and Stock
Issuance Agreement
10.5* 1997 Stock Option Plan (California and Other Employees),
together with form of Nonstatutory Stock Option Agreement
(and related Notice of Exercise of Nonstatutory Stock
Option), Incentive Stock Option Agreement (and related
Notice of Exercise of Incentive Stock Option), Stock
Purchase Agreement and Stock Issuance Agreement
10.6* 1997 Non-Employee Director's Option Plan, together with form
of Stock Option Agreement
10.7* 1996 Stock Option Plan, together with form of Nonstatutory
Stock Option Agreement (and related Notice of Exercise of
Nonstatutory Stock Option), Incentive Stock Option Agreement
(and related Notice of Exercise of Incentive Stock Option),
Stock Purchase Agreement and Stock Issuance Agreement
10.8* Fourth Amended and Restated Investor Rights Agreement among
the Company and the stockholders named therein, dated May
17, 1999
10.8.1* Fifth Amended and Restated Investor Rights Agreement among
the Company and the stockholders named therein, dated August
4, 1999.
10.9* Agreement dated as of May 21, 1999 between the Company and
Karen S. Goetz
10.10* Agreement and Plan of Merger and Reorganization by and among
the Company, Advantix Acquisition Corp., Tickets.com, Inc.
(n/k/a California Tickets.com, Inc.) and certain of its
stockholders dated as of January 26, 1999
10.11* Agreement and Plan of Merger and Reorganization by and among
the Company, Advantix Acquisition II Corp., TicketsLive
Corporation, and certain of its stockholders dated as of
March 18, 1999
10.12* Stock Purchase Agreement by and among the Company, ProTix,
Inc. and certain of its shareholders effective as of October
16, 1998
10.13*+ Stock Purchase Agreement by and among the Company, Bay Area
Seating Service, Inc. and certain of its shareholders
effective as of September 18, 1997
10.14* Agreement by and between the Company and RBB Bank AG dated
as of January 24, 1999, as amended
10.15* Employment Agreement between W. Thomas Gimple and the
Company effective as of April 29, 1999
</TABLE>

E-1
<PAGE> 87

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
10.16* Employment Agreement between John M. Markovich and the
Company effective as of April 29, 1999
10.17* Employment Agreement between Thomas R. Pascoe and the
Company effective as of April 29, 1999
10.18* Employment Agreement between James A. Caccavo and the
Company effective as of May 17, 1999
10.19* Employment Agreement between Karen S. Goetz and the Company
dated as of April 21, 1999
10.20*+ Commercial Application Partner Agreement by and between the
Company, Advantix (Ohio), Inc., Bay Area Seating Service,
Inc. and Sybase, Inc. dated as of April 6, 1998
10.21*+ Merchant Agreement dated as of March 1, 1999 by and between
GeoCities and the Company
10.22*+ Sponsorship Agreement by and between the Company and
MP3.com., Inc. dated February 17, 1999
10.23*+ Agreement dated as of November 1, 1998, by and between
International Merchandising Corporation and the Company, as
amended
10.24 Reserved
10.25* Lease Agreement between Sierra Pacific Properties, Inc. and
Bay Area Seating Service, Inc. dated December 29, 1989, and
amendments thereto
10.26* Lease Agreement by and between ProTix, Inc. and Guinea Road
Associates dated January 30, 1995
10.27* Lease Agreement by and between Advantix (Ohio), Inc. and
Playhouse Square Foundation dated October 1, 1997
10.28*+ Channel Partner Agreement dated as of April 20, 1999 by and
between Sitematic Corporation and the Company
10.29* Lease Agreement between the Company and AGL Investments No.
5 Limited Partnership dated July 23, 1999.
10.30*+ Content and Distribution Agreement between the Company and
Cox Interactive Media, Inc. dated as of August 4, 1999
10.31*+ RealName Address Prefix Agreement by and between the Company
and Centraal Corporation (n/k/a RealNames Corporation) dated
as of July 23, 1999
10.32*+ Letter of Intent between the Company and Excite@Home dated
as of August 4, 1999
10.33* Amendment to Excite@Home Tickets.com Letter of Intent by and
between the Company and Excite, Inc. dated as of September
20, 1999
10.34* Separation Agreement dated as of August 9, 1999 by and
between the Company and James A. Caccavo
10.35* Special Executive Stock Option Plan
10.36* Employment Agreement dated as of October 1, 1998 by and
between the Company and Andrew Dolich
10.37* Agreement and Plan of Merger by and among the Company,
Advantix Acquisition Corp. and Lasergate Systems, Inc. dated
as of June 21, 1999
10.38* Letter Agreement dated as of May 28, 1999 between the
Company and General Atlantic Partners
10.39* Warrant Issuance Agreement dated as of August 5, 1999 by and
among the Company and the persons named therein
</TABLE>

E-2
<PAGE> 88

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
10.40* Agreement dated January 24, 1999 by and between the Company
and RBB Bank, AG, as amended June 21, 1999
21.1* List of Subsidiaries
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
</TABLE>

- ---------------
* This exhibit was previously filed as an exhibit to the Company's Registration
Statement on Form S-1 declared effective November 3, 1999 (File No. 333-79709)
under the same exhibit number, and is incorporated by reference herein.

+ Confidential treatment has been granted by the Securities and Exchange
Commission with respect to portions of this exhibit. Such portions have been
omitted from this filing and have been filed separately with the Securities
and Exchange Commission.

E-3

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the
incorporation by reference of our report dated February 11, 2000 included in
this Form 10-K, into Tickets.com, Inc.'s previously filed Registration
Statement on Form S-8, No. 333-91883, dated December 1, 1999.

ARTHUR ANDERSEN LLP

Orange County, California
March 27, 2000

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 94,173,000
<SECURITIES> 0
<RECEIVABLES> 7,780,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122,459,000
<PP&E> 11,163,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 235,780,000
<CURRENT-LIABILITIES> 30,141,000
<BONDS> 0
0
0
<COMMON> 13,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 235,780,000
<SALES> 0
<TOTAL-REVENUES> 45,917,000
<CGS> 0
<TOTAL-COSTS> 30,100,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,958,000
<INCOME-PRETAX> (63,488,000)
<INCOME-TAX> 29,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,600,000)
<EPS-BASIC> (3.55)
<EPS-DILUTED> (3.55)

</TABLE>