KNOT INC, 424B1, 1999-12-02

KNOT INC
424B1, 1999-12-02
PERIODICALS: PUBLISHING OR PUBLISHING & PRINTING

Previous: FUTURELINK CORP, 8-K/A, 1999-12-02

Next: KEYSPAN CORP, 8-K, 1999-12-02

<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-87345

3,500,000 SHARES

[THE KNOT LOGO]

COMMON STOCK
------------------

Prior to this offering, there has been no public market for our common
stock. Our common stock has been approved for listing on The Nasdaq Stock
Market's National Market under the symbol "KNOT."

The underwriters have an option to purchase a maximum of 525,000 additional
shares to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 4.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS
PRICE TO AND PROCEEDS TO
PUBLIC COMMISSIONS THE KNOT
----------- ------------ -----------
<S> <C> <C> <C>
Per Share....................................... $10.00 $0.70 $9.30
Total........................................... $35,000,000 $2,450,000 $32,550,000
</TABLE>

Delivery of the shares of common stock will be made on or about December 7,
1999.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

HAMBRECHT & QUIST
SALOMON SMITH BARNEY

The date of this prospectus is December 1, 1999.
<PAGE> 2

INSIDE FRONT COVER:

- Background: photo of bride and groom.

- Bottom half of page contains centered text reading: "How do I get her
ring size?"; "Where do I seat my father's 2nd wife's children?"; "How can
I find a photographer from 1,500 miles away?"; "Can my brother be my
bridesmaid?"; "How can we combine Jewish and Scottish traditions?"; When
do we send out the invitations?"; "Is anyone else having cold feet?";
"What if we want fishing rods instead of flatware?"; "Have any exotic
honeymoons for under $3,000?"; "How do you tie a bow tie?"; "How do we
tell guests where we're registered?"; and "How do I make this feeling
last forever?"

- At bottom of page: "the knot, the new word in weddings; advice. ideas.
relief. shopping."

GATEFOLD:

- Title text reading "the new word in weddings . . . the knot" (across top
of both pages of gatefold).

- Centered on gatefold is The Knot's home page screen shot displaying a
link to The Knot's Ultimate Checklist, links to The Knot's areas, links
to The Knot Registry, links to "This Week's Features", links to planning
tools, and a link to The Knot Shop.

- Surrounding The Knot's home page screen are overlays of photos of brides,
grooms, friends and family.

- Right side of gatefold lists services and information provided by The
Knot Web site. Text reads: "Online and Offline All The Time", "Inspiring
Ideas", "Up-to-date Etiquette", "Online/800# Gift Registry", "Personal
Planning Tools", "Nationwide Vendor Listings", "Active Chat Rooms",
"Wedding Supply Shopping", "Honeymoon Travel Agent", "Thousands of
Editorial Articles", "15,000 Gown Pictures", "10,000 Gown Gifts", and
"395,000 Registered Couples".

- Bottom right hand corner contains The Knot's Web site address and the
words "open all night".
<PAGE> 3

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................. 1
RISK FACTORS........................ 4
FORWARD-LOOKING STATEMENTS.......... 19
TRADEMARKS.......................... 19
ASSUMPTIONS......................... 19
USE OF PROCEEDS..................... 20
DIVIDEND POLICY..................... 20
CAPITALIZATION...................... 21
DILUTION............................ 22
SELECTED FINANCIAL DATA............. 23
UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS........... 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 25
BUSINESS............................ 38
MANAGEMENT.......................... 56
CERTAIN TRANSACTIONS................ 68
PRINCIPAL STOCKHOLDERS.............. 70
DESCRIPTION OF CAPITAL STOCK........ 72
SHARES ELIGIBLE FOR FUTURE SALE..... 75
UNDERWRITING........................ 77
NOTICE TO CANADIAN RESIDENTS........ 80
LEGAL MATTERS....................... 82
EXPERTS............................. 82
WHERE YOU CAN FIND ADDITIONAL
INFORMATION....................... 82
INDEX TO FINANCIAL STATEMENTS....... F-1
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL DECEMBER 26, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND IN CONNECTION WITH UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

i
<PAGE> 4

PROSPECTUS SUMMARY

Because this is only a summary, it does not contain all of the information
that may be important to you. You should read the entire prospectus, including
"Risk Factors" and the financial statements and the notes to the financial
statements, before deciding to invest in our common stock. Information contained
on our online sites does not constitute part of this prospectus. References in
this prospectus to "The Knot," "we," "our" and "us" refer to The Knot, Inc.

THE KNOT, INC.

OUR BUSINESS

The Knot is the leading online destination targeting the wedding market.
Weddings are major milestone events and consumers tend to allocate significant
budgets to their weddings and related purchases. According to an independent
research report, the domestic wedding market generates over $45 billion in
retail sales annually.

Our easy-to-use online sites provide full-service offerings for couples
planning their weddings. We provide future brides and grooms with comprehensive
content, including thousands of articles on wedding planning organized by topic
and a database of local wedding vendors in 52 markets nationwide. Our sites also
feature numerous interactive services and personalized planning tools. By
providing hosted chats and message boards, we create an online community where
brides and grooms can interact. We offer consumers a convenient place to
purchase a broad range of wedding-related items through our online gift
registry, shops for wedding supplies and travel agency. We also author a series
of books and publish a semiannual gown guide that provide cross-promotional
opportunities and increase our brand awareness and our online audience.

We provide advertisers and vendors with targeted access to couples actively
seeking information and making meaningful buying decisions relating to all
aspects of their weddings. We receive revenue primarily from sponsorship and
advertising contracts and production contracts related to the development of
online sites and tools. We also generate revenue from the sale of merchandise,
publishing and the sale of travel packages. For the nine months ended September
30, 1999, sponsorship, advertising and production revenues represented 65% of
our net revenues.

In September 1999, we generated over 15.4 million page views on our Web
site compared to 2.5 million page views in December 1998. We are currently
enrolling as members an average of over 1,000 new couples per day.

OUR STRATEGY

Our strategy is to expand our position as the leading online resource
providing comprehensive wedding planning information, products and services by:

- building strong brand recognition of The Knot;

- aggressively growing our membership base and increasing member usage;

- providing a full-service shopping solution to make the wedding planning
process more convenient, efficient and enjoyable;

- generating multiple revenue streams; and

- pursuing strategic alliances and acquisitions.
1
<PAGE> 5

OUR OFFICES

Our business was incorporated on May 2, 1996. Our principal executive
offices are located at 462 Broadway, 6th Floor, New York, New York 10013. Our
telephone number is (212) 219-8555. The address of our Web site is
www.theknot.com. We are also located on America Online (keywords "Knot" and
"weddings").

THE OFFERING

<TABLE>
<S> <C>
Common stock offered................................. 3,500,000 shares
Common stock to be outstanding after this offering... 14,097,612 shares
Use of proceeds...................................... For general corporate purposes, capital
expenditures and working capital.
</TABLE>

The number of shares of common stock to be outstanding after this offering
is based on our shares outstanding as of December 1, 1999. This information
excludes 3,849,868 shares of common stock reserved for issuance under our 1999
Stock Incentive Plan, of which 1,606,406 shares are issuable upon the exercise
of stock options outstanding as of December 1, 1999, and 2,066,667 shares of
common stock issuable upon the exercise of warrants outstanding as of December
1, 1999.
2
<PAGE> 6

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

<TABLE>
<CAPTION>
PERIOD FROM
MAY 2, 1996 YEAR ENDED NINE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------- -----------------------
1996 1997 1998 1998 1999
-------------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................ $ 71 $ 596 $ 1,040 $ 826 $ 2,635
Cost of revenues.................... 9 67 131 82 904
--------- --------- --------- --------- ---------
Gross profit........................ 62 529 909 744 1,731
Total operating expenses............ 768 1,425 2,823 1,935 7,982
Loss from operations................ (706) (896) (1,914) (1,191) (6,251)
Net loss............................ $ (752) $ (1,095) $ (1,509) $ (830) $ (6,008)
========= ========= ========= ========= =========
Basic and diluted net loss per
share............................. $ (0.46) $ (0.67) $ (0.60) $ (0.35) $ (1.96)
========= ========= ========= ========= =========
Weighted average number of shares
used in calculating basic and
diluted net loss per share........ 1,625,410 1,625,410 2,497,065 2,344,126 3,066,960
========= ========= ========= ========= =========
Pro forma basic and diluted net loss
per share......................... $ (0.46) $ (0.67) $ (0.32) $ (0.19) $ (0.67)
========= ========= ========= ========= =========
Pro forma weighted average number of
shares used in calculating basic
and diluted net loss per share.... 1,625,410 1,625,410 4,780,024 4,264,126 8,932,455
========= ========= ========= ========= =========
</TABLE>

Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all previously outstanding preferred stock
into common stock, as if the shares had converted immediately upon their
issuance. See Note 2 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing basic and diluted net
loss per share.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 9,302 $ 9,302 $40,852
Working capital........................................ 9,257 9,257 40,807
Total assets........................................... 13,846 13,846 45,396
Convertible preferred stock............................ 17,901 -- --
Total stockholders' equity............................. 11,524 11,524 43,074
</TABLE>

The pro forma balance sheet data reflect the automatic conversion into
common stock of all outstanding convertible preferred stock upon the closing of
this offering. The pro forma as adjusted data reflect our receipt of the net
proceeds from the sale of the 3,500,000 shares of common stock offered by us at
an initial public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us.

For more information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
related notes included elsewhere in this prospectus.
3
<PAGE> 7

RISK FACTORS

Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following events actually occurs, our
business and financial results may suffer. In such event, the market price of
our common stock could decline, and you could lose all or part of your
investment in our common stock.

RISKS RELATED TO OUR BUSINESS

WE HAVE AN UNPROVEN BUSINESS MODEL AND IT IS UNCERTAIN WHETHER ONLINE
WEDDING-RELATED SITES CAN GENERATE SUFFICIENT REVENUES TO SURVIVE.

Our model for conducting business and generating revenues is new and
unproven. Our business model depends upon our ability to generate revenue
streams from multiple sources through our online sites, including:

- Internet sponsorship and advertising fees from third parties; and

- online sales of wedding gifts and supplies.

It is uncertain whether wedding-related online sites that rely on
attracting sponsors and advertisers, as well as people to purchase wedding gifts
and supplies, can generate sufficient revenues to survive. For our business to
be successful, we must provide users with an acceptable blend of products,
information, services and community offerings that will attract wedding
consumers to our online sites frequently. In addition, we must provide sponsors,
advertisers and vendors the opportunity to reach these wedding consumers. We
provide our services to users without charge and we may not be able to generate
sufficient revenues to pay for these services. Accordingly, we are not certain
that our business model will be successful or that we can sustain revenue growth
or be profitable.

WE HAVE A LIMITED OPERATING HISTORY AND EXPECT TO ENCOUNTER DIFFICULTIES FACED
BY EARLY STAGE COMPANIES IN THE INTERNET ADVERTISING AND ONLINE WEDDING MARKETS.

We commenced operations in May 1996 and recorded our first revenues in
September 1996, immediately following the launch of our first online property.
Accordingly, we have only a limited operating history with which you can
evaluate our business and prospects. An investor in our common stock must
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets, such as the Internet advertising
and online wedding markets. These risks include our ability to:

- increase the audience on our sites;

- broaden awareness of our brand;

- strengthen user-loyalty;

- offer compelling content;

- maintain our leadership in generating traffic;

- maintain our current, and develop new, strategic relationships;

- attract a large number of advertisers from a variety of industries;

4
<PAGE> 8

- respond effectively to competitive pressures;

- generate revenues from the sale of merchandise and e-commerce;

- integrate our recent acquisitions into our existing operations;

- continue to develop and upgrade our technology; and

- attract, integrate, retain and motivate qualified personnel.

As a result of our limited operating history, we do not have historical
financial data for a significant number of periods upon which to forecast our
revenues and results of operations.

These risks could negatively impact our financial condition if left
unaddressed. For more information on the effects of some of these risks, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

WE HAVE A HISTORY OF SIGNIFICANT LOSSES SINCE OUR INCEPTION AND EXPECT TO INCUR
SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE.

We have not achieved profitability and expect to continue to incur
significant losses and negative cash flow for the foreseeable future. We
incurred net losses of $752,000 for the period from May 2, 1996 (inception)
through December 31, 1996, $1.1 million for the year ended December 31, 1997,
$1.5 million for the year ended December 31, 1998, and $6.0 million for the nine
months ended September 30, 1999. As of September 30, 1999, our accumulated
deficit was $9.4 million. We also expect to continue to incur significant
operating expenses and capital expenditures and, as a result, we will need to
generate significant revenues to achieve and maintain profitability. Even if we
do achieve profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. Failure to achieve
or maintain profitability may materially and adversely affect the market price
of our common stock. For more information on our losses and the effects of our
expenses on our financial performance, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

WE LACK SIGNIFICANT REVENUES AND MAY BE UNABLE TO ADJUST SPENDING QUICKLY ENOUGH
TO OFFSET ANY UNEXPECTED REVENUE SHORTFALL.

Our revenues for the foreseeable future will remain dependent on user
traffic levels and advertising activity on our sites and the expansion of our
e-commerce activity. In addition, we plan to expand and develop content and to
upgrade and enhance our technology and infrastructure to support our growth. We
incur a significant percentage of our expenses, such as employee compensation
and rent, prior to generating revenues associated with those expenses. Moreover,
our expense levels are based, in part, on our expectation of future revenues. We
may be unable to adjust spending quickly enough to offset any unexpected revenue
shortfall. If we have a shortfall in revenues in relation to our growth in
expenses, then our results of operations would be materially and adversely
affected. For more information on our net revenues and the effects of our
expenses on our financial performance, see "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

5
<PAGE> 9

OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT
FLUCTUATION AND THESE FLUCTUATIONS MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR
COMMON STOCK.

Our quarterly revenues and operating results have fluctuated significantly
in the past and are expected to continue to fluctuate significantly in the
future as a result of a variety of factors, many of which are outside our
control. These factors include:

- the level of online usage;

- the level of traffic on our online sites;

- demand for online advertising;

- seasonal trends in both online usage and advertising placements;

- the addition or loss of advertisers;

- the advertising budgeting cycles of specific advertisers;

- the number of users that purchase merchandise from us;

- the amount and timing of capital expenditures and other costs relating to
the expansion of our operations, including those related to acquisitions;

- the introduction of new sites and services by us or our competitors;

- changes in our pricing policies or the pricing policies of our
competitors;

- general economic conditions; and

- economic conditions specific to the Internet, electronic commerce and
online media.

We do not believe that period-to-period comparisons of our operating
results are necessarily meaningful and you should not rely upon these
comparisons as indicators of our future performance.

Due to the foregoing factors, it is possible that our results of operations
in one or more future quarters may fall below the expectations of securities
analysts and investors. In such event, the trading price of our common stock is
likely to decline. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quarterly Results of Operations Data" for
detailed information on our quarterly operating results.

OUR FINANCIAL CONDITION AND REVENUES WOULD BE ADVERSELY AFFECTED IF TRAFFIC ON
OUR AOL SITE DECREASED OR IF CARRIAGE OF OUR SITES ON AOL WAS DISCONTINUED.

AOL has accounted for a significant portion of our online traffic to date.
In 1999, approximately 40% of our users were customers of AOL's Internet
services. If the financial condition and operations of AOL were to deteriorate
significantly, or if the traffic on our AOL site were to substantially decrease,
our revenues could be adversely affected.

In addition, our anchor tenant agreement with AOL expires on January 6,
2003. AOL may extend it for an additional two years, but does not have any
obligation to extend or renew the agreement. Through the AOL agreement, we
provide content on America Online, AOL.com, AOL Hometown, Netscape and
CompuServe. Under the terms of the agreement, AOL may terminate the agreement
without cause only with respect to our carriage on AOL Hometown, Netscape, and
CompuServe upon 30 days' prior written

6
<PAGE> 10

notice. If the carrying of our sites on AOL is discontinued, we would lose
members, sponsors and advertisers and our business, results of operations and
financial condition would be materially and adversely affected. For more
information about our relationship with AOL, see "Business -- Relationship with
AOL."

BECAUSE WEDDINGS OCCUR MORE FREQUENTLY IN THE SECOND AND THIRD QUARTERS OF THE
CALENDAR YEAR, OUR OPERATING RESULTS MAY FLUCTUATE DUE TO SEASONAL FACTORS.

Seasonal and cyclical patterns may affect our revenues. In 1997, 19% of
weddings occurred in the first quarter, 28% occurred in the second quarter, 30%
occurred in the third quarter and 23% occurred in the fourth quarter. Because we
launched The Knot Registry in November 1998 and acquired Bridalink in July 1999,
we have limited experience generating merchandise revenues. Therefore, we have
been unable to determine whether our merchandise revenues are affected by
seasonal fluctuations in the number of weddings. In addition, we believe that
advertising sales in traditional media, such as television and radio, generally
are lower in the first and third calendar quarters of each year. Historically,
we have experienced increases in our traffic during the first and second
quarters of the year. As a result of these factors, we may experience
fluctuations in our revenues from quarter to quarter.

WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE KNOT BRAND NAME WHICH
WOULD NEGATIVELY IMPACT OUR BUSINESS AND CAUSE OUR SPONSORSHIP AND ADVERTISING
REVENUES TO DECLINE.

Building recognition of our brand is critical to attracting and expanding
our online user base. Because we plan to continue building brand recognition, we
may find it necessary to accelerate expenditures on our sales and marketing
efforts or otherwise increase our financial commitment to creating and
maintaining brand awareness. Our failure to successfully promote and maintain
our brand would adversely affect our business and cause us to incur significant
expenses in promoting our brand without an associated increase in our net
revenues.

IF WE CANNOT PROTECT OUR DOMAIN NAMES, IT WILL IMPAIR OUR ABILITY TO BRAND
SUCCESSFULLY THE KNOT.

We currently hold various Web domain names, including www.theknot.com. The
acquisition and maintenance of domain names generally is regulated by Internet
regulatory bodies. 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, we may be unable
to acquire or maintain relevant domain names in all countries in which we
conduct business. Furthermore, it is unclear whether laws protecting trademarks
and similar proprietary rights will be extended to protect domain names.
Therefore, 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. We may not successfully carry out our
business strategy of establishing a strong brand for The Knot if we cannot
prevent others from using similar domain names or trademarks. This could impair
our ability to increase market share and revenues.

7
<PAGE> 11

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO SUCCESSFULLY
INTEGRATE OUR RECENT AND ANY FUTURE ACQUISITIONS.

In July 1999, we acquired Bridalink.com, an Internet wedding supply store,
and Click Trips, Inc., an online travel agency. In August 1999, we acquired
Wedding Photographers Network, an online searchable database of wedding
photographers. We may encounter difficulty integrating the personnel,
operations, technology and software of these acquired businesses. In addition,
one or more of the key personnel of the acquired businesses may decide not to
work for us. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations.

In the future, we may acquire, or invest in, complementary companies,
products or technologies. Acquisitions and investments involve numerous risks,
including:

- difficulties in integrating operations, technologies, products and
personnel;

- diversion of financial and management resources from existing operations;

- risks of entering new markets;

- potential loss of key employees; and

- inability to generate sufficient revenues to offset acquisition or
investment costs.

THE COSTS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR STRATEGIC ALLIANCES COULD
DILUTE YOUR INVESTMENT OR ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

To pay for an acquisition or to enter into a strategic alliance, we might
use equity securities, debt, cash, including the proceeds from this offering, or
a combination of the foregoing. If we use equity securities, our stockholders
may experience dilution. In addition, an acquisition may involve non-recurring
charges or involve amortization of significant amounts of goodwill. The related
increases in expenses could adversely affect our results of operations. Any such
acquisitions or strategic alliances may require us to obtain additional equity
or debt financing, which may not be available on commercially acceptable terms,
if at all.

IF THE USE OF THE INTERNET AS AN ADVERTISING AND MARKETING MEDIUM FAILS TO
DEVELOP OR DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR FUTURE REVENUES AND
PROSPECTS WOULD BE MATERIALLY AND ADVERSELY AFFECTED.

Our future success depends in part on a significant increase in the use of
the Internet as an advertising and marketing medium. Sponsorship, advertising
and production revenues constituted 65% of our net revenues for the nine months
ended September 30, 1999 and 82% of our net revenues for the year ended December
31, 1998. The Internet advertising market is new and rapidly evolving, and it
cannot yet be compared with traditional advertising media to gauge its
effectiveness. As a result, demand for and market acceptance of Internet
advertising solutions are uncertain. Many of our current and potential customers
have little or no experience with Internet advertising and have allocated only a
limited portion of their advertising and marketing budgets to Internet
activities. The adoption of Internet advertising, particularly by entities that
have historically relied upon traditional methods of advertising and marketing,
requires the acceptance of a new way of advertising and marketing. These
customers may find Internet advertising to be

8
<PAGE> 12

less effective for meeting their business needs than traditional methods of
advertising and marketing. Furthermore, there are software programs that limit
or prevent advertising from being delivered to a user's computer. Widespread
adoption of this software by users would significantly undermine the commercial
viability of Internet advertising.

WE HAVE A SMALL NUMBER OF SPONSORS AND ADVERTISERS AND THE LOSS OF A NUMBER OF
THESE WOULD RESULT IN A DECLINE IN OUR REVENUES.

We derive sponsorship revenues from contracts ranging up to three years and
advertising revenues principally from short-term advertising contracts. We
depend on a limited number of sponsors and advertisers for a significant part of
our net revenues. Consequently, the loss of any of these sponsors or advertisers
would cause our revenues to decline. For the nine months ended September 30,
1999, no single sponsor or advertiser accounted for 10% or more of our net
revenues. For the year ended December 31, 1998, Banfi Products Corp. accounted
for 19% of our net revenues. During the nine months ended September 30, 1999, we
did not generate net revenues from the sale of sponsorships or advertisements to
Banfi Products Corp.

We anticipate that our future results of operations will continue to depend
to a significant extent upon revenues from a small number of sponsors and
advertisers. In addition, we anticipate that such sponsors and advertisers will
continue to vary over time. For example, although Banfi Products accounted for a
large percentage of our revenues in 1998, different sponsors and advertisers
will account for a large percentage of our revenues this year. To achieve our
long-term goals, we will need to attract additional significant sponsors and
advertisers on an ongoing basis. If we fail to enter into a sufficient number of
large contracts during a particular period, our revenues for that period would
be adversely affected. For more information on our advertising revenues, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

OUR BUSINESS AND PROSPECTS WOULD SUFFER IF WE ARE UNABLE TO PROTECT AND ENFORCE
OUR INTELLECTUAL PROPERTY RIGHTS.

We rely solely upon copyright, trade secret and trademark law and
assignment of invention and confidentiality agreements to protect our
proprietary technology, processes, content and other intellectual property to
the extent that protection is sought or secured at all. We cannot assure you
that any steps we might take will be adequate to protect against infringement
and misappropriation of our intellectual property by third parties. Similarly,
we cannot assure you that third parties will not be able to independently
develop similar or superior technology, processes, content or other intellectual
property. The unauthorized reproduction or other misappropriation of our
intellectual property rights could enable third parties to benefit from our
technology without paying us for it. If this occurs, our business and prospects
would be materially and adversely affected. In addition, disputes concerning the
ownership or rights to use intellectual property could be costly and time
consuming to litigate, may distract management from other tasks of operating the
business, and may result in our loss of significant rights and the loss of our
ability to operate our business.

OUR PRODUCTS AND SERVICES MAY INFRINGE ON INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES AND ANY INFRINGEMENT COULD REQUIRE US TO INCUR SUBSTANTIAL COSTS AND
DISTRACT OUR MANAGEMENT.

Although we avoid infringing known proprietary rights of third parties,
including licensed content, we may be subject to claims alleging infringement of
third-party

9
<PAGE> 13

proprietary rights. If we are subject to claims of infringement or are
infringing the rights of third parties, we may not be able to obtain licenses to
use those rights on commercially reasonable terms, if at all. In that event, we
would need to undertake substantial reengineering to continue our online
offerings. Any effort to undertake such reengineering might not be successful.
Furthermore, a party making such a claim could secure a judgement that requires
us to pay substantial damages. A judgment could also include an injunction or
other court order that could prevent us from selling our products. Any claim of
infringement could cause us to incur substantial costs defending against the
claim, even if the claim is invalid, and could distract our management from our
business.

WE DEPEND UPON QVC TO PROVIDE US WAREHOUSING, FULFILLMENT AND DISTRIBUTION
SERVICES, AND SYSTEM FAILURES OR OTHER PROBLEMS AT QVC COULD CAUSE US TO LOSE
CUSTOMERS AND REVENUES.

We have a services agreement with QVC to warehouse, fulfill and arrange for
distribution of approximately 97% of our products. Our agreement with QVC
expires on the fourth anniversary of this offering. QVC does not have any
obligation to renew this agreement. If QVC's ability to provide us with these
services in a timely fashion or at all is impaired, whether through labor
shortage, slow down or stoppage, deteriorating financial or business condition,
Year 2000 problems or other system failures or for any other reason, or if the
services agreement is not renewed, we would not be able, at least temporarily,
to sell or ship our products to our customers. We may be unable to engage
alternative warehousing, fulfillment and distribution services on a timely basis
or upon terms favorable to us.

Our experience with QVC as a warehousing, fulfillment and distribution
service provider is limited. In connection with our transition to QVC as our
primary fulfillment provider, we have experienced system failures and other
problems resulting in duplicate orders and billing, delivery mistakes and
damaged products. We are unable to predict whether we will have similar problems
in the future. Any of these problems could cause us to lose customers and
revenues.

WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING NECESSARY TO EXECUTE OUR
BUSINESS STRATEGY.

We currently believe that the net proceeds from this offering, together
with our current cash and cash equivalents, will be sufficient to fund our
working capital and capital expenditure requirements for at least the next 12
months. To the extent we require additional funds to support our operations or
the expansion of our business, we may need to sell additional equity, issue debt
or convertible securities or obtain credit facilities through financial
institutions. We cannot assure you that additional funding, if required, will be
available to us in amounts or on terms acceptable to us. If sufficient funds are
not available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of acquisition opportunities, develop or enhance our
services or products, or otherwise respond to competitive pressures would be
significantly limited.

INCREASED COMPETITION IN OUR MARKETS COULD REDUCE OUR MARKET SHARE, THE NUMBER
OF OUR ADVERTISERS, OUR ADVERTISING REVENUES AND OUR MARGINS.

The Internet advertising and online wedding markets are new, rapidly
evolving and intensely competitive, and we expect such competition to intensify
in the future.

10
<PAGE> 14

We face competition for members, users and advertisers from the following
areas:

- online services or Web sites targeted at brides and grooms as well as the
online sites of retail stores, manufacturers and regional wedding
directories;

- bridal magazines, such as Bride's and Modern Bride; and

- online and retail stores offering gift registries, especially from
retailers offering specific bridal gift registries.

We expect competition to increase because of the business opportunities
presented by the growth of the Internet and e-commerce. Our competition may also
intensify as a result of industry consolidation and a lack of substantial
barriers to entry. Many of our current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, greater name recognition and substantially larger user or membership
bases than we have and, therefore, have a significantly greater ability to
attract advertisers and users. In addition, many of our competitors may be able
to respond more quickly than we can to new or emerging technologies and changes
in Internet user requirements, as well as devote greater resources than we can
to the development, promotion and sale of services.

There can be no assurance that our current or potential competitors will
not develop products and services comparable or superior to those that we
develop or adapt more quickly than we do to new technologies, evolving industry
trends or changing Internet user preferences. Increased competition could result
in price reductions, lower margins or loss of market share. In addition, if we
expand internationally, we may face additional competition. There can be no
assurance that we will be able to compete successfully against current and
future competitors.

IF SALES TO SPONSORS OR ADVERTISERS FORECASTED IN A PARTICULAR PERIOD ARE
DELAYED OR DO NOT OTHERWISE OCCUR, OUR RESULTS OF OPERATIONS FOR A PARTICULAR
PERIOD WOULD BE MATERIALLY AND ADVERSELY AFFECTED.

The time between the date of initial contact with a potential sponsor or
advertiser and the execution of a contract with the sponsor or advertiser is
often lengthy, typically ranging from six weeks for smaller agreements to six
months for larger agreements, and is subject to delays over which we have little
or no control, including:

- customers' budgetary constraints;

- customers' internal acceptance reviews;

- the success and continued internal support of advertisers' and sponsors'
own development efforts; and

- the possibility of cancellation or delay of projects by advertisers or
sponsors.

During the sales cycle, we may expend substantial funds and management
resources in advance of generating sponsorship or advertising revenues.
Accordingly, if sales to advertisers or sponsors forecasted in a particular
period are delayed or do not otherwise occur, we would generate less sponsorship
and advertising revenues during that period and our results of operations for
that period would suffer.

11
<PAGE> 15

OUR POTENTIAL INABILITY TO COMPETE EFFECTIVELY IN OUR INDUSTRY FOR QUALIFIED
PERSONNEL COULD HINDER THE SUCCESS OF OUR BUSINESS.

Competition for personnel in the Internet and wedding industries is
intense. We may be unable to retain those employees who are important to the
success of our business. We may also face difficulties attracting, integrating
or retaining other highly qualified employees in the future. We have
experienced, and expect to continue to experience, difficulty in hiring and
retaining highly-skilled employees with appropriate qualifications as a result
of our rapid growth and expansion. If we cannot attract new personnel or retain
and motivate our current personnel, our business may not succeed.

SYSTEMS DISRUPTIONS AND FAILURES COULD CAUSE ADVERTISER OR USER DISSATISFACTION
AND COULD REDUCE THE ATTRACTIVENESS OF OUR SITES.

The continuing and uninterrupted performance of our computer systems is
critical to our success. Our advertisers and sponsors, users and members may
become dissatisfied by any systems disruption or failure that interrupts our
ability to provide our services and content to them. Substantial or repeated
system disruptions or failures would reduce the attractiveness of our online
sites significantly. Substantially all of our communications hardware and some
of our other computer hardware operations are located at Exodus Communications'
facilities in Jersey City, New Jersey. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events could damage these
systems. Computer viruses, electronic break-ins or other similar disruptive
problems could also adversely affect our online sites. Our business could be
materially and adversely affected if our systems were affected by any of these
occurrences. We do not presently have any secondary "off-site" systems or a
formal disaster recovery plan. Our sites must accommodate a high volume of
traffic and deliver frequently updated information. Our sites have in the past
experienced slower response times or decreased traffic. These types of
occurrences in the future could cause users to perceive our sites as not
functioning properly and therefore cause them to use another online site or
other methods to obtain information or services. In addition, our users depend
on Internet service providers, online service providers and other site operators
for access to our online sites. Many of them have experienced significant
outages in the past, and could experience outages, delays and other difficulties
due to system disruptions or failures unrelated to our systems. Although we
carry general liability insurance, our insurance may not cover any claims by
dissatisfied providers or subscribers or may not be adequate to indemnify us for
any liability that may be imposed in the event that a claim were brought against
us. Any system disruption or failure, security breach or other damage that
interrupts or delays our operations could cause us to lose users, sponsors and
advertisers and adversely affect our business and results of operations.

WE MAY NOT BE ABLE TO DELIVER VARIOUS SERVICES IF THIRD PARTIES FAIL TO PROVIDE
RELIABLE SOFTWARE, SYSTEMS AND RELATED SERVICES TO US.

We are dependent on various third parties for software, systems and related
services in connection with our hosting and accounting software, data
transmission and security systems. Several of the third parties that provide
software and services to us have a limited operating history and have relatively
new technology. These third parties are dependent on reliable delivery of
services from others. To date, we have not experienced significant problems with
the services that these third parties provide to us. If our current providers
were to experience prolonged systems failures or delays, we would need to pursue
alternative sources of services. Although alternative sources of these services
are available,

12
<PAGE> 16

we may be unable to secure such services on a timely basis or on terms favorable
to us. As a result, we may experience business disruptions if these third
parties fail to provide reliable software, systems and related services to us.

WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE OUR USERS' PERSONAL
INFORMATION.

If third parties were able to penetrate our network security or otherwise
misappropriate our users' personal or credit card information, we could be
subject to liability. Our liability could include claims for unauthorized
purchases with credit card information, impersonation or other similar fraud
claims as well as for other misuses of personal information, such as for
unauthorized marketing purposes. These claims could result in costly and
time-consuming litigation which could adversely affect our financial condition.
In addition, the Federal Trade Commission and state agencies have been
investigating various Internet companies regarding their use of personal
information. We could have additional expenses if new regulations regarding the
use of personal information are introduced or if our privacy practices are
investigated.

WE MAY SUFFER DISRUPTION TO OUR BUSINESS AND WE COULD INCUR MATERIAL EXPENSES IF
ANY OF THE COMPUTER SYSTEMS OR SOFTWARE WE RELY ON FAIL TO BE YEAR 2000
COMPLIANT.

The Year 2000 problem could harm our business and financial results. Many
currently installed computer systems and software products are coded to accept
or recognize only two-digit entries in the date code field. These systems may
interpret the date code "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded or replaced to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. Although we have completed testing of our systems,
including internally developed proprietary software, third-party software,
hardware and services, and believe that they are Year 2000 compliant, we have
not developed a contingency plan. Moreover, we may discover Year 2000 problems
that need to be upgraded, modified or replaced, which could be time consuming
and expensive. In addition there can be no assurance that our non-information
technology systems, including our telephone systems and utilities, are Year 2000
compliant and will not have to be upgraded, modified or replaced. Our failure to
fix or replace internally developed proprietary software, third-party software,
hardware or services on a timely basis could result in lost revenues, increased
operating costs, the loss of customers and other business interruptions.

We depend heavily on a number of third-party vendors to provide both
network services and equipment. A significant Year 2000-related disruption of
the network services or equipment that third-party vendors provide to us could
cause our sponsors, advertisers, members and visitors to consider seeking
alternate providers. Year 2000 issues could also cause an unmanageable burden on
our technical support personnel, which could divert our technical resources away
from the technological development we need to succeed.

In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers, including
AOL and QVC, and others outside of our control will be Year 2000 compliant. The
failure by such entities to be Year 2000 compliant could result in a systemic
failure such as a prolonged Internet, telecommunications or electrical failure.
These suppliers could also prevent us from delivering services to our customers,
decrease the use of the Internet or prevent users from accessing our sites.

13
<PAGE> 17

IF THE ASSUMPTIONS THAT WE USE REGARDING THE GROWTH OF E-COMMERCE AND INTERNET
ARE INCORRECT, THEN THE FINANCIAL PROJECTIONS WE INCLUDE IN THIS PROSPECTUS MAY
BE MATERIALLY DIFFERENT FROM ACTUAL RESULTS.

This prospectus contains various third-party data and projections related
to our business and the Internet, including those relating to revenue generated
by e-commerce, the number of Internet users and the amount spent on Internet
advertising. These data and projections have been included in studies prepared
by independent market research firms, and the projections are based on surveys,
financial reports and models used by these firms, as well as a number of
assumptions.

If the underlying data or one or more of the assumptions contained in these
reports turns out to be incorrect, actual results or circumstances may be
materially different from the projections included in this prospectus. Any
difference could reduce our revenue and harm our results of operations.

RISKS RELATED TO OUR INDUSTRY

IF THE USE OF THE INTERNET AND COMMERCIAL ONLINE SERVICES AS MEDIA FOR COMMERCE
DOES NOT CONTINUE TO GROW, OUR BUSINESS AND PROSPECTS WOULD BE MATERIALLY AND
ADVERSELY AFFECTED.

We cannot assure you that a sufficiently broad base of consumers will
adopt, and continue to use, the Internet and commercial online services as media
for commerce, particularly for purchases of wedding gifts and supplies. Even if
consumers adopt the Internet or commercial online services as a media for
commerce, we cannot be sure that the necessary infrastructure will be in place
to process such transactions. Our long-term viability depends substantially upon
the widespread acceptance and the development of the Internet or commercial
online services as effective media for consumer commerce and for advertising.
Use of the Internet or commercial online services to effect retail transactions
and to advertise is at an early stage of development. Convincing consumers to
purchase wedding gifts and supplies online may be difficult.

Demand for recently introduced services and products over the Internet and
commercial online services is subject to a high level of uncertainty. Few proven
services and products exist. The development of the Internet and commercial
online services into a viable commercial marketplace is subject to a number of
factors, including:

- continued growth in the number of users of such services;

- concerns about transaction security;

- continued development of the necessary technological infrastructure;

- development of enabling technologies;

- uncertain and increasing government regulation; and

- the development of complementary services and products.

IF USERS EXPERIENCE DIFFICULTIES BECAUSE OF CAPACITY CONSTRAINTS OF THE
INFRASTRUCTURE OF THE INTERNET AND OTHER COMMERCIAL ONLINE SERVICES, POTENTIAL
USERS MAY NOT BE ABLE TO ACCESS OUR SITES AND OUR BUSINESS AND PROSPECTS WOULD
BE HARMED.

To the extent that the Internet and other online services continue to
experience growth in the number of users and frequency of use by consumers
resulting in increased bandwidth demands, there can be no assurance that the
infrastructure for the Internet and

14
<PAGE> 18

other online services will be able to support the demands placed upon them. The
Internet and other online services have experienced outages and delays as a
result of damage to portions of their infrastructure. Outages or delays,
including those resulting from Year 2000 problems, could adversely affect online
sites, e-mail and the level of traffic on all sites. We also depend on online
access providers that provide our users with access to our services. In the
past, users have experienced difficulties due to systems failures unrelated to
our systems. In addition, the Internet or other online services could lose their
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet or other online
service activity or to increased governmental regulation. Insufficient
availability of telecommunications services to support the Internet or other
online services also could result in slower response times and negatively impact
use of the Internet and other online services generally, and our sites in
particular. If the use of the Internet and other online services fails to grow
or grows more slowly than expected, if the infrastructure for the Internet and
other online services does not effectively support growth that may occur or if
the Internet and other online services do not become a viable commercial
marketplace, we may not achieve profitability.

WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY
AND THIS MAY HARM OUR BUSINESS.

If we are unable, for technological, legal, financial or other reasons, to
adapt in a timely manner to changing market conditions or customer requirements,
we could lose users and market share to our competitors. The Internet and
e-commerce are characterized by rapid technological change. Sudden changes in
user and customer requirements and preferences, frequent new product and service
introductions embodying new technologies and the emergence of new industry
standards and practices could render our existing online sites and proprietary
technology and systems obsolete. The emerging nature of products and services in
the online wedding market and their rapid evolution will require that we
continually improve the performance, features and reliability of our online
services. Our success will depend, in part, on our ability:

- to enhance our existing services;

- to develop and license new services and technology that address the
increasingly sophisticated and varied needs of our prospective customers
and users; and

- to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.

The development of online sites and other proprietary technology entails
significant technological and business risks and requires substantial
expenditures and lead time. We may be unable to use new technologies effectively
or adapt our online sites, proprietary technology and transaction-processing
systems to customer requirements or emerging industry standards. Updating our
technology internally and licensing new technology from third parties may
require significant additional capital expenditures.

IF WE BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
RELATED TO DOING BUSINESS ONLINE, OUR SPONSORSHIP, ADVERTISING AND MERCHANDISE
REVENUES COULD DECLINE AND OUR BUSINESS AND PROSPECTS COULD SUFFER.

Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. Laws and regulations may
be adopted covering

15
<PAGE> 19

issues such as user privacy, pricing, content, taxation and quality of products
and services. Any new legislation could hinder the growth in use of the Internet
and other online services generally and decrease the acceptance of the Internet
and other online services as media of communications, commerce and advertising.
The governments of states and foreign countries might attempt to regulate our
transmissions or levy sales or other taxes relating to our activities. The laws
governing the Internet remain largely unsettled, even in areas where legislation
has been enacted. It may take years to determine whether and how existing laws
such as those governing intellectual property, privacy, libel and taxation apply
to the Internet and Internet advertising services. In addition, the growth and
development of the market for e-commerce may prompt calls for more stringent
consumer protection laws, both in the United States and abroad, which may impose
additional burdens on companies conducting business online. The adoption or
modification of laws or regulations relating to the Internet and other online
services could cause our sponsorship, advertising and merchandise revenues to
decline and our business and prospects to suffer.

WE MAY BE SUED FOR INFORMATION RETRIEVED FROM OUR SITES.

We may be subject to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our online sites. These types of claims have been
brought, sometimes successfully, against online services as well as other print
publications in the past. We could also be subject to claims based upon the
content that is accessible from our online sites through links to other online
sites or through content and materials that may be posted by members in chat
rooms or bulletin boards. Our insurance, which covers commercial general
liability, may not adequately protect us against these types of claims.

WE MAY INCUR POTENTIAL PRODUCT LIABILITY FOR PRODUCTS SOLD ONLINE.

Consumers may sue us if any of the products that we sell online are
defective, fail to perform properly or injure the user, or if consumers
experience problems with honeymoon packages purchased through our sites. To
date, we have had limited experience selling products online and developing
relationships with manufacturers or suppliers of such products. We plan to sell
a range of products targeted specifically at brides and grooms through The Knot
Registry, The Knot Shop, Bridalink.com, Click Trips and other e-commerce sites
that we may acquire in the future. Such a strategy involves numerous risks and
uncertainties. Although our agreements with manufacturers and providers of
travel services typically contain provisions intended to limit our exposure to
liability claims, these limitations may not prevent all potential claims.
Liability claims could require us to spend significant time and money in
litigation or to pay significant damages. As a result, any such claims, whether
or not successful, could seriously damage our financial results, reputation and
brand name.

WE COULD FACE ADDITIONAL REGULATORY REQUIREMENTS, TAX LIABILITIES AND OTHER
RISKS IF WE DECIDE TO EXPAND INTERNATIONALLY.

We may decide to expand internationally. To date, we have no experience in
developing localized versions of our sites for international markets and in
marketing and selling internationally. If we decide to expand internationally
and we cannot overcome these challenges, our business will suffer. There are
additional risks related to doing business in international markets, such as
changes in regulatory requirements, tariffs and other trade barriers,
fluctuations in currency exchange rates, and adverse tax consequences.

16
<PAGE> 20

In addition, there are likely to be different consumer preferences and
requirements in such markets. Furthermore, we may face difficulties in staffing
and managing any foreign operations. We cannot assure you that one or more of
these factors would not harm any future international operations.

WE MAY INCUR SIGNIFICANT EXPENSES RELATED TO THE SECURITY OF PERSONAL
INFORMATION ONLINE.

The need to transmit securely confidential information online has been a
significant barrier to e-commerce and online communications. Any well-publicized
compromise of security could deter people from using the Internet or other
online services or from using them to conduct transactions that involve
transmitting confidential information. Because our success depends on the
acceptance of online services and e-commerce, we may incur significant costs to
protect against the threat of security breaches or to alleviate problems caused
by such breaches.

RISKS RELATED TO THIS OFFERING

AFTER THIS OFFERING, OUR EXECUTIVE OFFICERS, DIRECTORS AND 5% OR GREATER
STOCKHOLDERS WILL EXERCISE SIGNIFICANT CONTROL OVER ALL MATTERS REQUIRING A
STOCKHOLDER VOTE.

After this offering, our executive officers, directors and existing
stockholders who each own greater than 5% of the common stock that was
outstanding immediately before this offering and their affiliates will, in the
aggregate, beneficially own approximately 76% of our outstanding common stock.
As a result, these stockholders will be able to exercise control over all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership could also have the effect of delaying or preventing a change in
control.

FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE.

Following this offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the public market or
the perception that such sales could occur.

THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK, OUR STOCK PRICE MAY
EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS AND ANY VOLATILITY IN OUR STOCK
PRICE COULD RESULT IN CLAIMS AGAINST US.

Prior to this offering, investors could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering. The initial public offering price will be
determined by negotiations between us and the representatives of the
underwriters. The market price of our common stock may decline below the initial
public offering price after this offering.

Fluctuations in market price and volume are particularly common among
securities of Internet and other technology companies. The market price of our
common stock may fluctuate significantly in response to the following factors,
some of which are beyond our control:

- variations in quarterly operating results;

- changes in market valuations of Internet and other technology companies;

17
<PAGE> 21

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

- failure to complete significant sponsorship, advertising and merchandise
sales;

- additions or departures of key personnel;

- future sales of common stock; and

- changes in financial estimates by securities analysts.

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
common stock. We may in the future be the target of similar litigation.
Securities litigation could result in substantial costs and divert management's
attention and resources.

WE MAY SPEND THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT
AGREE.

The net proceeds of this offering are not allocated for specific uses. Our
management will have broad discretion to spend the net proceeds from this
offering in ways with which investors may not agree. The failure of our
management to apply these funds effectively would result in unfavorable returns,
which could cause the price of our common stock to decline.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT
DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.

Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders.

18
<PAGE> 22

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements which involve risks and
uncertainties. These forward-looking statements, which are usually accompanied
by words such as "may," "might," "will," "should," "could," "intends,"
"estimates," "predicts," "potential," "continue," "believes," "anticipates,"
"plans," "expects" and similar expressions, relate to statements about our
market opportunities, our strategy, our competition, our projected expense
levels and the adequacy of our available cash resources. This prospectus also
contains forward-looking statements attributed to third parties relating to
their estimates regarding the wedding industry and the growth of Internet use.
These forward-looking statements are based on assumptions that may be incorrect
and there can be no assurance that the projections included in these
forward-looking statements will come to pass. Our actual results could differ
materially from those expressed or implied by these forward-looking statements
as a result of various factors, including the risk factors described above and
elsewhere in this prospectus. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.

TRADEMARKS

The Knot is a registered trademark and/or service mark of The Knot, Inc. We
have applied for federal registration of the marks The Knot Ultimate Wedding
Checklist, Wedding Photographers Network, WPN, The Knot Wedding Gift Registry,
The Knot Registry, Click Trips and Bridalink Store. Other trademarks and service
marks appearing in this prospectus are the property of their respective holders.

ASSUMPTIONS

Unless otherwise indicated, all information in this prospectus reflects the
automatic conversion of all outstanding shares of convertible preferred stock
into 7,360,000 shares of our common stock upon the closing of this offering,
assumes the filing of our amended and restated certificate of incorporation upon
the closing of this offering and assumes no exercise of the underwriters'
over-allotment option.

19
<PAGE> 23

USE OF PROCEEDS

We will receive net proceeds from the sale of the shares of common stock in
this offering of $31.6 million, at an initial public offering price of $10.00
per share and after deducting underwriting discounts and commissions and
estimated offering expenses. If the underwriters exercise their over-allotment
option in full, our net proceeds will be $36.4 million.

The principal purposes of this offering are to obtain additional capital,
to create a public market for our common stock and to facilitate future access
to public equity markets. As of the date of this prospectus, we have not
allocated the net proceeds of this offering for specific uses. We expect to use
the proceeds for general corporate purposes. The actual amounts expended for
specific purposes will vary significantly depending on a number of factors,
including revenue growth, if any, and the extent and timing of our entry into
target markets and capital expenditures. We may also use a portion of the net
proceeds to acquire or invest in businesses, technologies or products that are
complementary to our business. However, we have no present plans or commitments
and are not currently engaged in any negotiations with respect to such
transactions.

Pending our use of the net proceeds of this offering for these purposes, we
intend to invest the proceeds in short-term, interest-bearing, investment-grade
securities.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock since
our inception. We intend to retain future earnings, if any, to finance the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future. Consequently, stockholders will need to
sell shares of common stock to realize a return on their investment, if any.

20
<PAGE> 24

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 1999:

- on an actual basis;

- on a pro forma basis to give effect to the automatic conversion of
7,360,000 shares of outstanding preferred stock into 7,360,000 shares of
common stock upon the closing of this offering;

- on a pro forma as adjusted basis to give effect to the sale of 3,500,000
shares of common stock by us in this offering at an initial public
offering price of $10.00 per share, after deducting underwriting
discounts and commissions and estimated offering expenses payable by us.

This information should be read in conjunction with our financial
statements and the notes to those statements included in this prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
------- ------- -----------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Long-term debt.............................................. $ -- $ -- $ --
Stockholders' equity:
Preferred Stock, $.001 par value, actual -- no shares
authorized, issued or outstanding; pro forma and pro
forma as adjusted -- 5,000,000 shares authorized and no
shares issued or outstanding........................... -- -- --
Series A convertible preferred stock, $.001 par value;
actual -- 3,360,000 shares authorized, issued and
outstanding; pro forma and pro forma as adjusted -- no
shares authorized, issued or outstanding............... 3,938 -- --
Series B convertible preferred stock, $.001 par value;
actual -- 4,000,000 shares authorized, issued and
outstanding; pro forma and pro forma as adjusted -- no
shares authorized, issued or outstanding............... 13,963 -- --
Common stock, $.01 par value; actual -- 14,640,000 shares
authorized and 3,093,608 shares issued and outstanding;
pro forma -- 100,000,000 shares authorized and
10,453,608 shares issued and outstanding; pro forma as
adjusted -- 100,000,000 shares authorized and
13,953,608 shares issued and outstanding............... 31 104 139
Additional paid-in-capital.................................. 7,796 25,624 57,139
Deferred compensation....................................... (2,716) (2,716) (2,716)
Deferred sales and marketing................................ (2,123) (2,123) (2,123)
Accumulated deficit......................................... (9,365) (9,365) (9,365)
------- ------- -------
Total stockholders' equity............................. $11,524 $11,524 $43,074
======= ======= =======
Total capitalization................................. $11,524 $11,524 $43,074
======= ======= =======
</TABLE>

The table above is based on shares outstanding as of September 30, 1999.
This table excludes:

- 1,762,968 shares of common stock issuable upon the exercise of stock
options outstanding as of September 30, 1999, with a weighted average
exercise price of $1.97 per share, which include 2,203 shares issuable
upon exercise of stock options not granted under our existing stock
option plan;

- 10,000 shares of common stock issuable upon the exercise of stock options
granted in connection with the Bridalink.com acquisition;

- 5,000 shares of common stock issued in connection with the Click Trips
acquisition and 10,000 shares of common stock issuable upon the exercise
of options to be granted upon achievement by Click Trips of
performance-based goals;

- 10,000 shares of common stock issued in connection with the Wedding
Photographers Network acquisition;

- 133,511 shares of common stock issuable to management of Casenhiser
Clothing Company, Inc. in connection with their employment by us, on the
second, third and fourth anniversaries of the April 1998 acquisition of
Bridal Search;

- 366,667 shares of common stock issuable upon the exercise of a warrant
with an exercise price of $7.20 per share held by AOL; and

- 1,700,000 shares of common stock issuable upon the exercise of a warrant
with an exercise price of $5.00 per share held by QVC Interactive
Holdings, LLC.

21
<PAGE> 25

DILUTION

Our pro forma net tangible book value as of September 30, 1999 was
approximately $10.6 million, or approximately $1.01 per share of common stock.
Pro forma net tangible book value per share is determined by dividing the amount
of our total tangible assets less total liabilities by the number of shares of
our common stock outstanding after giving pro forma effect to the conversion of
each share of preferred stock into one share of common stock upon the closing of
this offering. Dilution in pro forma net tangible book value per share
represents the difference between the amount per share paid by investors in this
offering and the pro forma net tangible book value per share of common stock
immediately after the completion of this offering. After giving effect to our
sale of 3,500,000 shares offered hereby at an initial public offering price of
$10.00 per share and after deducting underwriting discounts and commissions and
estimated offering expenses payable by us, and the application of the net
proceeds therefrom, our pro forma net tangible book value as of September 30,
1999 would have been $42.2 million, or $3.02 per share. This represents an
immediate increase in pro forma net tangible book value of $2.01 per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value of $6.98 per share to new investors. The following table illustrates this
per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Pro forma net tangible book value per share as of
September 30, 1999.......................................... $1.01
Increase per share attributable to new investors.......... 2.01
-----
Pro forma net tangible book value per share after this
offering.................................................. 3.02
------
Dilution in pro forma net tangible book value per share to
new investors............................................. $ 6.98
======
</TABLE>

The following table summarizes, on a pro forma basis as of September 30,
1999, after giving effect to the automatic conversion of all outstanding shares
of preferred stock into common stock upon the closing of this offering, the
total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to us by existing
stockholders and by new investors before deducting the underwriting discounts
and commissions and estimated offering expenses payable by us, at an initial
public offering price of $10.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 10,453,608 74.9% $19,509,600 35.8% $ 1.87
New investors.......................... 3,500,000 25.1% 35,000,000 64.2% 10.00
----------- ----- ----------- -----
Total............................. 13,953,608 100.0% $54,509,600 100.0%
=========== ===== =========== =====
</TABLE>

The foregoing tables and calculations exclude:

- 10,000 shares of common stock issuable upon the exercise of stock options
granted in connection with the Bridalink.com acquisition;

- 10,000 shares of common stock issued in connection with the Wedding
Photographers Network acquisition;

- 366,667 shares of common stock issuable upon the exercise of a warrant
with an exercise price of $7.20 per share held by AOL; and

- 1,700,000 shares of common stock issuable upon the exercise of a warrant
with an exercise price of $5.00 per share held by QVC Interactive
Holdings, LLC.

To the extent that any of these options or warrants are exercised, there
will be further dilution to new investors.

22
<PAGE> 26

SELECTED FINANCIAL DATA

The selected balance sheet data as of December 31, 1997 and 1998 and as of
September 30, 1999 and the selected statement of operations data for the period
from May 2, 1996 (inception) through December 31, 1996, the years ended December
31, 1997 and 1998 and the nine months ended September 30, 1999 have been derived
from our audited financial statements included in this prospectus. Balance sheet
data as of December 31, 1996 have been derived from our audited financial
statements not included in this prospectus. The statement of operations data for
the nine months ended September 30, 1998 have been derived from unaudited
financial statements included in this prospectus. In the opinion of management,
the statement of operations data for the nine months ended September 30, 1998
have been prepared on the same basis as the audited financial statements
appearing in this prospectus and include all necessary adjustments, consisting
only of normal recurring adjustments, we believe to be necessary for a fair
presentation of the data. Unaudited pro forma basic and diluted net loss per
share have been calculated assuming the conversion of all previously outstanding
preferred stock into common stock, as if the shares had converted immediately
upon their issuance. The selected financial data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our financial statements and the notes to those
statements included in this prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
MAY 2, 1996 YEAR ENDED NINE MONTHS
(INCEPTION) TO DECEMBER 31, ENDED SEPTEMBER 30,
DECEMBER 31, --------------------- ---------------------
1996 1997 1998 1998 1999
-------------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................................... $ 71 $ 596 $ 1,040 $ 826 $ 2,635
Cost of revenues................................. 9 67 131 82 904
--------- --------- --------- --------- ---------
Gross profit..................................... 62 529 909 744 1,731
Operating expenses:
Product and content development................ 262 635 1,031 788 1,685
Sales and marketing............................ 255 503 768 476 2,913
General and administrative..................... 242 265 809 539 2,194
Non-cash compensation.......................... -- -- 93 57 717
Non-cash sales and marketing................... -- -- -- -- 127
Depreciation and amortization.................. 9 22 122 75 346
--------- --------- --------- --------- ---------
Total operating expenses......................... 768 1,425 2,823 1,935 7,982
Loss from operations............................. (706) (896) (1,914) (1,191) (6,251)
Interest income (expense), net................... (46) (199) 15 (29) 243
--------- --------- --------- --------- ---------
Loss before extraordinary items.................. (752) (1,095) (1,899) (1,220) (6,008)
Extraordinary items.............................. -- -- 390 390 --
--------- --------- --------- --------- ---------
Net loss......................................... $ (752) $ (1,095) $ (1,509) $ (830) $ (6,008)
========= ========= ========= ========= =========
Loss per share -- basic and diluted:
Loss before extraordinary items................ $ (0.46) $ (0.67) $ (0.76) $ (0.52) $ (1.96)
Extraordinary items............................ -- -- 0.16 0.17 --
--------- --------- --------- --------- ---------
Net loss per share............................... $ (0.46) $ (0.67) $ (0.60) $ (0.35) $ (1.96)
========= ========= ========= ========= =========
Weighted average number of shares used in
calculating basic and diluted net loss per
share.......................................... 1,625,410 1,625,410 2,497,065 2,344,126 3,066,960
========= ========= ========= ========= =========
Pro forma basic and diluted net loss per share... $ (0.46) $ (0.67) $ (0.32) $ (0.19) $ (0.67)
========= ========= ========= ========= =========
Pro forma weighted average number of shares used
in calculating basic and diluted net loss per
share.......................................... 1,625,410 1,625,410 4,780,024 4,264,126 8,932,455
========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1996 1997 1998 1999
----- ------- ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 16 $ 305 $1,038 $ 9,302
Working capital............................................. (84) 194 1,003 9,257
Total assets................................................ 194 1,153 1,950 13,846
Convertible preferred stock................................. -- -- 3,938 17,901
Total stockholders' equity.................................. (751) (1,017) 1,646 11,524
</TABLE>

23
<PAGE> 27

UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS

The following unaudited pro forma condensed statement of operations for the
year ended December 31, 1998 has been derived from the application of pro forma
adjustments to the historical financial statements of The Knot, Inc. and
Casenhiser Clothing Company, Inc. d/b/a Bridal Search, which are included
elsewhere in this prospectus. The unaudited pro forma condensed statement of
operations information gives effect to the acquisition of the assets of
Casenhiser Clothing Company, Inc. as if such transaction had occurred on January
1, 1998.

The unaudited pro forma condensed statement of operations does not purport
to be indicative of what our actual results of operations would have been
assuming the acquisition of Casenhiser Clothing Company, Inc. had been completed
on January 1, 1998, nor does it purport to be indicative of results of
operations that we may achieve in the future.

We have accounted for the acquisition of Casenhiser Clothing Company, Inc.
using the purchase method of accounting. We have allocated the aggregate
purchase price to the assets acquired based upon their fair values. We have
allocated the excess purchase price over the fair value of the assets acquired
to goodwill.

Pro forma basic and diluted net loss per share have been calculated
assuming the conversion of all previously outstanding preferred stock into
common stock, as if the shares had converted immediately upon their issuance.
See Note 2 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing basic and diluted net
loss per share.

The adjustment to pro forma net revenues for the year ended December 31,
1998 reflects the elimination of $38,000 of licensing fees that we paid to
Casenhiser Clothing Company, Inc. The adjustments to pro forma total operating
expenses include $19,000 of goodwill amortized during the period, $97,000 of
non-cash compensation amortized during the period, $33,000 of payroll and
related expenses and $9,000 of facilities costs.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------
CASENHISER
CLOTHING PRO
THE KNOT, INC. COMPANY, INC. ADJUSTMENTS FORMA
-------------- ---------------- ----------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues................................... $1,040 $44 $(38) $1,046
Cost of revenues............................... 131 -- -- 131
--------- --------- --------- ---------
Gross profit................................... 909 44 (38) 915
Total operating expenses....................... 2,823 48 120 2,991
--------- --------- --------- ---------
Loss from operations........................... (1,914) (4) (158) (2,076)
Net loss....................................... $(1,509) $(6) $(158) $(1,673)
========= ========= ========= =========
Basic and diluted net loss per share........... $(0.60) $(0.66)
========= =========
Weighted average number of shares used in
calculating basic and diluted net loss per
share........................................ 2,497,065 2,537,588
========= =========
Pro forma basic and diluted net loss per
share........................................ $(0.32) $(0.35)
========= =========
Pro forma weighted average number of shares
used in calculating basic and diluted net
loss per share............................... 4,780,024 4,820,547
========= =========
</TABLE>

24
<PAGE> 28

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

You should read the following discussion of our financial condition and
results of operations together with our financial statements, the notes to those
statements and the other information in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. You
should consider carefully the information about these risks and uncertainties
contained in the section of this prospectus entitled "Risk Factors" before you
decide to buy our common stock.

OVERVIEW

The Knot is the leading online wedding destination on the World Wide Web
and the primary wedding content provider on America Online and several other of
AOL's leading brands, including AOL.com, Netscape Netcenter and CompuServe. We
commenced operations in May 1996, and recorded our first revenues in September
1996, immediately following the launch of our first online property. Our Web
site was launched in July 1997. We launched The Knot Registry, our online gift
registry, in November 1998 and significantly expanded our registry product
offerings in July 1999. In July 1999, we acquired the assets of Bridalink.com,
an Internet wedding supply store and the common stock of Click Trips, Inc., an
online travel agency. Also in July 1999, we entered into a strategic alliance
with Weddingpages, Inc. In August 1999, we acquired the assets of Wedding
Photographers Network, a searchable database of local wedding photographers.

We derive revenues from the sale of sponsorship, advertising and production
contracts. We also derive revenues from the sale of merchandise, from publishing
and from the sale of travel packages.

Sponsorship revenues are derived principally from contracts currently
ranging up to three years. Sponsorships are designed to integrate advertising
with specific editorial content. Sponsors can purchase the exclusive right to
promote products or services on a specific editorial area and can purchase a
special feature on our sites.

Advertising revenues are derived principally from short-term contracts
which typically range from one month up to one year. Advertising contracts
include banner advertisements and listings for local wedding vendors.

Sponsorship and advertising contracts provide for the delivery of a minimum
number of impressions. Impressions are the featuring of a sponsor's
advertisement, banner, link or other form of content on our sites. To date, we
have recognized our sponsorship and advertising revenues over the duration of
the contracts on a straight line basis as we have exceeded minimum guaranteed
impressions. To the extent that minimum guaranteed impressions are not met, we
are generally obligated to extend the period of the contract until the
guaranteed impressions are achieved. If this were to occur, we would defer and
recognize the corresponding revenues over the extended period.

Production revenues are derived from the development of online sites and
tools. Production revenues are recognized when the development is completed and
the online sites and tools are delivered.

To promote our brand on third-party sites, we produce online sites for
third parties featuring both The Knot and the third party. The cost of
production of these sites is included in our operating expenses. In return, we
receive distribution and exposure to their viewers, outbound links to our sites
and, in some circumstances, offline brand marketing. We do not recognize
revenues with respect to these barter transactions.

25
<PAGE> 29

Sponsorship, advertising and production revenues amounted to $1.7 million,
or 65% of our net revenues, for the nine months ended September 30, 1999, and
$853,000 or 82% of our net revenues, for the year ended December 31, 1998.

For the nine months ended September 30, 1999, our top six advertisers
accounted for 39% of our net revenues. For the year ended December 31, 1998, a
different advertiser accounted for 19% of our net revenues. For the year ended
December 31, 1997, one advertiser accounted for 42% of our net revenues and
another advertiser accounted for 13% of our net revenues. From May 2, 1996 (our
inception date) through December 31, 1996, four advertisers accounted for 34%,
30%, 23% and 13% of net revenues. Our large advertisers generally differed from
period to period. We expect that our large advertisers will continue to differ
over time.

Merchandise revenues are derived from the sales of merchandise through
Bridalink.com, which was acquired in July 1999, The Knot Registry and The Knot
Shop. Merchandise revenues include outbound shipping and handling charges. For
the nine months ended September 30, 1999, merchandise revenues were derived
principally from Bridalink.com and The Knot Registry. Merchandise revenues are
recognized when products are shipped to customers, reduced by an allowance for
estimated sales returns. Merchandise revenues amounted to 26% of our net
revenues for the nine months ended September 30, 1999 and 2% of our net revenues
for the year ended December 31, 1998.

Publishing revenues are derived from author royalties paid to us related to
our book publishing contract and from sales of books published by us, such as
our gown guide. Royalties are recognized when we have met all contractual
obligations, which typically include the delivery and acceptance of a final
manuscript. Revenues from the sale of books are recognized when the books are
shipped, reduced by an allowance for estimated sales returns. Publishing
revenues amounted to 6% of our net revenues for the nine months ended September
30, 1999 and 14% of our net revenues for the year ended December 31, 1998.

Travel revenues are derived from commissions earned on the sale of travel
packages by our online travel agency, Click Trips, Inc., which we acquired on
July 31, 1999. These revenues are recognized when the customer commences travel.
Travel commission revenues amounted to 2% of our net revenues for the nine
months ended September 30, 1999.

We generated revenues for the nine months ended September 30, 1998 and for
the year ended December 31, 1997, through usage fees paid by AOL based on the
number of customers visiting our AOL site. Usage fees were recognized as they
were earned based upon user time spent on our AOL site. We generated $47,000 and
$74,000 of usage revenues from AOL which represented 5% and 13% of our net
revenues for the years ended December 31, 1998 and 1997, respectively. We paid
$16,000 and $68,000 in commissions to AOL for the years ended December 31, 1998
and 1997, respectively. On September 30, 1998, we entered into an anchor tenant
agreement with AOL which eliminated usage revenues receivable from, and
commissions payable to, AOL. Under this anchor tenant agreement, we pay carriage
fees to AOL. For the nine months ended September 30, 1999, we paid $750,000 in
carriage fees to AOL. For the year ended December 31, 1998, we did not pay
carriage fees to AOL. We are obligated to pay carriage fees to AOL of $250,000
for the three months ended December 31, 1999 and $300,000 each quarter
thereafter for the remainder of the agreement.

We recorded deferred compensation of approximately $3.3 million through
September 30, 1999, primarily as a result of the issuance of stock options to
employees

26
<PAGE> 30

with exercise prices per share subsequently determined for financial reporting
purposes to be below the fair market value per share of our common stock at the
dates of grant. The difference is recorded as a reduction of stockholders'
equity and amortized as non-cash compensation expense on an accelerated method
over the four-year vesting period of the related options.

In July 1999, we amended our anchor tenant agreement with AOL and recorded
deferred sales and marketing of $2.3 million as a result of the issuance of a
warrant to AOL in connection with that amendment. Deferred sales and marketing
is being amortized as non-cash sales and marketing expense on a straight-line
basis over the life of the agreement.

Extraordinary items for the year ended December 31, 1998 consist of a gain
of $1.1 million, representing the forgiveness of a portion of a note payable to
AOL including interest accrued on this note, and a loss of $719,000,
representing the write-off of unamortized deferred financing costs associated
with such note payable.

We have incurred net losses of $9.4 million from our inception on May 2,
1996 through September 30, 1999. We have historically relied on advances under a
retired note payable to AOL and on private sales of equity securities to fund
our operations. We expect operating and net losses to continue for the
foreseeable future as we continue to incur significant expenses while pursuing
our business strategy.

RESULTS OF OPERATIONS

The following table sets forth for the periods presented certain data from
our statement of operations, expressed as a percentage of net revenues.

<TABLE>
<CAPTION>
PERIOD FROM
MAY 2, 1996 YEAR ENDED NINE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------- --------------------
1996 1997 1998 1998 1999
-------------- ------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................... 12.8 11.2 12.6 9.9 34.3
-------- ------ ------ ------ ------
Gross profit....................... 87.2 88.8 87.4 90.1 65.7
Operating expenses:
Product and content
development................... 371.2 106.6 99.1 95.5 63.9
Sales and marketing.............. 361.2 84.4 73.9 57.7 110.5
General and administrative....... 343.1 44.4 77.9 65.2 83.3
Non-cash compensation............ -- -- 9.0 6.9 27.2
Non-cash sales and marketing..... -- -- -- -- 4.8
Depreciation and amortization.... 12.9 3.7 11.7 9.1 13.1
-------- ------ ------ ------ ------
Total operating expenses........... 1,088.4 239.1 271.6 234.4 302.8
Loss from operations............... (1,001.2) (150.3) (184.2) (144.3) (237.1)
Interest income (expense), net..... (64.9) (33.4) 1.4 (3.6) 9.2
-------- ------ ------ ------ ------
Loss before extraordinary items.... (1,066.1) (183.7) (182.8) (147.9) (227.9)
Extraordinary items................ -- -- 37.5 47.2 --
-------- ------ ------ ------ ------
Net loss........................... (1,066.1)% (183.7)% (145.3)% (100.7)% (227.9)%
======== ====== ====== ====== ======
</TABLE>

27
<PAGE> 31

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

Net Revenues

Net revenues increased to $2.6 million for the nine months ended September
30, 1999 from $826,000 for the nine months ended September 30, 1998.
Sponsorship, advertising and production revenues increased to $1.7 million for
the nine months ended September 30, 1999 from $656,000 for the nine months ended
September 30, 1998, primarily due to a $854,000 increase in revenues generated
from additional sponsorship and production contracts and a $266,000 increase in
revenues generated from the launch of local vendor advertising programs in July
1999. As a percentage of net revenues, sponsorship, advertising and production
revenues accounted for approximately 65% and 79% for the nine months ended
September 30, 1999 and 1998, respectively.

Merchandise revenues amounted to $694,000 for the nine months ended
September 30, 1999, resulting primarily from a $453,000 increase related to the
acquisition of Bridalink.com in July 1999 and a $240,000 increase related to the
launch of The Knot Registry in November 1998. As a percentage of net revenues,
merchandise revenues accounted for 26% for the nine months ended September 30,
1999. There were no merchandise revenues in the corresponding period in 1998.

Publishing revenues increased to $160,000 for the nine months ended
September 30, 1999 from $143,000 for the nine months ended September 30, 1998.
The increase in publishing revenues was due to a $58,000 increase in sales of
our gown guide which was published at the end of June 1999, partially offset by
a $43,000 decrease in book publishing revenues. As a percentage of net revenues,
publishing revenues accounted for 6% and 17% for the nine months ended September
30, 1999 and 1998, respectively.

Travel revenues accounted for $54,000 of our net revenues for the nine
months ended September 30, 1999, resulting from the acquisition of Click Trips,
Inc. in July 1999. As a percentage of net revenues, travel revenues accounted
for 2% for the nine months ended September 30, 1999. There were no travel
revenues in the corresponding period in 1998.

We anticipate that the components of our net revenues will continue to
fluctuate as our business continues to grow.

Cost of Revenues

Cost of revenues consists of the cost of merchandise sold, payroll and
related expenses for our personnel who are responsible for the production of
customized online sites and tools, and costs of Internet access and hosting
services.

Cost of revenues increased to $904,000 for the nine months ended September
30, 1999 from $82,000 for the nine months ended September 30, 1998. The increase
was primarily due to an increase in the sale of merchandise through
Bridalink.com of $317,000 and through The Knot Registry of $169,000, and a
$141,000 increase in the cost of producing online sites and tools. As a
percentage of our net revenues, cost of revenues increased to 34% for the nine
months ended September 30, 1999 from 10% for the nine months ended September 30,
1998.

We anticipate that the cost of revenues will continue to grow in absolute
dollars as we increase our merchandising efforts and expand our sponsorship and
production contracts. Sponsorship, advertising and production gross margins are
currently greater than merchandise gross margins. As our business continues to
grow and our net revenues

28
<PAGE> 32

continue to change, we expect our cost of revenues to continue to fluctuate as a
percentage of net revenues.

Product and Content Development

Product and content development expenses consist of payroll and related
expenses for creative personnel, information technology, and expenses for
third-party software developers and contract programmers.

Product and content development expenses increased to $1.7 million for the
nine months ended September 30, 1999 from $788,000 for the nine months ended
September 30, 1998. The increase was primarily attributable to a $908,000
increase resulting from our hiring additional staff to enhance the content and
functionality of our sites, partially offset by a $241,000 decrease in
third-party programming and content licensing fees. As a percentage of our net
revenues, product and content development expenses decreased to 64% for the nine
months ended September 30, 1999 from 95% for the nine months ended September 30,
1998.

We believe that significant investments in product and content development
are required to remain competitive and, therefore, expect that our product and
content development expenses will continue to increase in absolute dollars for
the foreseeable future.

Sales and Marketing

Sales and marketing expenses consist primarily of payroll and related
expenses for sales and marketing, customer service and public relations
personnel, as well as expenditures for our AOL anchor tenant agreement,
advertising and promotional activities, and fulfillment and distribution of
merchandise.

Sales and marketing expenses increased to $2.9 million for the nine months
ended September 30, 1999, from $476,000 for the nine months ended September 30,
1998. The increase was primarily due to a $750,000 increase in carriage fees
paid under our anchor tenant agreement with AOL, which went into effect on
January 1, 1999, a $519,000 increase in personnel costs related to the hiring of
additional sales and marketing personnel and a $331,000 increase in sales
commissions. As a percentage of our net revenues, sales and marketing expenses
increased to 111% for the nine months ended September 30, 1999 from 58% for the
nine months ended September 30, 1998.

We believe that significant investments in sales and marketing personnel
and programs are required to remain competitive and to build our brand both
online and offline, and, therefore, that our sales and marketing expenses will
continue to increase in absolute dollars for the foreseeable future.

General and Administrative

General and administrative expenses consist primarily of payroll and
related expenses for our executive management, finance and administrative
personnel, legal and accounting fees, facilities costs and insurance expenses.

General and administrative expenses increased to $2.2 million for the nine
months ended September 30, 1999 from $539,000 for the nine months ended
September 30, 1998.

29
<PAGE> 33

This increase was primarily due to a $650,000 increase in personnel costs and a
$198,000 increase in professional fees. As a percentage of our net revenues,
general and administrative expenses increased to 83% for the nine months ended
September 30, 1999 from 65% for the nine months ended September 30, 1998.

We expect our general and administrative expenses to increase in absolute
dollars for the foreseeable future as we continue to hire personnel and incur
expenses to build our administrative infrastructure to support the growth of our
business and our operations as a public company.

Non-Cash Compensation

We recorded $3.0 million of deferred compensation during the nine months
ended September 30, 1999 and $268,000 of deferred compensation for the nine
months ended September 30, 1998. Amortization of deferred compensation increased
to $695,000 for the nine months ended September 30, 1999 from $57,000 for the
nine months ended September 30, 1998. As a percentage of our net revenues,
amortization of deferred compensation increased to 26% for the nine months ended
September 30, 1999 from 7% of our net revenues for the nine months ended
September 30, 1998.

Non-Cash Sales and Marketing

We recorded $2.3 million of deferred sales and marketing during the nine
months ended September 30, 1999, related to the issuance of a warrant to AOL in
connection with our amended anchor tenant agreement in July 1999. Amortization
of deferred sales and marketing was $127,000 for the nine months ended September
30, 1999. As a percentage of net revenues, amortization of deferred sales and
marketing amounted to 5% for the nine months ended September 30, 1999.

Depreciation and Amortization

Depreciation and amortization expenses consist of depreciation and
amortization of property and equipment and amortization of goodwill related to
acquisitions.

Depreciation and amortization expenses increased to $346,000 for the nine
months ended September 30, 1999 from $75,000 for the nine months ended September
30, 1998. This increase was primarily due to a $153,000 increase in depreciation
due to the increase in property and equipment purchases and an additional
$118,000 of amortization of goodwill related to acquisitions. As a percentage of
net revenues, depreciation and amortization expense increased to 13% for the
nine months ended September 30, 1999 from 9% for the nine months ended September
30, 1998.

PERIOD FROM MAY 2, 1996 (INCEPTION) TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1997 AND 1998

Net Revenues

Net revenues increased to $1.0 million for the year ended December 31, 1998
from $596,000 for the year ended December 31, 1997 and from $71,000 in the
period from inception through December 31, 1996. The increase for each period
was due primarily to

30
<PAGE> 34

an increase in the average dollar value of sponsorship programs and in the
number of sponsors and advertisers. As a percentage of net revenues, sponsorship
and advertising revenues accounted for approximately 82%, 100%, and 100% for the
years ended December 31, 1998 and 1997 and for the period from inception through
December 31, 1996, respectively.

Merchandise revenues were $17,000 for the year ended December 31, 1998 as a
result of the launch of The Knot Registry in November 1998. As a percentage of
net revenues, merchandise revenues accounted for 2% for the year ended December
31, 1998. There were no merchandise revenues for the year ended December 31,
1997 or for the period from inception through December 31, 1996.

Publishing revenues were $143,000, for the year ended December 31, 1998 as
a result of the delivery and acceptance of the first book under our publishing
contract. As a percentage of net revenues, pubishing revenues accounted for 14%
for the year ended December 31, 1998. There were no publishing revenues for the
year ended December 31, 1997 or for the period from inception through December
31, 1996.

Cost of Revenues

Cost of revenues increased to $131,000 for the year ended December 31,
1998, from $67,000 for the year ended December 31, 1997 and from $9,000 in the
period from inception through December 31, 1996. These increases in cost of
revenues were primarily due to the increased number of sponsors and advertisers
resulting in an increased expense of $35,000 for the year ended December 31,
1998 and $45,000 for the year ended December 31, 1997. These increases in cost
of revenues were also due to an increase in Internet access and hosting services
expenses of $13,000 for the year ended December 31, 1998 and $5,000 for the year
ended December 31, 1997. Cost of revenues for the year ended December 31, 1998
included the cost of merchandise sold as a result of the launch of The Knot
Registry in November 1998. As a percentage of net revenues, cost of revenues
remained relatively constant at 13%, 11% and 13% for the years ended December
31, 1998 and 1997, and for the period from inception through December 31, 1996,
respectively.

Product and Content Development

Product and content development expenses increased to $1.0 million for the
year ended December 31, 1998, from $635,000 for the year ended December 31, 1997
and from $262,000 for the period from inception through December 31, 1996. The
increase for each period was primarily attributable to increased personnel costs
related to enhancing the content and functionality of our sites. As a percentage
of net revenues, product and content development expenses decreased to 99% from
107% and from 371% for the years ended December 31, 1998 and 1997, and for the
period from inception through December 31, 1996, respectively. The percentage
decreases for each period were primarily attributable to the higher growth rate
in our net revenues as compared to the growth rate associated with these
expenses.

31
<PAGE> 35

Sales and Marketing

Sales and marketing expenses increased to $768,000 for the year ended
December 31, 1998, from $503,000 for the year ended December 31, 1997 and from
$255,000 for the period from inception through December 31, 1996. The increase
for the year ended December 31, 1998 was primarily a result of a $236,000
increase in personnel costs, which include sales commissions, and a $95,000
increase in costs incurred to retain an outside public relations firm. The
increase for the year ended December 31, 1997 was primarily a result of a
$107,000 increase in personnel costs and a $68,000 increase in commissions we
paid to AOL. As a percentage of net revenues, sales and marketing expenses
decreased to 74% from 84% and from 361% for the years ended December 31, 1998
and 1997 and for the period from inception through December 31, 1996,
respectively. The percentage decreases for each period were primarily
attributable to the higher growth rate in our net revenues as compared to the
growth rate associated with these expenses.

General and Administrative

General and administrative expenses increased to $809,000 for the year
ended December 31, 1998, from $265,000 for the year ended December 31, 1997 and
from $242,000 for the period from inception through December 31, 1996. The
increase for each period was primarily due to an increase in personnel costs and
facilities expenses resulting from an increase in the number of personnel hired
to support the growth of our business. The increase for the year ended December
31, 1998 was primarily due to a $119,000 increase in facilities expenses and a
$105,000 increase in personnel costs. As a percentage of net revenues, general
and administrative expenses increased to 78% for the year ended December 31,
1998 from 44% for the year ended December 31, 1997 and decreased from 343% for
the period from inception through December 31, 1996. The percentage increase
from 1997 to 1998 was primarily attributable to increased personnel costs, while
the percentage decrease from 1996 to 1997 was primarily attributable to the
higher growth rate in our net revenues as compared to the growth rate in general
and administrative expenses.

Non-Cash Compensation

We recorded $480,000 in deferred compensation for the year ended December
31, 1998. Amortization of deferred compensation was $93,000, or 9% of our net
revenues, for the year ended December 31, 1998.

Depreciation and Amortization

Depreciation and amortization expenses increased to $122,000 for the year
ended December 31, 1998, from $22,000 for the year ended December 31, 1997 and
from $9,000 in the period from inception through December 31, 1996. The increase
for each period was primarily due to increased depreciation resulting from
increased purchases of property and equipment to support the growth of our
business. Also included in depreciation and amortization for the year ended
December 31, 1998 was approximately $54,000 of goodwill amortization related to
the acquisition of Bridal Search in April 1998. As a percentage of net revenues,
depreciation and amortization remained relatively constant at 12%, 4% and 13% of
net revenues for the years ended December 31, 1998 and 1997, and for the period
from inception through December 31, 1996, respectively.

32
<PAGE> 36

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly statement of
operations data for each of the seven quarters ended September 30, 1999. We have
prepared these data on the same basis as our audited financial statements in
this prospectus and have included all necessary adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of our results
of operations for these interim periods. You should read these interim financial
data together with our audited financial statements and the notes to those
statements in this prospectus. Our historical results of operations do not
necessarily indicate the results of operations we will achieve in the future,
and our results of operations for interim periods do not necessarily indicate
the results of operations for any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues........... $ 226 $ 439 $ 161 $ 214 $ 194 $ 544 $ 1,897
Cost of revenues....... 33 28 21 49 53 188 663
------- ------- ------- ------- ------- ------- -------
Gross profit........... 193 411 140 165 141 356 1,234
Operating expenses:
Product and content
development....... 166 290 333 242 401 464 820
Sales and
marketing......... 94 144 238 292 706 788 1,419
General and
administrative.... 83 153 302 271 420 621 1,153
Non-cash
compensation...... -- 22 35 36 129 213 375
Non-cash sales and
marketing......... -- -- -- -- -- -- 127
Depreciation and
amortization...... 7 31 38 46 69 106 171
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 350 640 946 887 1,725 2,192 4,065
Loss from operations... (157) (229) (806) (722) (1,584) (1,836) (2,831)
Interest income
(expense), net....... (49) 4 16 44 (10) 110 143
------- ------- ------- ------- ------- ------- -------
Loss before
extraordinary
items................ (206) (225) (790) (678) (1,594) (1,726) (2,688)
Extraordinary items.... -- 390 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net loss............... $ (206) $ 165 $ (790) $ (678) $(1,594) $(1,726) $(2,688)
======= ======= ======= ======= ======= ======= =======
</TABLE>

Net revenues for the three months ended September 30, 1999 increased by
$1.4 million as compared to the three months ended June 30, 1999 primarily as a
result of revenues generated from additional sponsorship and production
contracts, the launch of local vendor advertising programs in July 1999, as well
as merchandise revenues generated through Bridalink.com which was acquired in
July 1999. There was a corresponding increase in both cost of revenues and sales
and marketing expenses during the three months ended September 30, 1999.

Net revenues for the three months ended June 30, 1999 increased from the
three months ended March 31, 1999 as a result of an increase in the average
dollar value of sponsorship agreements and in the number of sponsors and
advertisers. Net revenues for the three months ended September 30, 1998
decreased from the prior three month period

33
<PAGE> 37

as a result of lower sponsorship revenues as well as decreased publishing
revenues. Net revenues for the three months ended June 30, 1998 increased from
the prior three month period primarily as a result of publishing revenues
recognized from the delivery and acceptance of the first book under our book
publishing contract.

Sales and marketing expenses for the three months ended March 31, 1999
increased from the three months ended December 31, 1998 as a result of carriage
fees under our new anchor tenant agreement with AOL which went into effect on
January 1, 1999.

LIQUIDITY AND CAPITAL RESOURCES

We funded our operations from our inception on May 2, 1996 through April
1998 primarily with advances under a retired note payable to AOL. Subsequent to
April 1998, we have funded our operations primarily through private sales of
preferred equity securities totaling $18.0 million. As of September 30, 1999, we
had $9.3 million in cash and cash equivalents.

Net cash used in operating activities was $4.8 million for the nine months
ended September 30, 1999. This resulted primarily from the net loss for the
period of $6.0 million as adjusted for depreciation and amortization of $1.2
million and an increase in accounts receivable of $717,000, other current assets
of $646,000 and inventories of $389,000, partially offset by increases in
accounts payable and accrued expenses of $788,000 and deferred revenue of
$788,000. Net cash used in operating activities was $1.7 million for the year
ended December 31, 1998, $837,000 for the year ended December 31, 1997 and
$625,000 for the period from May 2, 1996 (inception) through December 31, 1996,
primarily as a result of the net loss for the periods of $1.9 million, $1.1
million and $752,000, respectively, adjusted for depreciation and amortization
of $242,000, $105,000 and $9,000, respectively.

Net cash used in investing activities was $1.6 million for the nine months
ended September 30, 1999, primarily due to the purchase of property and
equipment of $1.2 million and cash paid for business acquisitions of $335,000.
Net cash used in investing activities was $305,000 for the year ended December
31, 1998, $24,000 for the year ended December 31, 1997 and $58,000 for the
period from inception through December 31, 1996, primarily due to the purchase
of property and equipment and, in 1998, cash paid for a business acquisition.

Net cash provided by financing activities was $14.7 million for the nine
months ended September 30, 1999 primarily resulting from the issuance of Series
B Preferred Stock in April 1999. Financing activities provided $2.8 million for
the year ended December 31, 1998 from the sale of Series A Preferred Stock.
Financing activities for the year ended December 31, 1997 provided $1.2 million
and for the period from inception through December 31, 1996 provided $700,000,
representing borrowings under a note payable to AOL.

Although we have no material commitments for capital expenditures, our
capital expenditures have increased from $58,000 for the period from inception
through December 31, 1996 to over $1.1 million for the nine months ended
September 30, 1999, consistent with the growth in our operations and staffing.
We anticipate that this increase in capital expenditures will continue for the
foreseeable future as a result of increased growth. We intend to continue to
pursue acquisitions of, or investments in, complementary

34
<PAGE> 38

businesses, services and technologies, expand our sales and marketing programs
and conduct more aggressive brand promotions.

As of September 30, 1999, we had commitments under non-cancelable operating
leases amounting to $6.1 million, of which $374,000 will be due on or before
September 30, 2000.

As of September 30, 1999, we had a commitment under our amended anchor
tenant agreement with AOL in the amount of $3.9 million, of which $1.2 million
will be due on or before September 30, 2000.

We currently believe that the net proceeds from this offering, together
with our current cash and cash equivalents, will be sufficient to fund our
working capital and capital expenditure requirements for at least the next 12
months. We cannot assure you that additional funding, if required, will be
available to us in amounts or on terms acceptable to us. If sufficient funds are
not available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of acquisition opportunities, develop or enhance our
services or products, or otherwise respond to competitive pressures would be
significantly limited. Those limitations would materially and adversely affect
our business, results of operations and financial condition.

RECENT ACQUISITIONS

On July 6, 1999, we purchased all of the assets of Bridalink.com for
approximately $124,000 in cash and the issuance of immediately vested stock
options to purchase up to 10,000 shares of our common stock at an exercise price
$1.50 per share. The common stock was valued at $7.00 per share for financial
reporting purposes. Bridalink.com operates www.bridalink.com, an Internet
wedding supply store located in Northern California.

On July 31, 1999, we acquired all of the capital stock of Click Trips, Inc.
for 5,000 shares of common stock. The common stock was valued at $7.00 per share
for financial reporting purposes. Under the terms of the acquisition agreement,
the 5,000 shares of common stock will be held in escrow for six months for the
purpose of indemnifying us against any potential liabilities of Click Trips.
Click Trips has the right to receive options to purchase up to an additional
10,000 shares of our common stock upon the attainment of $1.2 million in
commission revenue for the year ended December 31, 2000. The exercise price
related to the options will be equal to the fair market value of our common
stock on the date of grant. Click Trips operates www.clicktrips.com, an online
travel agency and is located in Warminster, Pennsylvania.

On August 18, 1999, we acquired the assets of Wedding Photographers
Network, a division of The Denis Reggie Company, for 10,000 shares of our common
stock. The common stock was valued at $8.00 per share for financial reporting
purposes. Wedding Photographers Network is a searchable database of local
wedding photographers and is located in Atlanta, Georgia.

We have accounted for these acquisitions using the purchase method of
accounting. Goodwill resulting from these acquisitions is being amortized using
the straight line method over three years. The results of operations for each
acquisition are included in the period subsequent to the date of each
acquisition.

35
<PAGE> 39

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded
to accept or recognize only two-digit entries in the date code field. These
systems and software products will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software may need to be upgraded, redesigned or replaced to
comply with such Year 2000 requirements to avoid system failure or
miscalculations causing disruptions of normal business activities.

Our business, results of operations and financial condition would suffer if
the systems on which we depend to conduct our business are not Year 2000
compliant. Our potential areas of exposure include products purchased from third
parties, information technology that we use for internal operations including
computers and software, and non-information technology systems and services
including telephone systems, electricity and other items that we use for
internal operations.

STATE OF READINESS

We are not currently aware of any Year 2000 compliance problems relating to
our systems that would have a material adverse effect on our business, results
of operations and financial condition. We have made a preliminary assessment of
the Year 2000 readiness of our operating, financial and administrative systems,
including hardware and software. All of the internally developed production
systems for our sites are Year 2000 compliant. We have received and have on file
Year 2000 readiness statements from AOL, QVC and each of our current third-party
technology vendors. In each case, these technology vendors state that the Year
2000 date change will not result in a significant interruption in critical
services or negatively impact their clients in any material way. With respect to
information technology we addressed Year 2000 compliance issues primarily
through commercially available patches or upgrades in the ordinary course of
business. We have completed integrated testing of our systems, including
internally developed proprietary software, third-party software, hardware and
services, and have found no Year 2000 compliance problems.

We have contacted our principal vendors of material non-information
technology systems and services used by us, such as our telephone system and
utility providers, and requested confirmation of the Year 2000 compliance of
their systems and services. We have received notification from some of these
vendors that the systems and services that they provide to us are Year 2000
compliant. We have replaced the systems and services of non-compliant vendors
with compliant alternatives.

COSTS

To date, we have spent an immaterial amount on Year 2000 compliance issues,
and we expect to incur additional costs not to exceed $200,000 in connection
with identifying, evaluating and addressing Year 2000 compliance issues. Most of
our expenses for the Year 2000 have related to, and are expected to continue to
relate to, the operating costs associated with time spent by employees and
consultants in the evaluation process and execution of Year 2000 compliance.
Such expenses, if higher than anticipated, could have a material adverse effect
on our business, results of operations and financial condition.

36
<PAGE> 40

RISKS

We believe, based upon our investigations and testing to date, that the
Year 2000 issue will not have a material adverse effect on our business, results
of operations or financial condition. However, despite all of our efforts to
date towards insuring Year 2000 compliance, latent issues may still surface in
the future that require upgrades, modifications, or replacement, all of which
could be time-consuming and expensive. Our failure to fix or replace internally
developed proprietary software, third-party software, hardware, or services on a
timely basis could result in lost revenues, increased operating costs, the loss
of customers and other business interruptions.

We depend heavily on a number of third-party vendors to provide both
network services and equipment. A significant Year 2000-related disruption of
the network, services or equipment that third-party vendors provide to us could
cause our sponsors, advertisers, members and visitors to consider seeking
alternate providers. Year 2000 issues could also cause an unmanageable burden on
our technical support personnel, which in turn could materially and adversely
affect our business, results of operations and financial condition.

CONTINGENCY PLAN

Because no systems have been found to be non-compliant, we have determined
that a contingency plan is not required. We are unable to provide for
contingencies arising as a result of large scale or Internet-wide failure
because we are not aware of any adequate replacement service for the Internet.

37
<PAGE> 41

BUSINESS

OVERVIEW

The Knot is the leading online wedding destination on the World Wide Web
and the primary wedding content provider on America Online and several other of
AOL's leading brands, including AOL.com, Netscape Netcenter and CompuServe. We
combine comprehensive content and an online community with wedding-related
commerce. Our online sites provide full-service offerings targeted at the
planning needs of today's brides and grooms. We believe that our sites enable
our users to overcome the many challenges of the wedding planning process by
providing a one-stop solution. In addition, we provide advertisers and vendors
with targeted access to couples actively seeking information and making
meaningful buying decisions relating to all aspects of their weddings.

Located at www.theknot.com on the Web and on AOL at keywords "Knot" and
"weddings", our sites provide future brides and grooms with useful information
and resources. We offer:

- - a searchable database that draws on thousands of articles on wedding planning;

- - a database of approximately 13,000 local vendors in 52 markets nationwide;

- - a searchable bridal gown database with more than 15,000 gown images from over
140 bridal designers;

- - a searchable database with more than 750 bridal accessories, including
headpieces, shoes and purses;

- - 45 weekly hosted chats;

- - nine integral tools for planning the wedding;

- - an online gift registry with more than 10,000 gifts;

- - an online shop of over 450 wedding supplies and gifts; and

- - honeymoon travel packages.

We also service the wedding market through a series of books and a semiannual
gown guide. These traditional forms of media provide cross-promotional
opportunities and assist us in increasing our brand awareness and our online
audience.

Engaged couples are increasingly turning to The Knot. In September 1999, we
generated over 15.4 million page views on our Web site compared to 2.5 million
in December 1998. As of September 30, 1999, more than 395,000 couples had
enrolled on our site to become members, and we are currently enrolling as
members an average of over 1,000 new couples per day.

INDUSTRY BACKGROUND

Growth of the Internet and Online Commerce

The Internet has emerged as a global medium that allows millions of people
worldwide to obtain information, communicate and conduct business. In its June
1999 report, International Data Corporation estimates that the number of
Internet users

38
<PAGE> 42

worldwide will grow from approximately 142 million users in 1998 to 502 million
by the end of 2003. Additionally, worldwide commerce revenues on the Internet
are expected to grow from approximately $50 billion at the end of 1998 to
approximately $1.3 trillion by the end of 2003. The Internet has also become an
attractive medium for advertising. Advertisers can utilize the Internet to
target specific groups based on consumer tastes and buying patterns. Forrester
Research estimates that the dollar volume of online advertising will increase
from $1.5 billion in 1998 to $15.3 billion in 2003.

The Wedding Industry

Each year approximately 2.4 million couples get married in the United
States. According to an independent research report, the domestic wedding market
generates approximately $45 billion in retail sales annually. Presumed to be a
once-in-a-lifetime occasion, a wedding is a major milestone event and,
therefore, consumers tend to allocate significant budgets to the wedding and
related purchases. According to a 1997 survey of readers of Bride's magazine,
the average amount spent on a wedding was $19,104, excluding the honeymoon.

Planning a wedding can be a stressful and confusing process. Engaged
couples must make numerous decisions and expensive purchases. A typical wedding
requires decisions and planning relating to bridal registries, invitations,
wedding gowns and wedding party attire, wedding rings, photographers, music,
caterers, flowers and honeymoons. In addition to the number of decisions faced
by engaged couples, the fixed date and the emotional significance of the event
intensify the stress. For the majority of engaged couples, the process of
planning a wedding is an entirely new one. They do not know where to find the
necessary information and services, how much services or goods should cost or
when decisions need to be made. These planning decisions are further complicated
because many couples choose to have their weddings in locations other than where
they live. Researching and soliciting local wedding services from distant
locations without traveling and making an enormous time commitment is extremely
difficult. Today's to-be-weds are seeking reliable resources and information to
assist in their planning and purchase decisions.

Vendors and advertisers highly value to-be-weds as a consumer group.
Replenished on an annual basis, wielding substantial budgets and facing a firm
deadline, engaged couples are ideal recipients of advertisers' messages and
vendors' products and services. According to Modern Bride, during the six months
prior to and the six months following a wedding, the average couple will make
more buying decisions and purchase more products and services than at any other
time in their lives. The challenges and obstacles that engaged couples face make
them especially receptive to marketing messages. A disproportionate amount of
advertising revenues are generated per subscriber by bridal magazines. According
to Advertising Age, in 1998 the top three bridal magazines generated an average
of $190.74 in revenues per reader, compared to an average of $75.50 in revenues
per reader in the top three travel magazines and an average of $53.63 in
revenues per reader in the top three women's magazines.

The wedding market also represents significant opportunities for the retail
industry. Over 91% of all to-be-weds register for gifts. According to a 1997
report by Bride's magazine, engaged couples receive gifts from an average of 200
guests, most of whom are spending between $70 and $100. Because items are
selected by the engaged couple but paid for by their guests, price sensitivity
is minimal and registry products are rarely discounted by retailers. Registry
for products in all categories has grown, prompting many

39
<PAGE> 43

national retailers -- previously without registries -- to enter the gift
registry market. Weddings also generate substantial revenues for travel services
companies. Honeymoon travel generates an estimated $4.5 billion annually.
According to a 1997 Bride's survey, over 99% of all newlyweds go on a honeymoon
with an average cost of $3,657 per couple.

Traditional Wedding Resources Fail to Adequately Service Today's Engaged Couples

The wedding market is highly fragmented and wedding resources are widely
dispersed. In addition, to-be-weds face difficulty in locating wedding planning
information. Traditionally, to-be-weds have relied upon many different resources
when planning their weddings, including family and friends, bridal magazines,
books, bridal registries, wedding consultants and travel agents. Because the
traditional providers of wedding resources are single-service/product focused,
to-be-weds must manage multiple providers. Consequently, to-be-weds find wedding
planning to be stressful, time consuming and inconvenient.

Seeking information and ideas, most engaged couples turn to bridal
magazines for assistance. Many couples, however, find that the sheer volume of
gown ad pages, scarcity of editorial content, the lack of organization of these
magazines and their infrequent publishing schedules make them an inefficient and
insufficient source of timely and relevant wedding planning information.

In addition, the registry process is equally burdensome. Increasingly,
to-be-weds supplement department store bridal registries, the customary source
of wedding gifts, to satisfy their gift preferences. Despite the inconvenience,
a significant portion of today's engaged couples register at two or more stores
and increasingly turn to specialty and discount stores to obtain the product
variety they desire.

The Internet and the Wedding Industry

To-be-weds are seeking a comprehensive resource to assist in their
preparation and planning for a wedding. Because of its global reach and capacity
to transmit information rapidly, the Internet represents an ideal medium over
which to-be-weds can easily access information and communicate with the
widely-dispersed providers of local wedding resources. We expect the impact of
the Internet on the wedding market to be significant.

In 1997, the median age was 26 for first-time brides and 28 for first-time
grooms, placing them in the demographic age group, 18 to 34 years, that
currently comprises approximately 41% of all home Web users. As Internet use
continues to increase, engaged couples are more likely to turn to online
resources as the first place they look for wedding products, information and
registry services. Recognizing this trend, traditional providers of wedding
resources have begun to offer their services and products online. Like their
offline equivalents, however, these online offerings are single-service/product
focused. To-be-weds continue to search for a comprehensive solution to their
information, planning and purchasing needs at a single destination.

THE KNOT SOLUTION

We are the leading online destination targeting the wedding market. We
focus on the needs of engaged couples and have created an online environment
that provides information, advice, community, tools and commerce in the areas of
wedding planning most important to couples including engagement, wedding day,
honeymoons and newlywed life. In addition, we provide vendors and advertisers
with targeted marketing opportunities

40
<PAGE> 44

due to the well-defined demographic profile of our users. Key components of our
solution include:

BENEFITS TO USERS

Relevant Wedding Content. We provide creative and up-to-date information
and resources to attract users to our sites. Weddings are information-intensive
events requiring extensive research, planning and decision-making. Our sites
provide future brides and grooms with a wide range of wedding-related
information and resources. We also provide offline information and services to
brides and grooms. We author books that serve as guides for wedding planning and
publish The Knot Ultimate Wedding Gown Guide, a semiannual publication
cataloguing wedding gowns from the top designers in the world.

Active Membership and Community Participation. Our online sites generate a
high degree of member involvement through chats, message boards and personalized
interactive services. To-be-weds actively seek forums to exchange ideas and ask
questions during the planning process. We encourage and promote active
participation within our online community. The Knot community allows our members
to interact with other couples, as well as our own experts, on wedding planning
issues and concerns. For example, our "Ask Carley" area is an interactive
service in which wedding etiquette and other questions are answered daily by our
experts on wedding planning. This area includes a searchable database that draws
from an archive of up-to-date answers to over 11,000 questions. We also send out
a weekly general newsletter to our subscribers updating them on new articles,
features and upcoming events on our sites and bi-weekly newsletters focused on
specific topics, such as registries and accessories. Additionally, our
interactive services allow users to prepare and modify their wedding budget and
create personalized checklists and Web pages.

Convenient, Comprehensive Shopping Experience. We integrate our
interactive services and informative content with comprehensive shopping
services, which range from wedding gifts and supplies to honeymoons. We have
developed The Knot Registry, which we believe is the Internet's most
comprehensive wedding gift registry. Unlike other online bridal registries which
link users to large retailers in exchange for a payment from the retailer, we
buy products directly from manufacturers. This enables us to provide our users
with a large selection of products from a wide range of categories, while
maintaining a high level of customer service. We offer registry gifts ranging
from fine china and blenders to mountain bikes and safaris. Our strategic
relationship with QVC facilitates our ability to offer a broad range of products
and enables products to be shipped generally within 48 hours of receipt of
order. Wedding guests can quickly and easily purchase gifts online or offline
via toll-free phone service, fax or mail, 24 hours a day.

Through our online wedding supply stores, to-be-weds can conveniently
purchase from one source a broad range of gifts for the wedding party and
supplies for the wedding ceremony, such as decorated disposable cameras, ring
pillows and unity candles. Many of these items are highly specialized and
difficult to find through traditional retail outlets.

Access to the Local Wedding Market. Through our strategic alliance with
Weddingpages, Inc., we offer a database of approximately 13,000 local wedding
vendors. In July 1999, we entered into an 18-month exclusive agreement with
Weddingpages, a publisher of local wedding magazines across the United States
and owner of a Web site offering wedding-related services and information.
Weddingpages Bride and Home is published in 52 markets twice yearly. This
magazine is distributed on a continual roll-out

41
<PAGE> 45

basis with estimated newsstand circulation that exceeds the combined circulation
of Bride's and Modern Bride. Through this strategic alliance, we offer a
national online site with a local sales force in over 50 markets and an
extensive database that brides and grooms can search to find vendors at their
wedding locations. Categories in the local vendor database include wedding
venues, caterers, florists, bridal shops, photographers, musicians and limousine
services. Weddingpages sells online advertising to local wedding vendors on our
behalf. We receive the revenue from these sales and pay Weddingpages a 65% sales
commission. We also pay Weddingpages a monthly fee for related administrative
and operating functions, including customer service, ad production and
accounting services. In addition, in August 1999, we acquired Wedding
Photographers Network, a division of The Denis Reggie Company. Wedding
Photographers Network allows to-be-weds to search for local wedding
photographers meeting their specific needs.

BENEFITS TO ADVERTISERS, SPONSORS AND VENDORS

We provide advertisers, sponsors and vendors with targeted access to
couples actively seeking information and advice and making meaningful spending
decisions relating to all aspects of their weddings. We offer advertisers,
sponsors and vendors an opportunity to establish brand loyalty with first-time
purchasers of many products and services.

Advertisers and Sponsors. We are able to deliver to advertisers and
sponsors significant leads to potential purchasers. Editorial content and
advertising are often integrated on our sites. For example, an article about
honeymoons might feature an advertisement for a resort. Instead of traditional
banners or buttons, our sponsors usually select our custom-developed marketing
programs that offer special features, including tools. When a user clicks on an
advertisement positioned on our sites, a sponsor's site appears which showcases
the advertiser's products and services. These sites can provide relevant product
and contact information, electronic catalogues of products or hyperlinks to the
sponsor's Web site. Companies can also enter into longer term arrangements to
exclusively sponsor entire editorial areas or special features.

Vendors. We provide our vendors with a consumer group that will make more
buying decisions than at any other time in their lives. Our easy-to-use shopping
sites increasingly promote e-commerce. Vendors' products are attractively
displayed with color photographs and descriptions customized for the bridal
market. Through our interactive online features, such as chat rooms and message
boards, and by utilizing the creative content portions of our sites, we
encourage and assist our users in making purchasing decisions.

OUR STRATEGY

Our objective is to expand our position as the leading online resource
providing comprehensive wedding planning, information, products and services.
Key elements of our business strategy include the following:

Build Strong Brand Recognition. Building brand recognition of the Knot is
critical to attracting and expanding our online user base. We have secured the
leading position in the online wedding market. To maintain the focus on The Knot
brand, we will continue to emphasize our editorial and creative content. We
believe that our content and ability to make the wedding process easier, more
fun and convenient for today's busy couples will continue to build our brand.

42
<PAGE> 46

We will also strengthen brand awareness through our book series and gown
guide. Through our affiliation with Weddingpages, the largest local wedding
publication in the United States, we are increasing our brand awareness at the
local level. We plan to continue building brand recognition by leveraging our
membership base and creating innovative and integrated marketing solutions.

Aggressively Grow Membership. New member enrollment per month has grown
from 11,000 in December 1998 to over 36,000 in September 1999. We currently
enroll as members an average of over 1,000 new couples per day. We intend to
continue to grow our membership base and increase member usage through our
content offerings, interactive services, active community participation and
strategic relationships.

Provide Full-Service Wedding Resources. We facilitate the wedding planning
process by providing what we believe is one of the most comprehensive package of
services, tools and commerce applications. By continuing to combine our
extensive wedding content and our active online community with a full-service
shopping solution, we plan to maintain our strong position and to make the
wedding planning process more convenient, efficient and enjoyable. We intend to
continue to expand the services we offer and the content we provide.

Capitalize on Multiple Revenue Opportunities. We intend to leverage the
size and favorable demographics of our online community to generate multiple
revenue streams. Our primary focus to date has been on national advertising
revenues and on providing our sponsors and advertisers with targeted access to
couples actively seeking information and making purchase decisions. We view our
relationships with our sponsors and advertisers as critical to our success. We
intend to continue to seek additional sponsorship contracts with longer terms
and higher dollar values for our contracts. We also intend to benefit from our
increased presence in the local wedding market. Our searchable database features
advertising in 52 local markets for local wedding vendors, such as
photographers, caterers and florists.

We expect to generate increasing online revenues from The Knot Registry and
our convenient gift and supply shops. We will continue to use our content to
promote e-commerce opportunities. Additionally, we expect to realize revenues
from publishing our books and semiannual gown guide. We will pursue additional
revenue opportunities, as appropriate, in connection with the needs of today's
engaged and newly married couples. We also intend to extend the relationship we
build with our users and provide access to additional products and services
relevant to newlyweds and growing families.

Continue to Pursue Strategic Alliances and Acquisitions. We plan to expand
our business through strategic alliances and acquisitions. Since April 1999, we
have entered into strategic relationships with QVC and Weddingpages, and we have
acquired Bridalink, Click Trips and Wedding Photographers Network. Our
relationship with QVC allows us to rapidly purchase, process and ship
merchandise for The Knot Registry, and our relationship with Weddingpages allows
us to provide our users with access to an extensive database of local vendors
and resources. The acquisitions of Bridalink, Click Trips and Wedding
Photographers Network expanded the resources available on our sites for to-be-
weds. We intend to seek other opportunities to acquire or form alliances with
other companies that will enhance our business. We have no present plans or
commitments with respect to acquisitions or alliances and we are not currently
engaged in any negotiations with respect to these opportunities.

43
<PAGE> 47

THE KNOT'S ONLINE NETWORK

Our sites allow users to access information, participate in interactive
chats and message boards, and purchase items online. The following is a brief
description of our online content:

EDITORIAL CONTENT

Engagement This area provides advice on proposing, choosing a
diamond ring, and throwing an engagement party. It
also includes steps to take after the bride and
groom are engaged.

Planning Advice This area informs couples on the business points
of planning a wedding. Topics include questions to
ask wedding vendors, points to be included in
contracts and tips for weddings on a budget.

Wedding Ideas Photos, stories, and creative ideas from weddings
around the country are featured in this area.
Additional topics include ethnic traditions,
second weddings and theme wedding ideas.

The Dress The articles and photo features in this area cover
all aspects of bridal fashion. Highlights include
the latest bridal gown trends, advice on choosing
accessories and advice on which gowns look good on
whom.

Big Day Beauty Articles and photos in this area advise brides on
the latest trends in bridal make-up and hair, as
well as recommend pre-wedding fitness and spa
treatments.

Grooms and Guys This area is devoted to grooms, groomsmen, dads
and ring bearers. Articles include topics from
wedding duties and toasts to groomsmen gifts and
bachelor parties.

Maids and Moms This area is devoted to helping bridesmaids, moms
and flowergirls sort out their wedding duties.
Also included are articles on throwing showers,
finding bridesmaid dresses and throwing
bachelorette parties.

Newlywed Nesting This area focuses on helping the bride and groom
set up house, including what to register for, how
to entertain, how to make post-wedding financial
decisions and how to maintain relationships after
the wedding.

Honeymoon Escapes Articles and photo features in this area cover
honeymoon destinations throughout the world.
Included in the area is advice on overseas travel,
resorts, packing tips and activities.

44
<PAGE> 48

INTERACTIVE FEATURES AND TOOLS

Ask Carley In this area, the wedding editors provide answers
to couples' etiquette questions. Topics include
divorced families, second weddings, problem
bridesmaids, and general wedding etiquette.

Gown Search This database of wedding attire includes more than
15,000 wedding gown images from over 140 bridal
designers. A bride can search for gowns by price,
designer or silhouette and save results to her own
saved gown list to view later. In addition, this
database features bridesmaid dresses, attire for
the mothers of the bride and groom, and flower
girl dresses.

Big Day Budgeter This personalized budget calculator creates a
category-by-category wedding budget. For each category, the budgeter offers
advice and explains what the couple can afford in
their price range. The budgeter saves the couple's
budget information online, where they can update
it 24 hours a day.

Local Vendor Finder In partnership with Weddingpages, we provide
listings of approximately 13,000 wedding vendors
in 52 local markets nationwide. Categories include
caterers, bakers, banquet halls, limousine
companies, musicians, and other wedding
professionals. Information includes contact
information, photos and service descriptions.

Personal Wedding Web Pages Couples can create a Web page for their wedding.
On these three-page Web sites couples can include
photos, personal stories, ceremony details such as
location and time, local lodging and activities
for guests, names and description of bridal party
members and a link to buy items on the couple's
registry list at The Knot.

The Ultimate Wedding
Checklist This checklist provides a personalized,
week-by-week wedding planning to-do list created
according to a couple's wedding date. Couples
visit the Web site for their daily to-dos and
check off items they have completed.

Wedding Photographers
Network This is a database of professional wedding
photographers that provides couples the ability to
search by date, location and price. Couples can
view online portfolios of the photographers' work.

Diamond Finder This database of diamond information helps couples
find an appropriate stone based on budget, cut,
quality and size requirements. This feature also
includes the ability to appraise a diamond or to
double-check a price.

Wedding Guest List Manager This online address book allows couples to manage
their guest list, invitations and seating. Couples
can track guest address information as well as the
total number of guests invited and guest
responses. Additionally, they can create a seating
chart and record gifts received and thank you
notes sent.

Accessory Search This database allows brides to search for bridal
accessories by designer name or category.
Categories include headpieces, shoes, purses,
gloves and jewelry. Brides can also search by
specific criteria such as price point. Search
results include photos, price, style number and
purchase information.

45
<PAGE> 49

COMMUNITY FEATURES

Wedding Chat We have 24-hour chat rooms on both America Online
and the Web. We have 45 weekly hosted chats. Our
18 chat hosts, usually newlyweds, manage the room
to facilitate conversation flow and help brides
find information on The Knot that answers their
questions.

Newsletters Couples can subscribe to a general weekly
newsletter featuring updates on current Knot
editorial articles, tips on using The Knot and
special promotions. Couples can also subscribe to
biweekly newsletters focused on topics such as
registry and accessories.

Discussion Groups The Knot message boards provide an area for
couples to exchange personal stories, creative
ideas and advice. Special board features include
the wedding dress resale classifieds board, and
the "vendor referral" board, where brides list
their favorite wedding professionals.

Wedding Announcements A database of wedding announcements that allows
visitors to The Knot to find couples marrying in a
specific area of the country or on a specific
wedding date. Photos and stories about the
couples' weddings are included in this area, which
also allows visitors to post good wishes for them.

SPONSORSHIP, ADVERTISING AND PRODUCTION

We have derived a significant amount of our revenues to date from the sale
of sponsorship, advertising and production contracts. For the nine months ended
September 30, 1999, sponsorship, advertising and production revenues represented
65% of our net revenues.

Our strategy is focused on generating a majority of our advertising
revenues from sponsors and advertisers who seek a cost-effective means to reach
the wedding market. Sponsors advertise on the editorial areas of our sites, and
can purchase special features in an area designated solely for them. These
programs are typically exclusive and are for a period of up to three years.

Sponsorships provide content while showcasing sponsors' products and
services, creating a relationship between our users and our sponsors. The
special feature programs typically include an exclusive Knot-designed online
site, as well as site-wide banners and links to the sponsor's Web site. In
addition, special features also include integrated marketing programs which may
include online promotional events, such as sweepstakes, or hosted chat sessions,
collection of user data for the sponsor, offline promotions, such as collateral
material distribution at bridal shows and links to other strategic areas of the
sponsor's Web site. For example, OurBeginning.com, a wedding invitation
supplier, is the exclusive sponsor of The Complete Guide to Invitations where we
publish articles about wording, addressing and assembling invitations as well as
an Invitation Q&A section. There are advertising banners and text that link to
OurBeginning.com's special feature area as well as to their site. The special
feature area also contains links to the OurBeginning.com Web site.

Both content specific area and special feature sponsorships may also
include interactive tools. For example, Mondera's Wedding Band Finder, which is
hosted on our

46
<PAGE> 50

Web site allows users to search for wedding bands by gender, price or metal. If
there are wedding bands available that meet the user's criteria, a buy button
appears on the screen. If the user clicks on the buy button, they will be linked
directly to Mondera's Web site where the user can make the purchase.

We offer short-term advertising contracts ranging from one month to one
year. For example, a local photographer can purchase a listing on our Wedding
Photographers Network which typically contains key contact information and may
also contain a portfolio sample of a photographer's work. Advertisers can also
purchase banner advertisements.

E-COMMERCE

The Knot Shop and Bridalink.com

We offer wedding supplies through The Knot Shop and Bridalink.com.
Bridalink.com is our separate online store for wedding supplies which we
maintain in order to attract new users and generate additional revenue. We offer
over 450 products, including decorated disposable cameras, wedding bubbles and
bells, ring pillows, toasting flutes, car decorating kits, table centerpieces,
goblets and glasses, garters and unity candles. These highly specialized items
are often difficult to find through traditional retail outlets, and the purchase
of these items is often left to the last minute. Consumers can place orders
online, through a toll-free number, fax or via mail, 24 hours a day. We fulfill
orders from our warehouse located in Redding, California.

The Knot Registry

The Knot Registry offers a broad selection of more than 10,000 products and
services from more than 500 well-recognized brands. Approximately 45% of our
products are supplied by QVC vendors. Wedding guests can quickly and easily
purchase gifts online or via phone or fax, 24 hours a day. We offer traditional
registry categories such as china, household appliances and electronics, in
addition to non-traditional categories, such as outdoor gear, dance lessons,
entertainment and travel. Couples also may register for services which are
typically not available from traditional bridal registries, such as home
mortgage down payments, car loans and leases and investment services such as
mutual funds.

The Knot Registry is designed to provide convenience for the engaged
couple, allowing them to:

- register from anywhere 24 hours a day;

- modify and monitor their registry selections at any time throughout their
engagement;

- arrange for custom announcements, including personalized e-mail and
registry announcement cards, to guests, notifying them of the couple's
registration;

- select a delivery date;

- elect to participate in completion programs after the wedding to purchase
registry gifts selected but not received; and

- interact with our shopping experts through e-mail, instant messenger or a
toll-free phone service to help them decide which products best suit
their needs.

47
<PAGE> 51

Couples may browse products by traditional categories or price. To assist
registering couples through the difficult and time-consuming gift selection
process, The Knot Registry is also organized into custom groupings of products
and services designed to match the interests of particular lifestyles, such as
adventurous, romantic or cosmopolitan. This merchandising strategy is designed
to save the registrant time and streamline the registry process.

Through The Knot Registry, wedding guests can quickly and easily purchase
gifts online. The Knot Registry offers direct access to the couple's registry
list, a custom display of what remains to be purchased by category or price and
secure transactions to complete the order online. For guests lacking online
access, the couple's custom registry list is available for review via a
toll-free phone service, fax or mail, 24 hours a day.

In April 1999, we entered into a services agreement with QVC. Under this
agreement, QVC provides us warehousing, sales, fulfillment and distribution
services in connection with The Knot Registry. This services agreement was fully
implemented on September 7, 1999. Our strategic relationship with QVC affords us
the ability to purchase merchandise for The Knot Registry from QVC vendors at a
specified premium over QVC's volume discount rate. At the customer's request, a
product generally can be shipped within 48 hours of order. We utilize QVC to
process and ship all merchandise orders from The Knot Registry. Our services
agreement with QVC expires on the fourth anniversary of this offering. We have
the option to extend the term of the services agreement for an additional 180
days. QVC may terminate our services agreement if we fail to pay any amounts due
or otherwise breach the terms of the agreement, or if we are sold or become
bankrupt.

We believe The Knot Registry model offers several advantages over other
online retailers, traditional bridal registries or both. These advantages
include:

<TABLE>
<CAPTION>
ADVANTAGE OVER
TRADITIONAL ADVANTAGE OVER
BRIDAL REGISTRY ONLINE RETAILERS
--------------- ----------------
<S> <C> <C>
- - Items are registered weeks or even months prior X
to the desired shipment date. This allows us to
better plan our inventory needs and maximize
inventory turns.
- - The state-of-the-art fulfillment capabilities X X
of QVC allow us to implement a just-in-time
inventory strategy which reduces our inventory
carrying costs.
- - Since wedding guests often pay for gifts when X X
ordered and prior to procurement, we benefit
from the float on these funds.
- - Shipments are often bundled and shipped X X
together, reducing shipment costs.
- - The bride and groom may review their list of X X
gifts prior to shipment, enabling them to round
out sets or exchange gifts prior to shipment.
This review minimizes returns, while
representing an opportunity for us to sell them
additional products.
</TABLE>

48
<PAGE> 52

CLICK TRIPS, INC.

On July 31, 1999, we acquired Click Trips, Inc., an online travel agency
located at www.clicktrips.com. Click Trips specializes in destination travel
packages to the Caribbean, Bermuda and Mexico. Click Trips closely monitors
honeymoon and leisure travel trends and is therefore able to offer a high level
of customer service and great knowledge of resorts. In addition, the live chat,
past guest reviews, message boards and travel articles available on Click Trips
allow us to strengthen our sense of community among our online audience. The
Click Trips acquisition advances our brand-building initiative by integrating
the travel-related content and commerce platform with our existing
wedding-related offerings.

PUBLICATIONS

The Knot Book Series

Our book series consists of three books which are being published over
three years by Broadway Books, a division of Random House. We develop the
content of each book through the interaction between our users and our wedding
experts. This "real-world" approach, directed by our editorial team and based on
user experience and feedback, distinguishes us from the approach of traditional
wedding resources. Each book encourages readers to visit our sites. To date, we
have completed two of the books and a third is under development:

- The Knot's Complete Guide to Weddings in the Real World was published in
December 1998 and has gone to a second printing. This book is a detailed
wedding-planning resource for to-be-weds, offering the information a
bride and groom need to plan their wedding, from buying the ring to
crossing the threshold.

- The Knot Ultimate Wedding Planner, our second book, has been accepted by
the publisher and is scheduled to be published in January 2000. This book
includes worksheets, checklists, etiquette, tips, calendars and answers
to frequently-asked questions.

We sell our books on our online sites and through bookstores. We earn
royalties on sales of our books.

Wedding Gown Guide

We released The Knot Ultimate Wedding Gown Guide in June 1999. This guide
is an extensive catalogue of wedding gowns from the top designers in the world,
published without advertisements to be an attractive and efficient alternative
to traditional bridal magazines. With over 300 pages of color photos, the
publication provides in one resource information a bride needs to find the dress
of her dreams, including front, back and detail photos of over 1,000 gowns, full
descriptions and price information, and an index of designers and their
locations. The Ultimate Wedding Gown Guide also provides a buying checklist and
accessory and trend information. We intend to publish The Knot Ultimate Wedding
Gown Guide twice a year. We sell the gown guide on our Web site, through QVC's
television show and at bridal trade shows.

49
<PAGE> 53

MEMBERSHIP

We believe a large and active membership base is critical to our success.
Membership enrollment is free. Our members enjoy the use of personal Web pages,
message boards, budgeting tools, wedding checklists and gown search. We
recognize the importance of maintaining confidentiality of member information
and we have established a privacy policy to protect personal information. Our
current privacy policy is set forth on our sites. Our policy is not to tell any
third party any member's personal identifying information, but we may share
aggregated information about our members with other pre-screened organizations
who have specific direct mail product and service offers we think may be of
interest to our members. We may share aggregated member information with third
parties, such as a member's zip code or gender. In addition, we may use
information revealed by members and information built from user behavior to
target advertisements, content and e-mail.

RELATIONSHIP WITH AOL

On July 23, 1999, we entered into an amended anchor tenant agreement with
AOL, which extended the term of our existing agreement with AOL through January
6, 2003 and expanded our presence on AOL. Under the terms of the agreement, The
Knot is the primary wedding content provider on AOL and several other of AOL's
leading brands, including AOL.com, Netscape Netcenter and CompuServe. AOL
provides promotions and reserves programming areas for The Knot.

Under our original services agreement with AOL, we obtained usage fees from
AOL based on the number of customers visiting our AOL site, and we paid AOL
commissions on our advertising revenues. Under the new agreement, we now pay AOL
a quarterly carriage fee, with no obligation to pay AOL advertising commissions.
AOL may terminate the agreement regarding our carriage on specific properties
upon 30 days' prior written notice.

MARKETING

We utilize a number of strategies and programs to build awareness of The
Knot brand and to position The Knot as the definitive resource for wedding
planning and information. We employ an active press relations team, which
responds to numerous press inquiries. We promote our brand through television
and radio appearances by Carley Roney, our head wedding expert. In addition, we
actively encourage our promotions staff to speak at industry and corporate
events to enhance our reputation and promote our diverse products.

Our participation in wedding tradeshows and other industry events also
provides opportunities to promote The Knot brand. We are the exclusive online
sponsor of the Great Bridal Expo, the largest traveling consumer/trade show
dedicated to the wedding market. In exchange for our agreement to design,
promote and host the Great Bridal Expo Web site, the Great Bridal Expo has
agreed to distribute approximately 50,000 of The Knot branded shopping bags in
25 cities nationwide and will display two large banners featuring The Knot
throughout the trade shows. In addition, The Knot Ultimate Wedding Gown Guide
will be sold at the registration desks for the Great Bridal Expo, and a video
featuring The Knot will be displayed at each of the locations.

50
<PAGE> 54

We also take advantage of cross-promotional opportunities among our
properties and services. For example, The Knot's online presence will introduce,
promote and sell our publications. These opportunities help increase our brand
awareness and online traffic.

COMPETITION

The Internet advertising and online wedding markets are new, rapidly
evolving and intensely competitive, and we expect such competition to intensify
in the future. We face competition primarily from three separate areas: online
sites, magazines and gift registries.

There are many wedding-related sites on the Internet, developed and
maintained by online content providers. Retail stores, manufacturers, wedding
magazines and regional wedding directories also have online sites which compete
with us. We expect competition to increase because of the business opportunities
presented by the growth of the Internet and e-commerce. Competition may also
intensify as a result of industry consolidation and a lack of substantial
barriers to entry in our market. Moreover, we face competition for sponsorship
and advertising sales from other online content providers and advertisement
server companies that provide banner advertisement services that might be
considered an alternative marketing solution.

We also face competition for our services from bridal magazines. Bride's
and Modern Bride are the two dominant bridal publications in terms of revenue
and circulation. According to Advertising Age, these two magazines and Bridal
Guide, the third leading bridal magazine, generated gross advertising revenues
of $198.4 million in 1998.

The Knot Registry faces competition from online sources such as registry
aggregators. We also compete with retail stores offering gift registries,
especially from retailers offering specific bridal gift registries. These
stores, particularly national department store chains, have strong brand
awareness, many years of retailing experience, and most now have online
transactional capabilities.

We believe that the principal competitive factors in the online wedding
market are brand recognition, convenience, ease of use, information, quality of
service and products, member affinity and loyalty, reliability and selection. As
to these factors, we believe that we compete favorably. Our dedicated editorial,
sales and products staffs concentrate their efforts on producing the most
comprehensive online wedding resource available.

Generally, many of our current and potential competitors have longer
operating histories, significantly greater financial, technical and marketing
resources, greater name recognition and substantially larger user or membership
bases than we have. Therefore, these competitors have a significantly greater
ability to attract advertisers and users. In addition, many of these competitors
may be able to respond more quickly than we can to new or emerging technologies
and changes in Internet user requirements and to devote greater resources than
we do to the development, promotion and sale of services. There can be no
assurance that our current or potential competitors will not develop products
and services comparable or superior to those developed by us or adapt more
quickly than we do to new technologies, evolving industry trends or changing
Internet user preferences. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which would
materially and adversely affect our business, results of operation and financial
condition. In addition, if we expand internationally, we may face additional
competition. There can be no assurance that we will be able to compete
successfully

51
<PAGE> 55

against current and future competitors, or that competitive pressures faced by
us would not have a material adverse effect on our business, results of
operations and financial condition.

INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY

Our technology infrastructure provides for continuous availability of our
online service. All of the critical components of the system are redundant,
allowing us to withstand unexpected component failure and to undergo maintenance
or upgrades. Our operation is dependent on the ability to maintain our computer
and telecommunications systems in effective working order and to protect our
systems against damage from fire, natural disaster, power loss,
telecommunications failure or similar events. Our system hardware is co-located
at Exodus Communications' Jersey City, New Jersey data center. Systems
administrators and network managers at Exodus monitor our servers, operate our
network and execute backups. Our servers have access to auxiliary power during
outages. Our systems are copied to backup tapes daily, which are in turn sent to
us for offsite storage. Database and Web servers are redundant and operate using
clustering technology for effective load-balancing and fault tolerance.

Regular capacity planning allows us to quickly upgrade existing hardware
and integrate new hardware to react quickly to a rapidly expanding member base
and increased traffic to our sites. We generally operate at 99.9% uptime and no
unexpected downtime. Key content management and e-commerce components are
designed, developed and deployed by our in-house technology group. We also
license commercially available technology when appropriate in lieu of dedicating
our own human or financial resources. Current examples include eShare
Expressions, our chat server and NetGravity, our ad server. Also, we use
MapQuest for geographical mapping applications.

We employ several layers of security to protect data transmission and
prevent unauthorized access. We keep all of our production servers behind
firewalls for security purposes and do not allow outside access, at the
operating systems level, except via special secure channels. Strict password
management and physical security measures are followed. Computer emergency
response team alerts are read, and, where appropriate, recommended action is
taken to address security risks and vulnerabilities. From time to time, we use
the services of third party computer security experts and penetration tests have
been performed to help improve security.

E-commerce transactions and browser-based administration screens employ
secure sockets layer encryption to secure data transmitted between clients and
servers. Credit card information captured during e-commerce transactions is
never shared with outside parties, and we provide shoppers with a toll-free
number to place orders by phone as an alternative to completing a transaction
online.

GOVERNMENT REGULATION

We are not currently subject to direct federal, state or local regulation,
and laws or regulations applicable to access to or commerce over the Internet,
other than regulations applicable to businesses generally. Due to the increasing
popularity and use of the Internet and other online services, however, it is
possible that a number of laws and regulations may be adopted regarding the
Internet or other online services covering issues such as user privacy, freedom
of expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. The nature
of such legislation and the manner in which it may be interpreted and enforced
cannot be

52
<PAGE> 56

fully determined and, therefore, such legislation could subject us and/or our
customers to potential liability, which in turn could have an adverse effect on
our business, results of operations and financial condition. The adoption of any
such laws or regulations might also decrease the rate of growth of Internet use,
which in turn could decrease the demand for our service or increase the cost of
doing business or in some other manner have a material adverse effect on our
business, results of operations and financial condition. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. The vast majority of such laws were
adopted prior to the advent of the Internet and related technologies and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies.

Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
information is collected from users and provided to third parties. Changes to
existing laws or the passage of new laws intended to address these issues,
including some recently proposed changes, could create uncertainty in the
marketplace that could reduce demand for our services or increase the cost of
doing business as a result of litigation costs or increased service delivery
costs, or could in some other manner have a material adverse effect on our
business, results of operations and financial condition. In addition, because
our services are accessible throughout the United States, other jurisdictions
may claim that we are required to qualify to do business as a foreign
corporation in a particular state. We are qualified to do business in New York,
California, Texas and Virginia and our failure to qualify as a foreign
corporation in a jurisdiction where we are required to do so could subject us to
taxes and penalties for the failure to qualify and could result in our inability
to enforce contracts in such jurisdictions. Any such new legislation or
regulation, or the application of laws or regulations from jurisdictions whose
laws do not currently apply to our business, could have a material adverse
effect on our business, results of operations and financial condition.

To obtain membership on our sites, users must disclose their names,
addresses, e-mail addresses and roles in the wedding. Our members use budgeting
tools, wedding checklists, gown search, personal Web pages and message boards on
our sites. We do not currently sell any member's personal identifying
information to third parties unless the member has provided written consent. We
may share aggregated member information with third parties, such as a member's
zip code or gender. In addition, we may use information revealed by members and
information built from user behavior to target advertising, content and e-mail.
Privacy concerns may cause visitors to avoid online sites that collect
behavioral information and even the perception of security and privacy concerns,
whether or not valid, may indirectly inhibit market acceptance of our services.
In addition, because we rely on the collection and use of personal data from our
members for targeting advertisements shown on our services, we may be harmed by
any laws or regulations that restrict our ability to collect or use this data.
The European Union recently enacted its own privacy regulations that may result
in limits on the collection and use of some user information. The FTC has begun
investigations into the privacy practices of companies that collect information
about individuals on the Internet. Although we are not currently subject to
direct regulation by the FTC, there can be no assurance that we will not become
subject to direct regulation in the future.

53
<PAGE> 57

It may take years to determine how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. Any
new legislation or regulation regarding the Internet, or the application of
existing laws and regulations to the Internet, could harm us. Additionally,
while we do not currently operate outside of the United States, the
international regulatory environment relating to the Internet market could have
a material and adverse effect on our business, results of operations and
financial condition if we expand internationally.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

We regard our copyrights, service marks, trademarks, trade dress, trade
secrets, proprietary technology and similar intellectual property as critical to
our success, and rely on trademark and copyright law, trade secret protection,
confidentiality and assignment of invention agreements, and/or license
agreements with employees, customers, independent contractors, partners and
others to protect our proprietary rights. We strategically pursue the
registration of our trademarks and service marks in the United States, and have
applied for and obtained registration in the United States for some of our
trademarks and service marks, including "theknot". Effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which our products and services are made available online.

We have licensed in the past, and expect to license in the future, some of
our proprietary rights, such as trademarks or copyrighted material, to third
parties. While we attempt to ensure that the quality of our brand is maintained
by our licensees, there can be no assurance that our licensees will not take
actions that might materially adversely affect the value of our proprietary
rights or reputation, which could have a material adverse effect on our
business, financial condition and results of operations. There can be no
assurance that the steps we have taken to protect our proprietary rights will be
adequate or that third parties will not infringe or misappropriate our
copyrights, trademarks, trade secrets and similar proprietary rights. In
addition, there can be no assurance that other parties will not assert claims of
infringement of intellectual property against us. Although we believe that our
products and services do not infringe upon the intellectual property rights of
others and that we have all rights necessary to utilize the intellectual
property employed in our business, we may be subject to claims alleging
infringement of third-party intellectual property rights. Any such claims could
require us to spend significant sums on litigation, pay damages, delay product
installments, develop non-infringing intellectual property or acquire licenses
to intellectual property that is the subject of any such infringement.
Therefore, such claims could have a material adverse effect on our business,
results of operations and financial condition.

EMPLOYEES

At December 1, 1999, we had a total of 113 employees, of which 55 were
involved in product and content development, 36 were involved in sales and
marketing, and 22 were involved in general and administrative functions. None of
our employees is represented by a labor union. We have not experienced any work
stoppages and we consider relations with our employees to be good. Competition
for qualified personnel in our industry is intense. We believe that we will need
to continue to attract, hire and retain qualified personnel to be successful in
the future.

54
<PAGE> 58

FACILITIES

We currently lease approximately 20,000 square feet of space at our
headquarters in New York City. The lease expires on March 31, 2012. We lease
approximately 3,100 square feet of space for our customer service center and
merchandising operation in Orange County, California. The lease for this space
expires on August 31, 2002. We also lease approximately 3,000 square feet of
space for warehousing and operations in Redding, California. This lease expires
on May 31, 2001, with an option to extend for an additional two years. Click
Trips, our subsidiary in Warminster, Pennsylvania, also leases approximately
1,100 square feet of office space. The lease for this space expires on December
1, 2000, with an option to extend for an additional year.

We currently anticipate that we will require additional space to
accommodate our growth as more personnel are hired.

LEGAL PROCEEDINGS

We are not presently a party to any material legal proceedings.

55
<PAGE> 59

MANAGEMENT

OUR EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS

The executive officers, key employees and directors of The Knot, and their
ages and positions as of December 1, 1999, are:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
David Liu(2)......................... 34 President, Chief Executive Officer and
Chairman of the Board
Sandra Stiles(1)..................... 49 Chief Operating Officer, Assistant
Secretary and Director
Richard Szefc........................ 50 Chief Financial Officer, Treasurer and
Secretary
Carlos Manuel Abreu.................. 40 Chief Technology Officer
Carley Roney......................... 31 Editor-in-Chief
Michael Wolfson...................... 33 Vice President, Distribution
Rob Fassino.......................... 32 Vice President, Business Integration
Russell Casenhiser................... 34 Vice President of Retail Sales
Adam Sandow.......................... 31 Vice President of Sales
John Link(1)(2)...................... 57 Director
Ann Winblad(1)(2).................... 48 Director
</TABLE>

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

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

DAVID LIU is a co-founder of The Knot and has been our Chief Executive
Officer and a director since our inception in May 1996. From January 1993 to May
1996, Mr. Liu served as Director of Production of RunTime Inc., a CD-ROM
development firm that he co-founded with Ms. Roney. Prior to January 1993, Mr.
Liu was the Director of Production at VideOvation, a subsidiary of the Reader's
Digest. Mr. Liu received a B.F.A. in Film and Television from New York
University. Mr. Liu is married to Ms. Roney.

SANDRA STILES has been Chief Operating Officer since November 1998 and
Assistant Secretary since September 1999. From November 1998 to May 1999, she
served as our Chief Financial Officer. Ms. Stiles has served as a director of
The Knot since May 1998. From September 1994 to October 1998, she was the Senior
Vice President and Director of Operations for the Children's Book and Value
Publishing division of Random House. She also served as a Vice President and the
Corporate Comptroller of Random House from October 1990 to August 1994. Prior to
October 1990, Ms. Stiles held various positions at OmniCorp Holdings, Inc.,
Bertelsmann Inc. and Arthur Andersen & Co. She received a B.S. in Accounting
from New York University.

RICHARD SZEFC has been Chief Financial Officer since May 1999 and Treasurer
and Secretary since September 1999. From July 1998 to May 1999, Mr. Szefc was an
independent consultant. From April 1990 to July 1998, Mr. Szefc served as
Executive Vice President and Chief Financial Officer of Random House. Prior to
April 1990, Mr. Szefc

56
<PAGE> 60

served as a partner in the audit practice of Arthur Andersen & Co. Mr. Szefc
received a B.S. in Economics from the University of Pennsylvania.

CARLOS MANUEL ABREU has served as our Chief Technology Officer since
February 1999. From March 1992 to January 1999, Mr. Abreu was the Chief
Executive Officer and Chief Technology Officer of Cyberphilia, Inc., a developer
of intranets, extranets and e-commerce solutions for advertising,
pharmaceutical, public relations, publishing, architectural, e-commerce and
other companies. Mr. Abreu received a B.S. in Computer Science from Rutgers
University.

CARLEY RONEY is a co-founder of The Knot. She has served as the
Editor-in-Chief since our inception in May 1996. From May 1996 to September
1999, she also served as Vice President of Creative Development. From January
1994 to May 1996, she served as President at RunTime Inc., a CD-ROM development
firm that she co-founded with David Liu. Ms. Roney received a M.A. in cultural
studies and a B.F.A. in Film and Television from New York University. Ms. Roney
is married to Mr. Liu.

MICHAEL WOLFSON is a co-founder of The Knot and has served as Vice
President of Distribution since our inception. From May 1996 to September 1999,
he served as our Secretary. From April 1998 to April 1999, he also served as the
Vice President of Membership Acquisition. From October 1994 to February 1996,
Mr. Wolfson served as Director of Development of the Digital Media Division of
Margeotes Fertitta and Partners, an advertising agency. In 1992, Mr. Wolfson
founded and served as President of Luna Pictures, a company providing Avid-based
editing facilities for television and movie production companies. Mr. Wolfson
received a B.F.A. in Film and Television from New York University.

ROB FASSINO is a co-founder of The Knot. He has served as Vice President,
Business Integration since August 1999. He also served as Vice President of
Production from April 1999 to August 1999, and Vice President of Sales from June
1996 to April 1999. From October 1994 to June 1996, Mr. Fassino served as the
Director of the Digital Media Division of Margeotes Fertitta and Partners, an
advertising agency. Mr. Fassino received a B.F.A. in Film and Television from
New York University.

RUSSELL CASENHISER has served as Vice President of Retail Sales since May
1999. He has also served as Director of Registry Operations from April 1998 to
May 1999. From January 1996 to April 1998, Mr. Casenhiser was the President and
co-founder of Bridal Search, an online directory of bridal gowns. From September
1992 to December 1995, Mr. Casenhiser served as the President of La Galleria, a
high-end retail clothing store. Mr. Casenhiser received a B.S. in Economics from
Pepperdine University and a M.B.A from Pepperdine University.

ADAM SANDOW has served as Vice President of Sales since February 1999. From
December 1994 to January 1999, Mr. Sandow was President of Travel Publishing
Group, Inc., a consumer magazine publisher.

JOHN LINK has served as one of our directors since June 1999. Mr. Link has
been the Executive Vice President of Information Technology since January 1991
and Chief Information Officer of QVC since March 1994. He also served as Senior
Vice President of Information Technology from June 1989 to March 1994. Prior to
June 1989, Mr. Link held various senior technical management positions at Sun
Company. Mr. Link received a B.A. in Physics from the University of Delaware, a
Master of Science in Computer Science from the University of Pennsylvania and
completed the Program for Management

57
<PAGE> 61

Development at Harvard Business School. He is a member of the Society for
Information Management.

ANN WINBLAD has served as one of our directors since April 1998. Ms.
Winblad has been a general partner of Hummer Winblad Venture Partners, a venture
capital investment firm, since 1989. She is a member of the board of trustees of
the University of St. Thomas and is an advisor to numerous entrepreneurial
groups such as the Software Development Forum, the Stanford/MIT Venture Forum
and the Massachusetts Computer Software Council, Software Industry Business
Practices. Ms. Winblad also serves on the boards of directors of Net Perceptions
Inc., a developer and supplier of realtime recommendation technology for the
Internet, Liquid Audio Inc., a provider of an open platform that enables the
digital delivery of music over the Internet, and several private companies. Ms.
Winblad received a B.S. in Mathematics and Business Administration from the
University of St. Thomas and an M.A. in Education with an Economics focus from
the University of St. Thomas.

COMPOSITION OF THE BOARD

Prior to the closing of this offering, we intend to file a revised
certificate of incorporation under which our board of directors will be divided
into three classes, each of whose members will serve for a staggered three-year
term. Upon the expiration of the term of a class of directors, directors in that
class will be elected for three-year terms at the annual meeting of stockholders
in the year in which their term expires. Our board of directors has resolved
that John Link and Ann Winblad will be Class I Directors whose terms expire at
the 2000 annual meeting of stockholders. Sandra Stiles will be a Class II
Director whose term expires at the 2001 annual meeting of stockholders. David
Liu will be a Class III Director whose term expires at the 2002 annual meeting
of stockholders. A director's term will be subject to the election and
disqualification of their successors, or their earlier death, resignation or
removal.

BOARD COMMITTEES

The Audit Committee of the board of directors reviews, acts on and reports
to the board of directors on various auditing and accounting matters, including
the recommendation of our auditors, the scope of the annual audits, fees to be
paid to the auditors, the performance of our independent auditors and the
accounting practices of The Knot. The members of the Audit Committee are John
Link, Sandra Stiles and Ann Winblad.

The Compensation Committee of the board of directors recommends, reviews
and oversees the salaries, benefits and stock option plans for our employees,
consultants, directors and other individuals whom we compensate. The
Compensation Committee also administers our compensation plans. The members of
the Compensation Committee are John Link, David Liu and Ann Winblad.

DIRECTOR COMPENSATION

Directors who are also employees of The Knot receive no additional
compensation for their services as directors. Directors who are not employees of
The Knot will not receive a fee for attendance in person at meetings of the
board of directors or committees of the Board of Directors, but they will be
reimbursed for travel expenses and other out-of-pocket costs incurred with in
connection with the attendance at meetings.

58
<PAGE> 62

EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS

On April 12, 1999, we entered into an employment contract with Mr. Liu, our
Chief Executive Officer, for three years. The contract provides for salary and
the payment of one or more annual bonuses at the sole discretion of the board of
directors. In the event of his termination without cause before the end of the
contract term, Mr. Liu is entitled to one year's salary plus benefits. The
contract also contains a covenant by Mr. Liu not to compete for the term of the
contract and for one year after the term expires. As of August 1, 1999, Mr.
Liu's annual salary is $180,000.

On April 12, 1999, we entered into an employment contract with Ms. Roney,
our Editor-in-Chief, for three years. The contract provides for salary and the
payment of one or more annual bonuses at the sole discretion of the Board of
Directors. In the event of her termination without cause before the end of the
contract term, Ms. Roney is entitled to one year's salary plus benefits. The
contract also contains a covenant by Ms. Roney not to compete for the term of
the contract and for one year after the term expires. As of August 1, 1999, Ms.
Roney's annual salary is $120,000.

On November 2, 1998, we entered into an employment contract with Ms.
Stiles, our Chief Operating Officer, which is terminable at any time. In the
event of her termination without cause, Ms. Stiles is entitled to one year's
salary plus benefits. As of August 1, 1999, Ms. Stiles' annual salary is
$175,000.

On May 31, 1999, we entered into an employment contract with Mr. Szefc, our
Chief Financial Officer, which is terminable at any time. The contract provides
for an annual salary of $135,000 which has subsequently been increased to
$150,000, and, for termination without cause, one year's salary plus benefits.
In addition, in the event an individual or related group of persons acquires 50%
or more of our voting stock, at least 50% of Mr. Szefc's options will vest
immediately. As of July 16, 1999, Mr. Szefc's salary is $150,000.

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned for all services
rendered to us in all capacities during 1998 by our Chief Executive Officer and
our most highly compensated executive officers, other than our Chief Executive
Officer, who earned more than $100,000 in 1998 on an annualized basis and who
served as executive officers at the end of 1998.

59
<PAGE> 63

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS SECURITIES
------------------- UNDERLYING OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ------- ------- ----------------- ------------
<S> <C> <C> <C> <C>
David Liu...................... $94,833(1) $30,000 -- $ --
Chief Executive Officer
Sandra Stiles.................. 18,333(2) -- -- --
Chief Operating Officer
</TABLE>

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

(1) During the first quarter of 1998, Mr. Liu received $21,500 of the $94,833 in
compensation from Element Studios, a corporation formed in connection with
our inception.

(2) Ms. Stiles did not receive salary prior to November 2, 1998. Total
annualized salary for 1998 equals $110,000.

OPTION GRANTS IN LAST YEAR

The following table sets forth information regarding exercisable and
unexercisable stock options granted to each of the named executive officers in
the last fiscal year. No options were exercised by the named executive officers
during the year ended December 31, 1998. There was no public trading market for
the common stock as of December 31, 1998. Potential realizable values are
computed by:

- multiplying the number of shares of common stock subject to a given
option by the assumed market value on the date of grant,

- assuming that the aggregate stock value derived from that calculation
compounds annually for the entire term of the option, and

- subtracting from that result the aggregate option exercise prices.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------
NAME GRANTED YEAR SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David Liu................. -- -- $ -- -- $ -- $ --
Sandra Stiles............. 380,000 65.2% 0.50 04/30/08 119,490 302,811
</TABLE>

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

(1) Each option represents the right to purchase one share of common stock. The
options shown in these columns, which were originally granted under our
stock option plan, vest according to the following schedule: (a) twenty-five
percent (25%) upon the one year anniversary of the grant and (b) thereafter,
ratably per month for the remaining 36 months. Total options granted to
employees in the last fiscal year were 583,000.

60
<PAGE> 64

(2) Amounts represent hypothetical gains that could be achieved for the options
if exercised at the end of the option term. The 5% and 10% assumed annual
rates of compounded stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of our future common stock prices. These amounts represent
assumed rates of appreciation in the value of our common stock from the fair
market value on the date of grant. Actual gains, if any, on stock option
exercise depend on the future performance of the common stock. The amounts
reflected in the table may not necessarily be achieved. The initial public
offering price is higher than the estimated fair market value on the date of
grant, and the potential realizable value of the option grants would be
significantly higher than the numbers shown in the table if future stock
prices were projected to the end of the option term by applying the same
annual rates of stock price appreciation to the initial public offering
price.

AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES

The following table provides summary information concerning stock options
held as of December 31, 1998 by each of the named executive officers. No options
were exercised during fiscal 1998 by any of the named executive officers. The
value of unexercised in-the-money options has been calculated by determining the
difference between the exercise price per share payable upon exercise of such
options and the initial offering price of $10.00 per share.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
----------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
David Liu........................ -- -- $ -- $ --
Sandra Stiles.................... -- 380,000 -- 3,610,000
</TABLE>

1999 STOCK INCENTIVE PLAN

INTRODUCTION. The 1999 Stock Incentive Plan is intended to serve as the
successor program to our 1997 Long Term Incentive Plan. The 1999 plan was
adopted by the board of directors and approved by the stockholders in November
1999. The 1999 plan will become effective when the underwriting agreement for
this offering is signed. At that time, all outstanding options under our
existing 1997 plan will be transferred to the 1999 plan, and no further option
grants will be made under the 1997 plan. The transferred options will continue
to be governed by their existing terms, unless our compensation committee
decides to extend one or more features of the 1999 plan to those options. Except
as otherwise noted below, the transferred options have substantially the same
terms as will be in effect for grants made under the discretionary option grant
program of our 1999 plan.

SHARE RESERVE. 3,849,868 shares of our common stock have been authorized
for issuance under the 1999 plan. This share reserve consists of the number of
shares we estimate will be carried over from the 1997 plan plus an additional
increase of approximately 1,000,000 shares. The share reserve under our 1999
plan will automatically increase on the first trading day in January each
calendar year, beginning with calendar year 2001, by an amount equal to two
percent (2%) of the total number of shares of our common stock outstanding on
the last trading day of December in the prior calendar year, but in no event
will this annual increase exceed 1,000,000 shares (or such other lesser

61
<PAGE> 65

number determined by the Board). In addition, no participant in the 1999 plan
may be granted stock options or direct stock issuances for more than 500,000
shares (1,000,000 shares in the year of initial hire) of common stock in total
in any calendar year.

PROGRAMS. Our 1999 plan has five separate programs:

- the discretionary option grant program, under which eligible individuals
may be granted options to purchase shares of our common stock at an
exercise price not less than the fair market value of those shares on the
grant date;

- the stock issuance program, under which eligible individuals may be
issued shares of common stock directly, upon the attainment of
performance milestones or the completion of a specified period of service
or as a bonus for past services;

- the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary each year to the
acquisition of special below market stock option grants;

- the automatic option grant program, under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members to purchase shares of common stock at an exercise price
equal to the fair market value of those shares on the grant date; and

- the director fee option grant program, under which our non-employee board
members may be given the opportunity to apply a portion of any retainer
fee otherwise payable to them in cash each year to the acquisition of
special below-market option grants.

ELIGIBILITY. The individuals eligible to participate in our 1999 plan
include our officers and other employees, our board members and any consultants
we hire.

ADMINISTRATION. The discretionary option grant and stock issuance programs
will be administered by our compensation committee. This committee will
determine which eligible individuals are to receive option grants or stock
issuances under those programs, the time or times when the grants or issuances
are to be made, the number of shares subject to each grant or issuance, the
status of any granted option as either an incentive stock option or a
nonstatutory stock option under the federal tax laws, the vesting schedule to be
in effect for the option grant or stock issuance and the maximum term for which
any granted option is to remain outstanding. The compensation committee will
also have the authority to select the executive officers and other highly
compensated employees who may participate in the salary investment option grant
program in the event that program is put into effect for one or more calendar
years.

PLAN FEATURES. Our 1999 plan will include the following features:

- The exercise price for any options granted under the plan may be paid in
cash or in shares of our common stock valued at fair market value on the
exercise date. The option may also be exercised through a same-day sale
program without any cash outlay by the optionee.

- The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program, including any
transferred options from our 1997 plan, in return for the grant of new
options for the same or different

62
<PAGE> 66

number of option shares with an exercise price per share based upon the
fair market value of our common stock on the new grant date.

- Stock appreciation rights may be issued under the discretionary option
grant program. These rights will provide the holders with the election to
surrender their outstanding options for a payment from us equal to the
fair market value of the shares subject to the surrendered options less
the exercise price payable for those shares. We may make the payment in
cash or in shares of our common stock. None of the options under our 1997
plan have any stock appreciation rights.

CHANGE IN CONTROL. The 1999 plan will include the following change in
control provisions which may result in the accelerated vesting of outstanding
option grants and stock issuances:

- In the event that we are acquired by merger, asset sale, or sale of more
than 50% of our voting securities by the stockholders, each outstanding
option under the discretionary option grant program which is not to be
assumed by the successor corporation will immediately become exercisable
for all the option shares, and all outstanding unvested shares will
immediately vest, except to the extent our repurchase rights with respect
to those shares are to be assigned to the successor corporation.

- The compensation committee may grant options which will become
exercisable for all the option shares (i) in the event those options are
assumed in the acquisition but the optionee's service with us or the
acquiring entity is subsequently terminated or (ii) in connection with a
successful tender offer for more than fifty percent of our outstanding
voting stock or a change in the majority of our board through one or more
contested elections the vesting of any outstanding shares under our 1999
plan may be accelerated upon similar terms and conditions.

SALARY INVESTMENT OPTION GRANT PROGRAM. In the event the compensation
committee decides to put this program into effect for one or more calendar
years, each of our executive officers and other highly compensated employees may
elect to reduce his or her base salary for the calendar year by an amount not
less than $5,000 nor more than $50,000. Each selected individual who makes such
an election will automatically be granted, on the first trading day in January
of the calendar year for which his or her salary reduction is to be in effect,
an option to purchase that number of shares of common stock determined by
dividing the salary reduction amount by two-thirds of the fair market value per
share of our common stock on the grant date. The option will have exercise price
per share equal to one-third of the fair market value of the option shares on
the grant date. As a result, the option will be structured so that the fair
market value of the option shares on the grant date less the exercise price
payable for those shares will be equal to the amount of the salary reduction.
The option will become exercisable in a series of twelve equal monthly
installments over the calendar year for which the salary reduction is to be in
effect.

AUTOMATIC OPTION GRANT PROGRAM. Each individual who first becomes a non-
employee board member at any time after the effective date of this offering will
receive an option grant to purchase 15,000 shares of common stock on the date
such individual joins the board. In addition, on the date of each annual
stockholders meeting held after the effective date of this offering, each
non-employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board

63
<PAGE> 67

members, will automatically be granted an option to purchase 5,000 shares of
common stock, provided such individual has served on the board for at least six
months.

Each automatic grant will have an exercise price per share equal to the
fair market value per share of our common stock on the grant date and will have
a term of 10 years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid per
share, any shares purchased under the option which are not vested at the time of
the optionee's cessation of board service. The shares subject to each initial
15,000-share automatic option grant will vest in a series of three (3)
successive annual installments upon the optionee's completion of each year of
board service over the three (3)-year period measured from the grant date. The
shares subject to each annual 5,000-share automatic grant will vest upon the
optionee's completion of one (1) year of Board Service measured from the grant
date. However, the shares will immediately vest in full upon certain changes in
control or ownership or upon the optionee's death or disability while a board
member.

DIRECTOR FEE OPTION GRANT PROGRAM. If this program is put into effect in
the future, then each non-employee board member may elect to apply all or a
portion of any cash retainer fee for the year to the acquisition of a
below-market option grant. The option grant will automatically be made on the
first trading day in January in the year for which the non-employee board member
would otherwise be paid the cash retainer fee in the absence of his or her
election. The option will have an exercise price per share equal to one-third of
the fair market value of the option shares on the grant date, and the number of
shares subject to the option will be determined by dividing the amount of the
retainer fee applied to the program by two-thirds of the fair market value per
share of our common stock on the grant date. Accordingly, the fair market value
of the option shares on the grant date less the exercise price payable for those
shares will be equal to the portion of the retainer fee applied to that option.
The option will become exercisable in a series of twelve equal monthly
installments over the calendar year for which the election is in effect.
However, the option will become immediately exercisable for all the option
shares upon the death or disability of the optionee while serving as a board
member.

ADDITIONAL PROGRAM FEATURES. Our 1999 plan will also have the following
features:

- Outstanding options under the salary investment and director fee option
grant programs will immediately vest if we are acquired by a merger or
asset sale or if there is a successful tender offer for more than 50% of
our outstanding voting stock or a change in the majority of our board
through one or more contested elections.

- Limited stock appreciation rights will automatically be included as part
of each grant made under the salary investment option grant program and
the automatic and director fee option grant programs, and these rights
may also be granted to one or more officers as part of their option
grants under the discretionary option grant program. Options with this
feature may be surrendered to us upon the successful completion of a
hostile tender offer for more than 50% of our outstanding voting stock.
In return for the surrendered option, the optionee will be entitled to a
cash distribution from us in an amount per surrendered option share based
upon the highest price per share of our common stock paid in that tender
offer.

- The board may amend or modify the 1999 plan at any time, subject to any
required stockholder approval. The 1999 plan will terminate no later than
November 2, 2009.

64
<PAGE> 68

EMPLOYEE STOCK PURCHASE PLAN

INTRODUCTION. Our Employee Stock Purchase Plan was adopted by the board of
directors and approved by the stockholders in November 1999. The plan will
become effective immediately upon the signing of the underwriting agreement for
this offering. The plan is designed to allow our eligible employees and the
eligible employees of our participating subsidiaries to purchase shares of
common stock, at semi-annual intervals, with their accumulated payroll
deductions.

SHARE RESERVE. 300,000 shares of our common stock will initially be
reserved for issuance. The reserve will automatically increase on the first
trading day in January each calendar year, beginning in calendar year 2001, by
an amount equal to the total number of shares of our common stock issued under
the plan in the prior calendar year. In no event will any such annual increase
exceed 300,000 shares without approval of our board of directors.

OFFERING PERIODS. The plan will have a series of successive offering
periods, each with a maximum duration of 24 months. The initial offering period
will start on the date the underwriting agreement for the offering covered is
signed and will end on the last business day in January 2002. The next offering
period will start on the first business day in February 2002, and subsequent
offering periods will be set by our compensation committee.

ELIGIBLE EMPLOYEES. Individuals scheduled to work more than 20 hours per
week for more than 5 calendar months per year may join an offering period on the
start date or any semi-annual entry date within that period. Semi-annual entry
dates will occur on the first business day of February and August each year.
Individuals who become eligible employees after the start date of an offering
period may join the plan on any subsequent semi-annual entry date within that
offering period.

PAYROLL DEDUCTIONS. A participant may contribute up to 15% of his or her
Base Salary through payroll deductions, and the accumulated deductions will be
applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per share
on the participant's entry date into the offering period or, if lower, 85% of
the fair market value per share on the semi-annual purchase date. Semi-annual
purchase dates will occur on the last business day of January and July each
year. However, a participant may not purchase more than 1,000 shares on any
purchase date, and not more than 150,000 shares may be purchased in total by all
participants on any purchase date. Our compensation committee will have the
authority to change these limitations for any subsequent offering period.

RESET FEATURE. If the fair market value per share of our common stock on
any purchase date is less than the fair market value per share on the start date
of the two-year offering period, then that offering period will automatically
terminate, and a new two-year offering period will begin on the next business
day. All participants in the terminated offering will be transferred to the new
offering period.

CHANGE IN CONTROL. Should we be acquired by merger or sale of
substantially all of our assets or more than 50 percent of our voting
securities, then all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of the acquisition. The purchase price
will be equal to 85% of the market value per share on the participant's entry
date into the offering period in which an acquisition occurs or, if lower, 85%
of the fair market value per share immediately prior to the acquisition.

65
<PAGE> 69

PLAN PROVISIONS. The following provisions will also be in effect under the
plan:

- The plan will terminate no later than the last business day of January
2010.

- The board may at any time amend, suspend or discontinue the plan.
However, certain amendments may require stockholder approval.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Our amended and restated certificate of incorporation provides that the
liability of a director of The Knot shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law. Under the
Delaware General Corporation Law, the directors have a fiduciary duty to The
Knot which is not eliminated by this provision of the amended and restated
certificate of incorporation and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available.

Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers to purchase insurance with respect to
liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:

- for any breach of the director's duty of loyalty to The Knot or its
stockholders;

- for acts or omissions which are found by a court of competent
jurisdiction to be not in good faith or which involve intentional
misconduct or a knowing violation of law;

- for the payment of dividends or approval of stock repurchases or
redemptions that are prohibited by the Delaware General Corporation Law;
or

- for any transaction from which the director derived an improper personal
benefit.

The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. Our
amended and restated certificate of incorporation eliminates the personal
liability of directors to the fullest extent permitted by Section 102(b)(7) of
the Delaware General Corporation Law and provides that The Knot shall fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
that person is or was a director or officer of The Knot, or is or was serving at
the request of The Knot as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
This indemnification shall be against expenses including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the indemnitee in connection with such action, suit or proceeding.

We have entered into indemnification agreements with each of our current
directors and executive officers, in addition to the indemnification provided
for in The Knot's amended and restated certificate of incorporation. The Knot
believes that these provisions and agreements are necessary to attract and
retain qualified directors and executive officers. In addition, The Knot has
obtained liability insurance for its directors and officers.

66
<PAGE> 70

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the amended and restated certificate of
incorporation or under the indemnification agreements referred to above. The
Knot is not aware of any threatened litigation or proceeding that may result in
a claim for this type of indemnification.

67
<PAGE> 71

CERTAIN TRANSACTIONS

SERIES A PREFERRED STOCK AND INVESTMENTS BY AOL

During 1996, AOL advanced $700,000 to us to fund the development of our
online property located on AOL. On January 17, 1997, AOL loaned us $1,150,000
under a promissory note bearing interest at the rate of 6.54% per year. In
addition, we granted AOL a warrant to purchase 3,250,820 shares of Series A
Preferred Stock at $0.38 per share. The promissory note and the warrant were
scheduled to expire on January 16, 2007. In connection with AOL's investment, we
entered into an interactive services agreement under which The Knot would be
featured on AOL. The interactive services agreement was later superseded by an
anchor tenant agreement as described below.

On April 28, 1998, we sold an aggregate of 3,360,000 shares of our Series A
Preferred Stock at a price of $1.172 per share to Hummer Winblad Venture
Partners III, L.P., Hummer Winblad Technology Fund III, L.P. and AOL for an
aggregate purchase price of $3.9 million. In connection with the sale of these
shares, AOL converted $937,600 of the principal outstanding under the promissory
note held by AOL into 800,000 shares of Series A Preferred Stock. The remaining
$912,400 balance of principal plus accrued interest was forgiven and the
aforementioned warrant was cancelled. In addition, the investors entered into an
investors rights agreement under which we granted the investors registration
rights for the shares underlying the Series A Preferred Stock. For more
information, see "Description of Capital Stock -- Registration Rights."

SERIES B PREFERRED STOCK

On April 13, 1999, we sold 4,000,000 shares of our Series B Preferred Stock
at a price of $3.75 per share to QVC. QVC paid an aggregate of $15.0 million for
the shares of Series B Preferred Stock and received a warrant to purchase
1,700,000 shares of our common stock at an exercise price of $5.00 per share.
The warrant becomes exercisable upon the earlier of the fourth anniversary of
the issuance of the warrant or our initial public offering of common stock. In
addition, QVC received registration rights in connection with their shares of
stock and the shares issuable upon the exercise of its warrant, and became a
party to the investor rights agreement. The Series B Preferred Stock and the
warrant have been assigned to QVC Interactive Holdings, LLC. We also entered
into a services agreement with QVC, which we believe is on terms and conditions
no less favorable to us than we could have obtained from unaffiliated third
parties. For the nine months ended September 30, 1999, the Company purchased
merchandise and incurred warehouse fulfillment and distribution costs in the
approximate amounts of $26,000 and $60,000, respectively, under the Services
Agreement.

AOL ANCHOR TENANT AGREEMENT

On July 23, 1999, we entered into an amended anchor tenant agreement with
AOL, which extended the term of our existing agreement with AOL through January
6, 2003. Under the terms of the agreement, The Knot continues to be the primary
wedding content provider on AOL and on several other of AOL's leading
properties, including AOL.com Netscape Netcenter and CompuServe. Under the terms
of the agreement, we pay carriage fees to AOL. For the nine months ended
September 30, 1999, we paid $750,000 in carriage fees to AOL. For the year ended
December 31, 1998, we did not pay AOL carriage fees. Under the terms of the
agreement, AOL may terminate the agreement

68
<PAGE> 72

without cause only with respect to our carriage on AOL Hometown, Netscape and
CompuServe upon 30 day's prior notice. Advertisements and promotions are subject
to AOL's approval, and the advertisements may not promote AOL competitors such
as other Internet service providers or search engines. We believe the terms and
conditions of our anchor tenant agreement with AOL, taken as a whole, are no
less favorable to us than we could have obtained from unaffiliated third
parties.

In consideration for AOL's agreement to extend the term of the agreement,
we granted to AOL a warrant, exercisable for eight years from the date of grant,
to purchase 366,667 shares of our common stock at a price equal to $7.20 per
share. The warrant is immediately exercisable and expires in July 2007. In
addition, AOL received registration rights with respect to the shares issuable
under the warrant.

BRIDAL SEARCH

On April 2, 1998, we acquired substantially all of the assets of Casenhiser
Clothing Company, Inc. d/b/a Bridal Search for $50,000 and the issuance of
162,540 shares of our common stock. In addition, we agreed to issue up to
356,046 additional shares of common stock upon the achievement of future
performance criteria, of which 178,031 shares were issued in connection with the
launch of The Knot Registry in November 1998. In August 1999, we entered into a
settlement and release agreement under which Bridal Search agreed to forego its
rights to receive the remaining 178,015 shares associated with the achievement
of future performance criteria in exchange for a payment of $150,000. In
addition, in connection with their employment by us, we are required to issue
178,015 shares of common stock to under which former members of Bridal Search's
management upon the first, second, third and fourth anniversaries of their
employment, of which 44,504 shares were earned and issued in April 1999.

69
<PAGE> 73

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of the common stock as of December 1, 1999, and as adjusted to reflect
the sale of the shares of common stock offered by this prospectus, by each
person or group of affiliated persons whom we know to beneficially own 5% or
more of the common stock, each of our directors and named executive officers and
all of our directors and executive officers as a group. Unless otherwise
indicated, the address of each beneficial owner listed below is c/o The Knot,
Inc., 462 Broadway, 6th Floor, New York, New York 10013.

The following table gives effect to the shares of common stock issuable
within 60 days of December 1, 1999 upon the exercise of all options and other
rights beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power of the to shares.
Unless otherwise indicated, the persons named in the table have sole voting and
sole investment control of all shares beneficially owned.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
NUMBER OF SHARES --------------------------------
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING
- ---------------- --------------------- --------------- --------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND
DIRECTORS:
David Liu(2)(3).................... 673,383 6.4% 4.8%
Sandra Stiles(4)................... 158,334 1.5 1.1
John Link(5)....................... -- * *
Ann Winblad(6)..................... 2,560,000 24.2 18.2
OTHER 5% STOCKHOLDERS:
QVC Interactive Holdings,
LLC(7).......................... 5,700,000 46.4 36.1
Hummer Winblad Funds(6)............ 2,560,000 24.2 18.2
America Online, Inc.(8)............ 1,166,667 10.6 8.1
Rob Fassino(2)..................... 673,383 6.4 4.8
Carley Roney(2)(3)................. 673,383 6.4 4.8
Michael Wolfson(2)................. 673,383 6.4 4.8
All directors and executive
officers as a group (6 persons)(9).. 3,391,717 31.7 23.9
</TABLE>

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

* Less than 1%.

(1) Percentage of beneficial ownership is based on 10,597,612 shares of common
stock outstanding as of December 1, 1999 and 14,097,612 shares of common
stock outstanding after this offering.

(2) Consists of 673,383 shares owned by each of the four founders of The Knot,
of which 505,037 shares are subject to repurchase under a vesting agreement
over the 36-month period beginning April 28, 1998, as long as each such
founder remains an employee of The Knot. As of December 1, 1999, 266,547 of
the 505,037 shares held by each

70
<PAGE> 74

founder subject to vesting, had vested. The Knot has the right to repurchase
all or any portion of the unvested shares for $0.01 per share for a period
of 60 days from the date of early termination.

(3) Excludes 673,383 shares of common stock owned by this stockholder's spouse.

(4) Consists of 80,416 shares of common stock issuable upon exercise of
presently exercisable options and 7,917 shares of common stock issuable upon
the exercise of options exercisable within 60 days. Does not include 221,666
shares of common stock issuable upon the exercise of options that do not
vest within 60 days of December 1, 1999.

(5) Mr. Link's address is c/o QVC, Studio Park, West Chester, PA 19380.

(6) Consists of common stock issuable upon automatic conversion of 2,432,000
shares of Series A Preferred Stock owned by Hummer Winblad Venture Partners
III, L.P., and 128,000 shares of Series A Preferred Stock owned by Hummer
Winblad Technology Fund III, L.P. John Hummer, Ann Winblad (one of our
directors) and Mark Gorenberg are general partners of Hummer Winblad Equity
Partners II, L.P., the general partner of each of the Hummer Winblad Funds.
Consequently, Hummer Winblad Equity Partners II and Mr. Hummer, Ms. Winblad
and Mr. Gorenberg may each be deemed to beneficially own all of the shares
held by the Hummer Winblad Funds. Hummer Winblad Equity Partners II, Mr.
Hummer, Ms. Winblad and Mr. Gorenberg each disclaim beneficial ownership of
such shares, except to the extent of their pecuniary interest. The address
of the Hummer Winblad Funds is 2 South Park, 2nd Floor, San Francisco, CA
94107.

(7) Consists of common stock issuable upon automatic conversion of 4,000,000
shares of Series B Preferred Stock owned by QVC Interactive Holdings, LLC
and 1,700,000 shares issuable upon the exercise of a currently exercisable
warrant at the time of the initial public offering. The address of QVC
Interactive Holdings, LLC is Studio Park, West Chester, PA 19380.

(8) Consists of common stock issuable upon automatic conversion of 800,000
shares of Series A Preferred Stock owned by AOL and 366,667 shares issuable
upon the exercise of a currently exercisable warrant. The address of AOL is
22000 AOL Way, Dulles, Virginia 20166.

(9) Includes 88,334 shares of common stock issuable upon the exercise of options
which are currently vested or which vest within 60 days of December 1, 1999.

71
<PAGE> 75

DESCRIPTION OF CAPITAL STOCK

GENERAL

Immediately prior to the closing of this offering, we intend to amend and
restate our certificate of incorporation and bylaws. Our amended and restated
certificate of incorporation and bylaws are included as exhibits to the
registration statement of which this prospectus forms a part. The material terms
of our amended and restated certificate of incorporation and bylaws are
summarized below.

Upon the closing of our offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.001 per share.

COMMON STOCK

As of December 1, 1999, there were 10,597,612 shares of our common stock
outstanding held of record by 21 stockholders. Holders of common stock are
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Accordingly, holders of a
majority of the shares of common stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
common stock are entitled to receive ratably those dividends, if any, as may be
declared by our board of directors out of funds legally available for that
purpose, subject to any preferential dividend rights of any outstanding
preferred stock. Upon the liquidation, dissolution or winding up of The Knot,
the holders of our common stock are entitled to receive ratably our net assets
available, if any, after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Holders of our
common stock have no preemptive, subscription, redemption or conversion rights.
The outstanding shares of our common stock are, and the shares offered in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which we may designate and issue in the future.

PREFERRED STOCK

Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Our board of directors will be authorized, without further
stockholder approval, to issue from time to time up to an aggregate of 5,000,000
shares of preferred stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
including sinking fund provisions, redemption price or prices, liquidation
preferences and the number of shares constituting any series or designation of
series. For more information, see "-- Anti-Takeover Effects of Various
Provisions of Delaware Law and The Knot's Certificate of Incorporation and
Bylaws."

OPTIONS

We have 3,849,868 shares of our common stock reserved for issuance, upon
exercise of stock options, under our 1999 Stock Incentive Plan. As of December
1, 1999, there were outstanding options to purchase a total of 1,606,406 shares
of common stock, of which options to purchase approximately 117,750 will be
exercisable upon the closing of this offering. Since we intend to file a
registration statement on Form S-8 as soon as

72
<PAGE> 76

practicable following the closing of this offering, any shares issued upon
exercise of these options will be immediately available for sale in the public
market, subject to the terms of lock-up agreements entered into with the
underwriters. In addition, we have issued options to purchase 10,000 shares of
common stock outside of our existing stock option plan, all of which are
exercisable. For more information, see "Management -- 1999 Stock Incentive Plan"
and "Shares Eligible for Future Sale."

REGISTRATION RIGHTS

Under an investors' rights agreement, beginning six months after the
closing of this offering, the holders of 9,426,667 shares of common stock and
shares of common stock issuable upon the exercise of outstanding warrants will
be entitled to demand registration rights in connection with the registration of
their shares under the Securities Act of 1933. We are not required to effect
more than four registrations under these demand registration rights. In
addition, these holders will be entitled to piggyback registration rights in
connection with the registration of their shares under the Securities Act of
1933, subject to various limitations. Further, at any time after we become
eligible to file a registration statements on Form S-3, these holders may
require us to file registration statements under the Securities Act of 1933 on
Form S-3 in connection with their shares of common stock. These registration
rights are subject to conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares of common stock held
by security holders with registration rights to be included in a registration.
Generally, we are required to bear all of the expenses of all of these
registrations, except underwriting discounts and selling commissions.
Registration of any shares of common stock held by security holders with
registration rights would result in shares becoming freely tradable without
restriction under the Securities Act of 1933 immediately upon effectiveness of
such registration.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF
INCORPORATION AND BYLAWS

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or the business combination is approved in a prescribed manner. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
his, her or its affiliates and associates, owns or, within three years did own,
15% or more of the corporation's voting stock. This statute could prohibit or
delay the accomplishment of mergers or other takeover or change in control
attempts aimed at us and, accordingly, may discourage attempts to acquire us.

In addition, various provisions of our amended and restated certificate of
incorporation and our amended and restated bylaws, which provisions will be in
effect upon the closing of the offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by stockholders.

73
<PAGE> 77

BOARD OF DIRECTORS VACANCIES. Our amended and restated certificate of
incorporation authorizes our board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a stockholder from
removing incumbent directors and simultaneously gaining control of our board of
directors by filling the vacancies created by this removal with its own
nominees.

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our amended and
restated certificate of incorporation provides that stockholders may not take
action by written consent, but only at duly called annual or special meetings of
stockholders. Our amended and restated bylaws further provides that special
meetings of our stockholders may be called only by the chairman of the board of
directors, our chief executive officer or a majority of the board of directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS
NOMINATIONS. Our amended and restated bylaws provide that stockholders seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide us timely notice thereof in writing. To be timely, a stockholder's
notice must be delivered to or mailed and received at our principal executive
offices, not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the preceding year's annual meeting provided
regarding the previous year's annual meeting of stockholders; provided, that if
no annual meeting of stockholders was held in the previous year or the date of
the annual meeting of stockholders has been changed to be more than 30 calendar
days earlier than or 70 calendar days after this anniversary, notice by the
stockholder, to be timely, must be so received not earlier than 120 days prior
to such annual meeting nor later than the later of:

- 90 days prior to the annual meeting of stockholders; or

- the close of business on the 10th day following the date on which notice
of the date of the meeting is given to stockholders or made public,
whichever occurs first.

Our amended and restated bylaws also specify requirements as to the form
and content of a stockholders' notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to various limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred stock could make
more difficult or discourage an attempt to obtain control of The Knot by means
of a proxy contest, tender offer, merger or otherwise.

The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, New York, New York.

74
<PAGE> 78

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.

Upon the closing of this offering, we will have outstanding an aggregate of
14,097,612 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all shares sold in this offering will be freely tradeable without restriction or
further registration under the Securities Act unless such shares are purchased
by "affiliates" as that term is defined in Rule 144 under the Securities Act.
The following table illustrates the shares eligible for sale in the public
market:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<C> <S>
0 After the date of this prospectus, freely tradable
shares sold in this offering and shares saleable under
Rule 144(k) that are not subject to the 180-day lock-up

0 After 90 days from the date of this prospectus, shares
saleable under Rule 144 or Rule 701 that are not
subject to the 180-day lock-up

10,580,409 After 180 days from the date of this prospectus, the
180-day lock-up is released and these shares are
saleable under Rule 144 (subject, in some cases, to
volume limitations), Rule 144(k) or Rule 701

17,203 After 180 days from the date of this prospectus,
restricted securities that are held for less than one
year are not yet saleable under Rule 144
</TABLE>

LOCK-UP AGREEMENTS

All of our stockholders and option holders have signed lock-up agreements
under which they agreed not to transfer or dispose of, directly or indirectly,
any shares of our common stock or any securities convertible into or exercisable
or exchangeable for shares of our common stock for 180 days after the date of
this prospectus.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately 140,976 shares immediately after the offering, or

- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144

75
<PAGE> 79

in connection with such sale. Sales under Rule 144 are also subject to
manner-of-sale provisions, notice requirements and the availability of
current public information about us.

RULE 144(k)

Under Rule 144(k), a person who is not one of our affiliates at any time
during the 90 days preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding period of any
prior owner other than an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Therefore, unless otherwise contractually
restricted, "144(k)" shares may be sold immediately upon completion of this
offering.

RULE 701

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with restrictions, including the
holding period, contained in Rule 144.

REGISTRATION RIGHTS

After this offering, the holders of 9,426,667 shares of common stock and
shares of common stock issuable upon the exercise of outstanding warrants will
be entitled to rights in connection with the registration of those shares under
the Securities Act. For more information, see "Description of Capital
Stock -- Registration Rights." After such registration, these shares of our
common stock become freely tradeable without restriction under the Securities
Act. These sales could have a material adverse effect on the trading price of
our common stock.

STOCK PLANS

We intend to file a registration statement under the Securities Act
covering 3,849,868 shares of common stock reserved for issuance under our 1999
Stock Incentive Plan, and our Employee Stock Purchase Plan and the shares
reserved for issuance upon exercise of outstanding non-plan options. We expect
this registration statement to be filed and to become effective as soon as
practicable after the effective date of this offering.

As of December 1, 1999, options to purchase 1,606,406 shares of common
stock were issued and outstanding. All of these shares will be eligible for sale
in the public market from time to time, subject to vesting provisions, Rule 144
volume limitations applicable to our affiliates and, in the case of some
options, the expiration of lock-up agreements.

76
<PAGE> 80

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated December 1, 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Hambrecht & Quist
LLC and Salomon Smith Barney Inc. are acting as representatives, the following
respective numbers of shares of common stock:

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation..................... 1,395,000
Hambrecht & Quist LLC...................................... 852,500
Salomon Smith Barney Inc................................... 852,500
Advest, Inc................................................ 50,000
BancBoston Robertson Stephens Inc.......................... 50,000
E*Offering Corp............................................ 50,000
Invemed Associates LLC..................................... 50,000
Janney Montgomery Scott LLC................................ 50,000
Charles Schwab & Co., Inc.................................. 50,000
U.S. Bancorp Piper Jaffray Inc............................. 50,000
Thomas Weisel Partners LLC................................. 50,000
--------
Total...................................................... 3,500,000
========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 525,000 additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments in the sale of the common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $0.42 per share. The
underwriters and selling group members may allow a discount of $0.10 per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

77
<PAGE> 81

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
Total
-------------------------------
Without With
Per Share Over-allotment Over-allotment
-------------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us.............. $0.70 $2,450,000 $2,817,500
Expenses payable by us.............. $0.29 $1,000,000 $1,000,000
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the number of shares of common stock being offered.

We, our officers and directors and substantially all of our existing
stockholders and option holders have agreed that we will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Securities and Exchange Commission a registration statement under
the Securities Act of 1933 relating to, any additional debt securities shares of
our common stock or securities convertible into or exchangeable or exercisable
for any of our common stock, or publicly disclose the intention to make any such
offer, sale, pledge, disposition or filing, without the prior written consent of
Credit Suisse First Boston Corporation for a period of 180 days after the date
of this prospectus, except in our case issuances under the exercise of employee
stock options outstanding on the date hereof.

The underwriters have reserved for sale, at the initial public offering
price, up to 207,000 shares of the common stock for officers, directors,
employees, business associates and persons related to, or affiliated with, the
foregoing, who may have an interest in purchasing common stock in the offering.
The number of shares available for sale to the general public in the offering
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares.

We have agreed to indemnify the underwriters against specified liabilities
under the Securities Act of 1933, or to contribute to payments which the
underwriters may be required to make in respect thereof.

Our common stock has been approved for listing on The Nasdaq Stock Market's
National Market under the symbol "KNOT."

Prior to this offering, there has been no public market for the common
stock. The initial public offering price was determined by negotiation between
us and the underwriters. The principal factors considered in determining the
public offering price included the following: the information included in this
prospectus and otherwise available to the representatives; market conditions for
initial public offerings; the history and the prospects for the industry in
which we will compete; the ability of our management; the prospects for our
future earnings; the present state of our development and our current financial
condition; the general condition of the securities markets at the time of this
offering; and the recent market prices of, and the demand for, publicly traded
common stock of generally comparable companies.

78
<PAGE> 82

The representatives on behalf of the underwriters may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member are purchased in a stabilizing transaction or a
syndicate covering transaction to cover syndicate short positions.

Such stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.

79
<PAGE> 83

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that:

- such purchaser is entitled under applicable provincial securities laws to
purchase such common stock without the benefit of a prospectus qualified
under such securities laws,

- where required by law, that such purchaser is purchasing as principal and
not as agent, and

- such purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION FOR ONTARIO PURCHASERS

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be

80
<PAGE> 84

obtained from us. Only one such report must be filed in respect of common stock
acquired on the same date and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

81
<PAGE> 85

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed
upon for us by Brobeck, Phleger & Harrison LLP, New York, New York. Various
legal matters in connection with the offering will be passed upon for the
underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

The consolidated financial statements and schedule for The Knot, Inc. as of
December 31, 1997 and 1998 and September 30, 1999 and for the period from its
inception on May 2, 1996 to December 31, 1996, the years ended December 31, 1997
and 1998 and the nine month period ended September 30, 1999, included in this
prospectus and elsewhere in the registration statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report appearing
elsewhere in this prospectus, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

The financial statements for Casenhiser Clothing Company, Inc. d/b/a Bridal
Search as of December 31, 1997 and April 1, 1998 and for the year ended December
31, 1997 and for the period ended April 1, 1998, included in this prospectus and
elsewhere in the registration statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing elsewhere in this
prospectus, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with exhibits and schedules, under the Securities Act with
respect to the common stock to be sold in this offering. This prospectus does
not contain all of the information set forth in this registration statement. For
further information about The Knot and the shares of common stock to be sold in
the offering, please refer to this registration statement. For additional
information, please refer to the exhibits that have been filed with our
registration statement on Form S-1.

You may read and copy all or any portion of the registration statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C., 20549. You can
request copies of these documents upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our Securities and Exchange Commission filings, including the
registration statement, will also be available to you on the Securities and
Exchange Commission's Web site (http://www.sec.gov). As a result of this
offering, we will become subject to the information and reporting requirements
of the Securities Exchange Act of 1934, and will file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.

We intend to furnish our stockholders with annual reports containing
audited financial statements and to make available to our stockholders quarterly
reports for the first three quarters of each year containing unaudited financial
information.

82
<PAGE> 86

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
THE KNOT, INC.
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999.................................... F-3
Consolidated Statements of Operations for the period from
May 2, 1996 (date of inception) to December 31, 1996 and
the years ended December 31, 1997 and 1998 and the nine
months ended September 30, 1998 (Unaudited) and 1999...... F-4
Consolidated Statements of Stockholders' (Deficit) Equity
for the period from May 2, 1996 (date of inception) to
December 31, 1996 and the years ended December 31, 1997
and 1998 and the nine months ended September 30, 1999..... F-5
Consolidated Statements of Cash Flows for the period from
May 2, 1996 (date of inception) to December 31, 1996 and
the years ended December 31, 1997 and 1998 and the nine
months ended September 30, 1998 (Unaudited) and 1999...... F-6
Notes to Consolidated Financial Statements.................. F-8

CASENHISER CLOTHING COMPANY, INC.
Report of Independent Auditors.............................. F-24
Balance Sheets as of December 31, 1997 and April 1, 1998.... F-25
Statements of Operations for the year ended December 31,
1997 and the period ended April 1, 1997 (Unaudited) and
April 1, 1998............................................. F-26
Statements of Shareholder's (Deficit) Equity for the year
ended December 31, 1997 and the period ended April 1,
1998...................................................... F-27
Statements of Cash Flows for the year ended December 31,
1997 and the period ended April 1, 1997 (Unaudited) and
April 1, 1998............................................. F-28
Notes to Financial Statements............................... F-29
</TABLE>

F-1
<PAGE> 87

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of
The Knot, Inc.

We have audited the accompanying consolidated balance sheets of The Knot,
Inc. (the "Company") as of December 31, 1997 and 1998 and September 30, 1999,
and the related consolidated statements of operations, stockholders' (deficit)
equity and cash flows for the period from May 2, 1996 (date of inception) to
December 31, 1996, the years ended December 31, 1997 and 1998, and the nine
month period ended September 30, 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company at
December 31, 1997 and 1998, and September 30, 1999 and the consolidated results
of their operations and their cash flows for the period from May 2, 1996 (date
of inception) to December 31, 1996, the years ended December 31, 1997 and 1998,
and the nine month period ended September 30, 1999 in conformity with generally
accepted accounting principles.

/s/ ERNST & YOUNG LLP

New York, New York
October 26, 1999, except for Note 12 as to which the
date is November 5, 1999

F-2
<PAGE> 88

THE KNOT, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDER'S
DECEMBER 31, EQUITY AT
------------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
----------- ----------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 305,375 $ 1,037,589 $ 9,301,870
Accounts receivable, net of allowance of
$133,000 in 1999............................. 39,480 189,545 1,078,808
Inventories.................................... -- 28,741 511,639
Other current assets........................... 1,667 32,018 677,931
----------- ----------- -----------
Total current assets............................. 346,522 1,287,893 11,570,248
Property and equipment, net...................... 51,144 243,044 1,281,714
Goodwill, net.................................... -- 349,677 622,199
Deferred financing costs, net.................... 747,029 -- 296,667
Other assets..................................... 8,149 69,293 75,344
----------- ----------- -----------
Total assets..................................... $ 1,152,844 $ 1,949,907 $13,846,172
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses.......... $ 104,385 $ 225,094 $ 1,424,341
Deferred revenue............................... 48,436 60,111 889,263
----------- ----------- -----------
Total current liabilities........................ 152,821 285,205 2,313,604
Note payable..................................... 2,016,770 -- --
Other liabilities................................ -- 18,800 8,800
----------- ----------- -----------
Total liabilities................................ 2,169,591 304,005 2,322,404
Commitments and contingencies
Stockholders' (deficit) equity:
Series A convertible preferred stock, $.001 par
value; 3,360,000 shares authorized, issued
and outstanding at December 31, 1998 and
September 30, 1999 (liquidation value of
$3,937,920 at September 30, 1999)............ -- 3,937,920 3,937,920
Series B convertible preferred stock, $.001 par
value; 4,000,000 shares authorized, issued
and outstanding at September 30, 1999
(liquidation value of $15,000,000 at
September 30, 1999).......................... -- -- 13,963,000
Common stock, $.01 par value; 14,640,000 shares
authorized; 1,625,410, 3,034,103 and
3,093,608 shares issued and outstanding at
December 31, 1997 and 1998 and September 30,
1999, respectively; 100,000,000 and
10,453,608 shares authorized and outstanding,
proforma, respectively....................... 16,254 30,341 30,936 $ 104,536
Additional paid-in-capital..................... 814,779 1,421,714 7,796,448 25,623,768
Deferred compensation.......................... -- (387,020) (2,716,139) (2,716,139)
Deferred sales and marketing................... -- -- (2,122,984) (2,122,984)
Accumulated deficit............................ (1,847,780) (3,357,053) (9,365,413) (9,365,413)
----------- ----------- ----------- -----------
Total stockholders' (deficit) equity............. (1,016,747) 1,645,902 11,523,768 $11,523,768
----------- ----------- ----------- ===========
Total liabilities and stockholders' (deficit)
equity......................................... $ 1,152,844 $ 1,949,907 $13,846,172
=========== =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE> 89

THE KNOT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
MAY 2, 1996
(DATE OF NINE MONTHS ENDED
INCEPTION) TO YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
------------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues......................... $ 70,567 $ 596,071 $ 1,039,584 $ 825,791 $ 2,635,430
Cost of revenues..................... 9,044 66,905 131,214 81,977 903,990
---------- ----------- ----------- ----------- -----------
Gross profit......................... 61,523 529,166 908,370 743,814 1,731,440
Operating expenses:
Product and content development.... 261,921 635,440 1,030,323 788,362 1,685,057
Sales and marketing................ 254,864 503,113 768,250 476,159 2,913,246
General and administrative......... 242,116 264,746 809,385 538,589 2,194,582
Non-cash compensation.............. -- -- 93,046 56,787 716,719
Non-cash sales and marketing....... -- -- -- -- 127,016
Depreciation and amortization...... 9,128 22,226 121,718 75,411 346,461
---------- ----------- ----------- ----------- -----------
Total operating expenses............. 768,029 1,425,525 2,822,722 1,935,308 7,983,081
Loss from operations................. (706,506) (896,359) (1,914,352) (1,191,494) (6,251,641)
Interest income (expense), net....... (45,780) (199,135) 14,968 (29,412) 243,281
---------- ----------- ----------- ----------- -----------
Loss before extraordinary gain on
extinguishment of debt............. (752,286) (1,095,494) (1,899,384) (1,220,906) (6,008,360)
Extraordinary gain on extinguishment
of debt............................ -- -- 390,111 390,111 --
---------- ----------- ----------- ----------- -----------
Net loss............................. $ (752,286) $(1,095,494) $(1,509,273) $ (830,795) $(6,008,360)
========== =========== =========== =========== ===========
Loss per share -- basic and diluted:
Loss before extraordinary gain on
extinguishment of debt.......... $ (.46) $ (.67) $ (.76) $ (.52) $ (1.96)
Extraordinary gain on
extinguishment of debt.......... -- -- .16 .17 --
---------- ----------- ----------- ----------- -----------
Net loss........................... $ (.46) $ (.67) $ (.60) $ (.35) $ (1.96)
========== =========== =========== =========== ===========
Weighted average number of shares
used in calculating basic and
diluted net loss per share......... 1,625,410 1,625,410 2,497,065 2,344,126 3,066,960
========== =========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE> 90

THE KNOT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ----------------------- --------------------- PAID IN
SHARES AMOUNT SHARES AMOUNT SHARES PAR VALUE CAPITAL
--------- ---------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock at
inception, May 2, 1996............ -- $ -- -- $ -- 1,625,410 $16,254 $ (15,254)
Net loss for the period from May 2,
1996 (date of inception) to
December 31, 1996................. -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ------- ----------
Balance at December 31, 1996....... -- -- -- -- 1,625,410 16,254 (15,254)
Issuance of warrant in connection
with note payable................. -- -- -- -- -- -- 830,033
Net loss for the year ended
December 31, 1997................. -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ------- ----------
Balance at December 31, 1997....... -- -- -- -- 1,625,410 16,254 814,779
Issuance of common stock in
connection with acquisition....... -- -- -- -- 162,540 1,626 169,775
Deferred compensation related to
unvested common stock in
connection with acquisition....... -- -- -- -- -- -- 186,916
Issuance of common stock........... -- -- -- -- 1,068,122 10,681 (10,681)
Sale of Series A Convertible
Preferred Stock, net of costs..... 2,560,000 3,000,320 -- -- -- -- (217,378)
Conversion of note payable......... 800,000 937,600 -- -- -- -- --
Issuance of common stock........... -- -- -- -- 178,031 1,780 185,153
Deferred compensation related to
the issuance of stock options..... -- -- -- -- -- -- 293,150
Amortization of deferred
compensation...................... -- -- -- -- -- -- --
Net loss for the year ended
December 31, 1998................. -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ------- ----------
Balance at December 31, 1998....... 3,360,000 3,937,920 -- -- 3,034,103 30,341 1,421,714
Issuance of common stock........... -- -- -- -- 44,505 445 (445)
Sale of Series B Convertible
Preferred Stock, net of costs..... -- -- 4,000,000 15,000,000 -- -- (127,509)
Issuance of warrant in connection
with sale of Series B Convertible
Preferred Stock................... -- -- -- (1,037,000) -- -- 1,037,000
Issuance of common stock in
connection with acquisitions...... -- -- -- -- 15,000 150 114,850
Issuance of stock options in
connection with acquisitions...... -- -- -- -- -- -- 55,000
Issuance of warrant in connection
with distribution agreement....... -- -- -- -- -- -- 2,250,000
Amortization of deferred sales and
marketing......................... -- -- -- -- -- -- --
Deferred compensation related to
the issuance of stock options..... -- -- -- -- -- -- 3,045,838
Amortization of deferred
compensation...................... -- -- -- -- -- -- --
Net loss for the nine months ended
September 30, 1999................ -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ------- ----------
Balance at September 30, 1999...... 3,360,000 $3,937,920 4,000,000 $13,963,000 3,093,608 $30,936 $7,796,448
========= ========== ========= =========== ========= ======= ==========

<CAPTION>
TOTAL
DEFERRED STOCKHOLDERS'
DEFERRED SALES AND ACCUMULATED (DEFICIT)
COMPENSATION MARKETING DEFICIT EQUITY
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Issuance of common stock at
inception, May 2, 1996............ $ -- $ -- $ -- $ 1,000
Net loss for the period from May 2,
1996 (date of inception) to
December 31, 1996................. -- -- (752,286) (752,286)
----------- ----------- ----------- -----------
Balance at December 31, 1996....... -- -- (752,286) (751,286)
Issuance of warrant in connection
with note payable................. -- -- -- 830,033
Net loss for the year ended
December 31, 1997................. -- -- (1,095,494) (1,095,494)
----------- ----------- ----------- -----------
Balance at December 31, 1997....... -- -- (1,847,780) (1,016,747)
Issuance of common stock in
connection with acquisition....... -- -- -- 171,401
Deferred compensation related to
unvested common stock in
connection with acquisition....... (186,916) -- -- --
Issuance of common stock........... -- -- -- --
Sale of Series A Convertible
Preferred Stock, net of costs..... -- -- -- 2,782,942
Conversion of note payable......... -- -- -- 937,600
Issuance of common stock........... -- -- -- 186,933
Deferred compensation related to
the issuance of stock options..... (293,150) -- -- --
Amortization of deferred
compensation...................... 93,046 -- -- 93,046
Net loss for the year ended
December 31, 1998................. -- -- (1,509,273) (1,509,273)
----------- ----------- ----------- -----------
Balance at December 31, 1998....... (387,020) -- (3,357,053) 1,645,902
Issuance of common stock........... -- -- -- --
Sale of Series B Convertible
Preferred Stock, net of costs..... -- -- -- 14,872,491
Issuance of warrant in connection
with sale of Series B Convertible
Preferred Stock................... -- -- -- --
Issuance of common stock in
connection with acquisitions...... -- -- -- 115,000
Issuance of stock options in
connection with acquisitions...... -- -- -- 55,000
Issuance of warrant in connection
with distribution agreement....... -- (2,250,000) -- --
Amortization of deferred sales and
marketing......................... -- 127,016 -- 127,016
Deferred compensation related to
the issuance of stock options..... (3,045,838) -- -- --
Amortization of deferred
compensation...................... 716,719 -- -- 716,719
Net loss for the nine months ended
September 30, 1999................ -- -- (6,008,360) (6,008,360)
----------- ----------- ----------- -----------
Balance at September 30, 1999...... $(2,716,139) $(2,122,984) $(9,365,413) $11,523,768
=========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 91

THE KNOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
MAY 2, 1996
(DATE OF NINE MONTHS ENDED
INCEPTION) TO YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
------------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss before extraordinary gain on
extinguishment of debt......................... $(752,286) $(1,095,494) $(1,899,384) $(1,220,906) $(6,008,360)
Adjustments to reconcile net loss before
extraordinary gain on extinguishment of debt
to net cash used in operating activities
Depreciation and amortization................ 9,128 22,226 67,429 39,299 192,459
Amortization of goodwill..................... -- -- 54,289 36,112 154,002
Amortization of deferred financing costs..... -- 83,004 27,668 27,668 --
Amortization of deferred
compensation............................... -- -- 93,046 56,787 716,719
Amortization of deferred sales and
marketing.................................. 127,016
Noncash interest expense..................... 45,780 120,990 30,248 30,248 --
Allowance for doubtful accounts and loan
receivable................................. -- -- -- -- 183,000
Changes in operating assets and liabilities:
Accounts receivable........................ (40,567) 1,087 (150,065) (42,404) (716,808)
Inventories................................ -- -- (28,741) (33,719) (388,556)
Other current assets....................... (57,271) 56,604 (29,959) (11,007) (645,551)
Other assets............................... (29,485) 21,336 (61,144) (61,405) (6,051)
Accounts payable and accrued expenses...... 199,324 (94,939) 120,709 54,856 788,088
Deferred revenue........................... -- 48,436 11,675 23,168 788,224
Other liabilities.......................... -- -- 18,800 18,800 (10,000)
--------- ----------- ----------- ----------- -----------
Net cash used in operating activities.......... (625,377) (836,750) (1,745,429) (1,082,503) (4,825,818)
INVESTING ACTIVITIES
Purchases of property and equipment............ (58,231) (24,267) (255,299) (203,522) (1,185,119)
Loan receivable................................ -- -- -- (50,000) (50,000)
Acquisition of businesses, net of cash
acquired..................................... -- -- (50,000) -- (335,051)
--------- ----------- ----------- ----------- -----------
Net cash used in investing activities.......... (58,231) (24,267) (305,299) (253,522) (1,570,170)
FINANCING ACTIVITIES
Proceeds from note payable..................... 700,000 1,150,000 -- -- --
Proceeds from short term borrowings............ -- -- -- -- 750,000
Repayment of short term borrowings............. -- -- -- -- (750,000)
Financing costs................................ -- -- (217,378) (217,378) (339,731)
Proceeds from issuance of convertible preferred
stock........................................ -- -- 3,000,320 3,000,320 15,000,000
--------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities................................... 700,000 1,150,000 2,782,942 2,782,942 14,660,269
--------- ----------- ----------- ----------- -----------
Increase in cash and cash equivalents.......... 16,392 288,983 732,214 1,446,917 8,264,281
Cash and cash equivalents at beginning of
period....................................... -- 16,392 305,375 305,375 1,037,589
--------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period..... $ 16,392 $ 305,375 $ 1,037,589 $ 1,752,292 $ 9,301,870
========= =========== =========== =========== ===========
</TABLE>

F-6
<PAGE> 92
THE KNOT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

See accompanying notes.

F-7
<PAGE> 93

THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999

1. ORGANIZATION AND NATURE OF OPERATIONS

The Knot, Inc. (the "Company"), formerly Weddings.com, Inc., was
incorporated in the state of Delaware on May 2, 1996 ("Inception"). On June 18,
1996, the Company changed its name from Weddings.com, Inc. to The Knot, Inc.

The Company is a leading online destination targeting the wedding market.
The Company provides wedding resources on the World Wide Web and is the primary
wedding content provider on America Online and several other of AOL's leading
brands, including AOL.com, Netscape Netcenter and CompuServe. The Company's
online sites provide articles on wedding planning, organized by topic, a
database of local wedding vendors, interactive services and personalized
planning tools, a searchable bridal gown database, various communities of hosted
chats and message boards, a gift registry, a wedding supply and gift store and
honeymoon travel packages. The Company also authors a series of books and
publishes a semiannual gown guide.

The accompanying financial statements include the accounts of Click Trips,
Inc., a wholly owned subsidiary from July 31, 1999 through September 30, 1999.
All intercompany transactions have been eliminated in consolidation.

In August 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit the Company to sell shares of the Company's common stock in
connection with a proposed initial public offering ("IPO"). Following the
closing of the Company's IPO, the Company will be authorized to issue
105,000,000 shares; 100,000,000 of these shares will be designated as common
stock having a par value of $.01, and 5,000,000 of these shares will be
undesignated preferred shares, having a par value of $.001. The Company will be
authorized to issue shares of undesignated preferred stock in one or more
classes or series without further stockholder approval. If the offering is
consummated under the terms presently anticipated, all the then outstanding
shares of the Company's convertible stock will automatically convert into shares
of common stock on a one-for-one basis upon the closing of the proposed IPO. The
conversion of all of the convertible preferred stock has been reflected in the
accompanying unaudited pro forma consolidated balance sheet as if it had
occurred on September 30, 1999.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates. The most
significant estimates included in the preparation of the financial statements
are related to asset lives, the valuation of common stock, preferred stock and
warrants.

F-8
<PAGE> 94
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value due to the short-term nature of these
instruments. The carrying amounts of outstanding borrowings approximate fair
value.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents
were approximately $243,000, $1,003,000, and $9,039,000 at December 31, 1997 and
1998 and September 30, 1999, respectively. The market value of the Company's
cash equivalents approximates their cost plus accrued interest.

INVENTORY

Inventory consists of finished goods. Inventory costs are determined
principally by using the average cost method, and are stated at the lower of
such cost or net realizable value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets which range from three to seven
years. Leasehold improvements are amortized over the shorter of their estimated
useful lives or the term of the related lease agreement.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets, including goodwill, for
impairment whenever events or changes in circumstances such as significant
declines in revenues, earnings or cash flows or material adverse changes in the
business climate, indicate that the carrying amount of an asset may be impaired.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of the assets to future estimated undiscounted net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. To date, no
impairment has occurred.

GOODWILL

Goodwill is being amortized over three years using the straight-line
method. Accumulated amortization of goodwill approximates $54,000 and $208,000
at December 31, 1998 and September 30, 1999, respectively.

F-9
<PAGE> 95
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

The Company accounts for income taxes on the liability method as required
by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
recognized for the future tax consequence attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax liabilities of a change
in tax rates is recognized in results of operations in the period that includes
the enactment date.

NET REVENUES BY TYPE

Net revenues by type are as follows:

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------- ------------------------
TYPE 1996 1997 1998 1998 1999
- ---- ------------ -------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sponsorship,
advertising and
production........... $70,567 $596,071 $ 853,240 $656,117 $1,724,154
Merchandise............ -- -- 17,487 -- 694,119
Publishing, travel and
other................ -- -- 168,857 169,674 217,157
------- -------- ---------- -------- ----------
Total.................. $70,567 $596,071 $1,039,584 $825,791 $2,635,430
======= ======== ========== ======== ==========
</TABLE>

REVENUE RECOGNITION

Sponsorship and Advertising

Sponsorship and advertising contracts provide for the delivery of a minimum
number of impressions. Impressions are the featuring of a sponsor's
advertisement, banner, link or other form of content on our sites. To date, the
Company has recognized sponsorship and advertising revenues over the duration of
the contracts on a straight line basis as the Company has exceeded minimum
guaranteed impressions. To the extent that minimum guaranteed impressions are
not met, the Company is generally obligated to extend the period of the contract
until the guaranteed impressions are achieved. If this were to occur,

F-10
<PAGE> 96
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company would defer and recognize the corresponding revenues over the
extended period.

Production revenues are derived from the development of online sites and
tools. Production revenues are recognized when the development is completed and
the online sites and tools are delivered.

To promote the Company's brand on third-party sites, the Company produces
online sites for third parties featuring both The Knot and the third party. The
cost of production of these sites is included in operating expenses. In return,
the Company receives distribution and exposure to the viewers of such third
party sites, outbound links to its sites and, in some circumstances, offline
brand marketing. The Company does not recognize revenue with respect to these
barter transactions.

Usage revenues received from America Online, Inc. ("AOL") which totaled
approximately $74,000 for the year ended December 31, 1997 and $47,000
(unaudited) for the nine months ended September 30, 1998 were derived from AOL
customers visiting the Company's AOL site. Usage revenues were recognized as
they were earned based upon hours of viewership of the Company's site. As
discussed in Note 4, the Company signed a new agreement with AOL which
eliminated usage revenues from, and licensing fees to AOL, subsequent to
September 30, 1998.

Merchandise

Merchandise revenues are derived from sales of merchandise through
Bridalink.com, The Knot Registry and The Knot Shop. Merchandise revenues include
outbound shipping and handling charges. Merchandise revenues from product sales
are recognized when the products are shipped to customers, reduced by an
allowance for estimated sales returns.

Publishing

Publishing revenues are derived from author royalties related to book
publishing contracts and sales of books published by the Company. Royalties
related to book publishing contracts are recognized when the Company has met all
contractual obligations, which typically includes the delivery and acceptance of
a final manuscript. Revenues related to the sale of books are recognized when
the books are shipped, reduced by an allowance for estimated returns.

Travel

Travel revenues are derived from commissions on the sale of travel packages
by the Company's online travel agency, Click Trips, Inc. Such revenues are
recognized when the customer commences travel.

DEFERRED REVENUE

Deferred revenue represents payments received or billings in excess of
revenue recognized related to sponsorship, advertising and production contracts,
as well as advances received against future royalties to be earned relating to
book publishing contracts.

F-11
<PAGE> 97
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COST OF REVENUES

Cost of revenues consists of the cost of merchandise sold, payroll and
related expenses for personnel who are responsible for the production of
customized online sites and tools, and costs of Internet and hosting services.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising expense totaled
approximately $69,000, $79,000, $46,000, $11,000 (unaudited) and $57,000 for the
period from inception through December 31, 1996 and for the years ended December
31, 1997 and 1998 and the nine months ended September 30, 1998 and 1999,
respectively.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company maintains a significant portion of its cash
and cash equivalents with one financial institution. The Company's customers are
primarily concentrated in the United States. The Company performs on-going
credit evaluations, generally does not require collateral, and establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of customers, historical trends and other information. To date, such losses have
been within management's expectations.

For the year ended December 31, 1998, one advertiser accounted for 19% of
our net revenues. For the year ended December 31, 1997, one advertiser accounted
for 42% of our net revenues and a different advertiser accounted for 13% of our
net revenues. From May 2, 1996 (our inception date) through December 31, 1996,
four advertisers accounted for 34%, 30%, 23% and 13% of our net revenues,
respectively.

At September 30, 1999, two advertisers accounted for 14% and 12% of
accounts receivable, respectively. At December 31, 1998, four advertisers
accounted for 26%, 16%, 13%, and 12% of accounts receivable, respectively. At
December 31, 1997, two advertisers accounted for 62% and 38% of accounts
receivable, respectively.

STOCK-BASED COMPENSATION

The Company accounts for its employee stock option plan in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations and
complies with the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation."

STOCK SPLITS

On January 17, 1997 and April 27, 1998, the Company effected a 1,000 for 1
and a 16.2541 for 1 stock split, respectively. All share amounts have been
retroactively restated to reflect these events in the accompanying financial
statements.

F-12
<PAGE> 98
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTERIM FINANCIAL INFORMATION

The unaudited interim financial information as of September 30, 1998 and
for the nine months then ended has been prepared on the same basis as the annual
financial statements and, in the opinion of the Company's management, contains
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation. Operating results for any interim period are not necessarily
indicative of results to be expected for the entire year.

NET LOSS PER SHARE

The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share." Basic net loss per share is computed by dividing net loss
by the weighted average number of common shares outstanding during the period.
Diluted net loss per share adjusts basic loss per share for the effects of
convertible securities, stock options and other potentially dilutive financial
instruments, only in the periods in which such effect is dilutive. There were no
dilutive securities in any of the periods presented herein.

SEGMENT INFORMATION

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which establishes standards for the way
that a public enterprise reports information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. In the initial
year of application, comparative information for earlier years must be restated.
The Company operates in a single segment. The chief operating decision maker
allocates resources and assesses the performance associated with sponsorship and
advertising, merchandise, publishing and travel on a single segment basis.

COMPREHENSIVE INCOME

As of January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general purpose financial statements. Since the Company's comprehensive net
loss is equal to its net loss for all periods presented, the adoption of this
standard has had no impact on the Company's financial statements.

SOFTWARE DEVELOPMENT COSTS

In March 1998, the Accounting Standards Executive Committee of 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." This SOP is effective for fiscal years beginning
after December 15,

F-13
<PAGE> 99
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1998. The Company has adopted the provisions of SOP 98-1 during the nine months
ended September 30, 1999 with no material effect.

All projects are being amortized over their estimated useful lives, which
has been determined by management to be three years. Amortization on the
projects begins when the software is ready for its intended use.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
------- -------- -------------
<S> <C> <C> <C>
Leasehold improvements...................... $ 8,200 $ 8,200 $ 100,109
Software.................................... -- 47,900 489,058
Furniture and fixtures...................... 3,761 14,222 28,785
Computer equipment.......................... 70,537 271,505 955,004
------- -------- ----------
82,498 341,827 1,572,956
Less accumulated depreciation and
amortization.............................. 31,354 98,783 291,242
------- -------- ----------
$51,144 $243,044 $1,281,714
======= ======== ==========
</TABLE>

4. RELATED PARTY TRANSACTIONS

AOL

During 1996, AOL advanced $700,000 to the Company to fund the development
of the Company's online property located on AOL. During 1996, the Company
entered into an Interactive Services Agreement with AOL whereby AOL agreed to
carry the Company's content for a period of three years. As a result of this
agreement, AOL paid the Company a usage fee based on hours of viewership of the
Company's site on AOL. AOL received a commission equal to a percentage of the
Company's advertising revenues, as defined, that were derived from its site.
This agreement was amended in 1998 eliminating usage fees paid to the Company
and eliminating commissions paid to AOL.

The Company paid commissions to AOL in the approximate amounts of $0,
$68,000, $16,000 and $16,000 (unaudited) for the period from Inception through
December 31, 1996, the years ended December 31, 1997 and 1998 and for the nine
months ended September 30, 1998, respectively.

The Company earned usage fees from AOL in the approximate amounts of $0,
$74,000, $47,000 and $47,000 (unaudited) for the period from Inception through
December 31, 1996, the years ended December 31, 1997 and 1998 and for the nine
months ended September 30, 1998, respectively.

On January 17, 1997, the Company and AOL entered into a Note and Warrant
Purchase Agreement, whereby the Company issued to AOL a Secured Promissory Note

F-14
<PAGE> 100
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(the "AOL Note") and a Stock Subscription Warrant (the "AOL Warrant") to
purchase 3,250,820 shares of the Company's Series A Convertible Preferred Stock.
The AOL Warrant was valued at approximately $830,000, based on its estimated
fair value. Such value was recorded as deferred financing costs and was
amortized on a straight line basis over the life of the AOL Warrant.

The Company borrowed a total of $1,850,000 under the AOL Note, inclusive of
the $700,000 advanced in 1996. The AOL Note bore interest at 6.54% per annum and
was payable January 16, 2007.

On April 28, 1998, AOL exchanged the note payable of $2,047,018, which
included accrued interest of $197,018, and the AOL Warrant for 800,000 shares of
Series A Convertible Preferred Stock (see Note 8) valued at $937,600. At the
date of exchange, AOL was solely a creditor of the Company, since the AOL
Warrant was worthless. In accordance with SFAS No. 15, "Accounting by Debtors
and Creditors for Troubled Debt Restructurings" this transaction was accounted
for as a troubled debt restructuring and an extraordinary gain on the
extinguishment of debt was recognized.

On September 30, 1998, the Company entered into an Anchor Tenant Agreement
with AOL (the "AOL Agreement"), whereby the Company received distribution within
the AOL service. Beginning January 1, 1999, the Company was obligated to pay
carriage fees throughout the term of the AOL Agreement. This agreement
superseded any prior agreements between the Company and AOL.

The company paid carriage fees to AOL in the amount of $750,000 for the
nine months ended September 30, 1999.

In July 1999, the Company entered into an amended and restated Anchor
Tenant Agreement with AOL ("Restated AOL Agreement") which superseded the AOL
Agreement. The Restated AOL Agreement expires on January 6, 2003 and provides
for a quarterly carriage fee payable over the remaining term of the Restated AOL
Agreement.

At September 30, 1999, the Company is obligated to pay carriage fees to AOL
as follows:

<TABLE>
<S> <C>
Year ending September 30:
2000......................................... $1,150,000
2001......................................... 1,200,000
2002......................................... 1,200,000
2003......................................... 300,000
----------
Total.......................................... $3,850,000
==========
</TABLE>

Pursuant to the Restated AOL Agreement, the Company issued a warrant to
purchase 366,667 shares of the Company's common stock at $7.20 per share,
subject to certain anti -dilution provisions. The warrant is immediately
exercisable and expires in July 2007. The Company valued this warrant at
approximately $2,250,000, by using the Black-Scholes option pricing model with
an expected volatility factor of 55%, risk free interest rate of 5%,

F-15
<PAGE> 101
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

no dividend yield, and a 2-year life, which will be recognized as non-cash sales
and marketing expense on the straight line basis over the term of the agreement.

QVC, INC. ("QVC")

On April 13, 1999, the Company sold 4,000,000 shares of Series B
Convertible Preferred Stock ("Series B") for $15,000,000 to QVC. In connection
with the sale of Series B Convertible Preferred Stock, the Company issued a
warrant to QVC to purchase 1,700,000 shares of common stock at $5.00 per share
subject to certain anti-dilution provisions. The warrant becomes exercisable
upon the earlier of the fourth anniversary of the issuance of the warrant or
upon the occurrence of certain events including the closing of an initial public
offering. At issuance, the fair value of the warrant was calculated to be
approximately $1,037,000 by using the Black-Scholes option pricing model with an
expected volatility factor of 55%, risk free interest rate of 5%, no dividend
yield, and a 2-year life.

In April 1999, the Company entered into a services agreement with QVC (the
"Services Agreement"), whereby QVC will provide warehousing, fulfillment and
distribution services with respect to the Company's registry and book products.
Additionally, the services agreement, which has a term of four years from the
date of this offering, provides for the Company to purchase certain merchandise
through QVC at amounts in excess of QVC's cost. The fees for such services were
negotiated on an arm's length basis.

For the nine months ended September 30, 1999, the Company purchased
merchandise and incurred warehousing, fulfillment and distribution costs in the
approximate amounts of $26,000 and $60,000, respectively, under the Services
Agreement.

The Company also has an agreement with QVC to sell merchandise through a
co-branded site accessible from within QVC's on-line site.

5. ACQUISITIONS

CASENHISER CLOTHING COMPANY, INC. d/b/a BRIDAL SEARCH

On April 2, 1998, the Company acquired all of the assets of Bridal Search
for $50,000 in cash and 162,540 shares of the Company's common stock valued at
$1.05 per share for financial reporting purposes. In addition, the Company was
required to issue up to 356,046 additional shares to Bridal Search upon the
achievement of future performance criteria, of which 178,031 shares were issued
in connection with the launch of the Company's registry in November 1998 at a
value of $1.05 per share. The remaining 178,015 shares were issuable upon the
attainment of certain revenue based goals. In August 1999, the Company entered
into a Settlement and Release Agreement whereby Bridal Search agreed to forego
its rights to receive the remaining 178,015 shares related to revenue based
goals in exchange for a payment of $150,000. Such amount, representing
contingent purchase price, was recorded as additional goodwill. The purchase
price, net of tangible assets acquired, principally fixed assets of
approximately $4,000, was recorded as goodwill.

F-16
<PAGE> 102
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Under the agreement, the former owners of Bridal Search are also entitled
to receive an additional 178,015 shares of the Company's common stock,
contingent upon their employment by the Company and which vest over four years.
The value of these shares of $186,916 was recorded as deferred compensation. As
of September 30, 1999, 44,504 shares had vested pursuant to the agreement.

Bridalink.com

In July 1999, the Company acquired all of the assets of Bridalink.com for
approximately $124,000 in cash and the issuance of 10,000 immediately vested
stock options to purchase common stock at an exercise price of $1.50 per share.
The common stock was valued at $7.00 per share for financial reporting purposes.
Bridalink.com operates an online wedding supply store located in Northern
California. The acquisition was accounted for under the purchase method of
accounting. The purchase price, including legal fees, of $191,000, net of
tangible assets acquired, principally inventory and fixed assets of $124,000 was
recorded as goodwill.

CLICK TRIPS, INC.

In July 1999, the Company acquired all of the capital stock of Click Trips,
Inc. ("Click Trips") for 5,000 shares of common stock. The common stock was
valued at $7.00 per share for financial reporting purposes. Such shares are
being held in escrow for six months for the purpose of indemnifying the Company
against any potential liabilities of Click Trips. Click Trips has the right to
receive options to purchase up to 10,000 shares of the Company's common stock
upon the attainment of $1,200,000 in commission revenues for the year ended
December 31, 2000. The exercise price related to such options will be equal to
the fair market value of the Company's common stock on the date of grant. Click
Trips operates an online travel agency. The acquisition was accounted for under
the purchase method of accounting. The purchase price, including legal fees, of
$67,000, net of tangible assets acquired, principally fixed assets of
approximately $16,000, was recorded as goodwill.

WEDDING PHOTOGRAPHERS NETWORK

In August 1999, the Company acquired all of the assets of Wedding
Photographers Network ("WPN"), a division of The Denis Reggie Company, for
10,000 shares of the Company's common stock. The common stock was valued at
$8.00 per share for financial reporting purposes. WPN offers a search engine to
obtain a listing of professional wedding photographers in various local areas.
This acquisition was accounted for under the purchase method of accounting. The
purchase price of $159,000 which includes legal fees, and liabilities assumed of
approximately $38,000, was recorded as goodwill.

Unaudited pro forma data for the Company for the year ended December 31,
1998, and for the nine months ended September 30, 1999 giving effect to the
acquisitions of Bridal Search, Bridalink.com, Click Trips, Inc. and Wedding
Photographers Network as if these acquisitions had occurred at the beginning of
each period presented (with the exception of Bridal Search which is already
reflected in the Company's consolidated

F-17
<PAGE> 103
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

historical financial statements for the nine months ended September 30, 1999)
are shown below. Pro forma basic and diluted net loss per share has been
calculated assuming the conversion of all convertible preferred stock on the
date of issuance.

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
<S> <C> <C>
Net revenues................................. $ 1,698,000 $ 3,665,025
Loss before extraordinary item............... (1,895,000) (5,865,000)
Net loss..................................... (1,505,000) (5,865,000)
Basic and diluted net loss per share......... (.59) (1.90)
Pro forma basic and diluted net loss per (.31) (.65)
share......................................
</TABLE>

6. ALLIANCE AGREEMENT WITH WEDDINGPAGES, INC.

In July 1999, the Company entered into an 18-month exclusive alliance
agreement with Weddingpages, Inc., ("Weddingpages"). Weddingpages sells online
advertising to local wedding vendors on our behalf. We receive the revenue from
the sale of advertisements and pay Weddingpages a 65% sales commission. We also
pay Weddingpages a monthly fee for related administration and operating
functions, including customer service, ad production, and accounting services.

7. SHORT TERM BORROWINGS

In July 1998, the Company entered into a short term borrowing agreement
with a bank whereby the Company was allowed to borrow up to $750,000 at an
interest rate equal to prime plus 2%. The agreement matured in April 1999. In
August 1999, this balance was paid in full.

8. CAPITAL STOCK

The Company's Amended and Restated Articles of Incorporation provides for
22,000,000 authorized shares of capital stock consisting of 14,640,000 shares of
common stock each having a par value of $.01 per share and 7,360,000 shares of
convertible preferred stock, each having a par value of $.001.

PREFERRED STOCK

On April 28, 1998, the Company sold 2,560,000 shares of Series A
Convertible Preferred Stock ("Series A") for $3,000,320. Simultaneously, the AOL
Note in the amount of $2,047,018, which included accrued interest of $197,018
and the AOL Warrant were exchanged for 800,000 shares of Series A Convertible
Preferred Stock valued at $937,600 (See Note 4).

On April 13, 1999, the Company sold 4,000,000 shares of Series B
Convertible Preferred Stock ("Series B") for $15,000,000 to QVC (see Note 4).

F-18
<PAGE> 104
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Each share of Series A and Series B Preferred Stock is convertible into one
share of the Company's common stock subject to certain anti-dilution provisions.
The Series A and Series B Convertible Preferred Stock will be automatically
converted into common stock upon completion of an initial public offering of the
Company's common stock with minimum net proceeds to the Company of $10,000,000
with a minimum price per share of $7.50.

The holders of the Series A and Series B Preferred Stock shall be entitled
to receive noncumulative annual dividends, at the rate of $.09 and $.30 per
share, respectively, if and when declared by the Board of Directors. The holders
of preferred stock are entitled to the number of votes equal to the number of
shares of common stock into which their preferred stock is convertible. Neither
series of preferred stock is redeemable.

In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A and B Preferred Stock shall be entitled to receive
$1.172 and $3.75 for each outstanding share of stock, respectively, plus
declared but unpaid dividends on such shares.

COMMON STOCK

From inception through April 24, 1998, all outstanding common shares of the
Company were owned by Element Studios, Inc. ("Element"), formerly MW
Entertainment, Inc. On April 24, 1998, in connection with a recapitalization of
the Company prior to the sale of Series A Preferred Stock, Element was
dissolved. The outstanding common shares of the Company owned by Element were
distributed equally to the four founders of Element. On April 28, 1998, the
Company issued an additional 1,068,122 common shares to the founders. Following
the recapitalization, each founder was the holder of 673,383 common shares.

In conjunction with the Series A issuance, the founders entered into
Vesting Agreements, whereby each founder granted the Company the right to
repurchase 505,037 shares of common stock for $.01, if the founder is no longer
employed by the Company. The amount of shares subject to the Vesting Agreements
are reduced ratably over thirty six months. Common shares subject to repurchase
are held in escrow and amounted to 392,807 and 266,544, per founder, at December
31, 1998, and September 30, 1999, respectively.

9. STOCK OPTIONS

Under the terms of the Company's 1997 Long Term Incentive Plan (the "1997
Plan"), 2,849,868 shares of common stock of the Company have been reserved for
incentive stock options, nonqualified stock options (incentive and nonqualified
stock options are collectively referred to as "Options"), restricted stock, or
any combination thereof. Awards may be granted to such directors, officers,
employees and consultants of the Company as the Board of Directors shall in its
discretion select. Only employees of the Company are eligible to receive grants
of incentive stock options.

F-19
<PAGE> 105
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Balance at December 31, 1996.......................... -- $ --
Options granted....................................... 98,825 .01
Options canceled...................................... -- --
---------
Options outstanding at December 31, 1997.............. 98,825 .01
Options granted....................................... 583,000 .50
Options canceled...................................... (8,810) .01
---------
Options outstanding at December 31, 1998.............. 673,015 .93
Options granted....................................... 1,131,750 2.84
Options canceled...................................... (44,000) 1.77
---------
Options outstanding at September 30, 1999............. 1,760,765 $1.97
=========
</TABLE>

As of December 31, 1998 and September 30, 1999, 34,828 and 229,509,
respectively, of the above options were exercisable. Generally, options are
granted at the fair market value of the stock on the date of grant as determined
by the Board of Directors. Options vest up to a four year period and have terms
not to exceed 10 years.

Had compensation for the Plan been determined consistent with the
provisions of SFAS No. 123, the effect on the Company's net loss before
extraordinary items and basic and diluted net loss before extraordinary items
per share would have been changed to the following pro forma amounts:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss before extraordinary
items, as reported.......... $(1,095,494) $(1,899,384) $(1,220,906) $(6,008,360)
Net loss before extraordinary
items, pro forma.............. (1,096,282) (1,988,488) (1,273,178) (6,341,133)
Basic and diluted loss before
extraordinary items per
share, as reported.......... (.67) (.76) (.52) (1.96)
Basis and diluted loss per
share, pro forma............ (.67) (.80) (.54) (2.07)
</TABLE>

F-20
<PAGE> 106
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of each option granted has been estimated on the date of
grant using the minimum value method option pricing model with the following
assumptions:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Expected option lives......................... 4 years 4 years 4 years
Risk-free interest rates...................... 5.72% 4.64% 5.75%
Expected volatility........................... 0% 0% 0%
Dividend yield................................ 0% 0% 0%
</TABLE>

For purposes of pro forma disclosures, the estimated fair value of options
is amortized to expense over the options' vesting period.

During the year ended December 31, 1998 and the nine months ended September
30, 1999, the Company granted options with exercise prices that were
subsequently determined to be less than the value for financial reporting
purposes on the date of grant. As a result, the Company has recorded deferred
compensation of approximately $293,000 during 1998 and $3,046,000 during the
nine months ended September 30, 1999. These amounts, together with deferred
compensation recorded in connection with the acquisition of Bridal Search, will
be recognized as noncash compensation expense on an accelerated basis over the
vesting period of the options consistent with the method described in FASB
Interpretation No. 28.

10. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.

F-21
<PAGE> 107
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities
consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------- -------------------------
1997 1998 1998 1999
--------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax assets:
Net operating loss
carryforwards................... $ 804,600 $ 1,374,000 $ 1,030,200 $ 3,874,000
Deferred revenue.............. -- 5,800 4,300 2,900
Depreciation and
amortization............... 8,900 49,500 37,200 111,100
Other......................... 500 800 500 100
--------- ----------- ----------- -----------
Total deferred tax assets....... 814,000 1,430,100 1,072,200 3,988,100
Deferred tax liabilities:
Capitalized software costs.... -- -- -- (188,500)
--------- ----------- ----------- -----------
Net deferred tax assets......... 814,000 1,430,100 1,072,200 3,799,600
Valuation allowance........... (814,000) (1,430,100) (1,072,200) (3,799,600)
--------- ----------- ----------- -----------
Total deferred tax assets....... $ -- $ -- $ -- $ --
========= =========== =========== ===========
</TABLE>

Net deferred tax assets have been fully offset by a valuation allowance due
to the uncertainty of realizing such benefit.

At December 31, 1998, the Company had net operating loss carryforwards of
approximately $2,975,000 for federal and state income tax purposes which are set
to expire in years 2011 through 2018.

11. COMMITMENTS

OPERATING LEASES

The Company leases office facilities and certain warehouse space under
noncancelable operating lease agreements which expire at various dates through
2003. In October 1999, the Company entered into a lease amendment for additional
office space through March 31, 2012. Future minimum lease payments under
noncancelable operating leases including the lease amendment made in October
1999, are as follows:

<TABLE>
<S> <C>
Year ending September 30:
2000..................................... $ 374,000
2001..................................... 415,000
2002..................................... 416,000
2003..................................... 400,000
2004..................................... 450,000
Thereafter............................... 4,060,000
----------
Total...................................... $6,115,000
==========
</TABLE>

Rent expense for the period from Inception to December 31, 1996, the years
ended December 31, 1997 and 1998 and the nine months ended September 30, 1998
and 1999

F-22
<PAGE> 108
THE KNOT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amounted to approximately $30,000, $43,000, $183,000, $98,000 (unaudited) and
$198,000, respectively.

Sublease income for the year ended December 31, 1998 and the nine months
ended September 30, 1998 and 1999 amounted to $97,000, $66,000 (unaudited) and
$36,000, respectively.

12. SUBSEQUENT EVENTS

1999 STOCK INCENTIVE PLAN (THE "1999 PLAN")

In November 1999, the Company's Board of Directors adopted the 1999 Plan,
as a successor plan to the 1997 Plan, pursuant to which 1,000,000 additional
shares of the Company's common stock have been reserved for issuance to selected
employees, non-employee directors and consultants. All options under the 1997
Plan are incorporated into the 1999 Plan and no further option grants will be
made under the 1997 Plan. The 1999 Plan will become effective upon completion of
the Company's initial public offering of its common stock.

EMPLOYEE STOCK PURCHASE PLAN

In November 1999, the Company's Board of Directors adopted the Employee
Stock Purchase Plan to be effective upon completion of the Company's initial
public offering of its common stock. The Company has initially reserved 300,000
shares of common stock for issuance under the 1999 Plan.

COMMON STOCK

At November 5, 1999, the Company had reserved the following shares of
common stock for future issuance after giving effect to transactions in this
footnote:

<TABLE>
<S> <C>
Conversion of Series A and Series B Preferred Stock.... 7,360,000
Options under the 1999 Stock Incentive Plan............ 3,849,868
Common stock warrant................................... 1,700,000
Common stock warrant................................... 366,667
Options under the Employee Stock Purchase Plan......... 300,000
Options related to the acquisition of Bridalink.com.... 10,000
Options related to the acquisition of Click Trips,
Inc.................................................. 10,000
Common Shares issuable in connection with employment of
certain management of Bridal Search.................. 133,511
----------
Total common stock reserved for future issuance........ 13,730,046
==========
</TABLE>

F-23
<PAGE> 109

REPORT OF INDEPENDENT AUDITORS

The Shareholder of
Casenhiser Clothing Company, Inc.

We have audited the accompanying balance sheets of Casenhiser Clothing
Company, Inc. (the "Company") as of December 31, 1997 and April 1, 1998, and the
related statements of operations, shareholder's equity and cash flows for the
year ended December 31, 1997 and the period ended April 1, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company at December 31,
1997 and April 1, 1998 and the results of its operations and its cash flows for
the year ended December 31, 1997 and the period ended April 1, 1998 in
conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

New York, New York
August 18, 1999

F-24
<PAGE> 110

CASENHISER CLOTHING COMPANY, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 1,
1997 1998
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 2,333 $ 3,249
Inventories......................................... 2,480 2,320
Other current assets................................ 1,750 850
--------- ---------
Total current assets.................................. 6,563 6,419
Property and equipment................................ 45,902 45,902
Less: accumulated depreciation........................ (39,436) (40,113)
--------- ---------
Property and equipment, net........................... 6,466 5,789
--------- ---------
Total assets.......................................... $ 13,029 $ 12,208
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses............... $ -- $ 5,743
--------- ---------
Total current liabilities............................. -- 5,743
Commitments and contingencies
Shareholder's equity:
Common stock, $.01 par value; 100,000 shares
authorized; 10,000, shares issued and outstanding
at December 31, 1997 and April 1, 1998,
respectively..................................... 100 100
Additional paid-in-capital.......................... 172,578 172,578
Accumulated deficit................................. (159,649) (166,213)
--------- ---------
Total shareholder's equity............................ 13,029 6,465
--------- ---------
Total liabilities and shareholder's equity............ $ 13,029 $ 12,208
========= =========
</TABLE>

See accompanying notes.

F-25
<PAGE> 111

CASENHISER CLOTHING COMPANY, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED PERIOD ENDED
1997 APRIL 1, 1997 APRIL 1, 1998
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net revenues.................................... $137,590 $11,908 $44,025
Operating expenses.............................. 75,898 18,810 48,402
-------- ------- -------
Income (loss) from operations................... 61,692 (6,902) (4,377)
Interest expense................................ (7,631) (1,149) (2,187)
-------- ------- -------
Net income (loss)............................... $ 54,061 $(8,051) $(6,564)
======== ======= =======
Income (loss) per share -- basic and diluted:
Net income (loss)............................. $ 5.41 $ (.81) $ (.66)
======== ======= =======
Weighted average number of shares used in
calculating basic and diluted net income
(loss) per share.............................. 10,000 10,000 10,000
======== ======= =======
</TABLE>

See accompanying notes.

F-26
<PAGE> 112

CASENHISER CLOTHING COMPANY, INC.

STATEMENTS OF SHAREHOLDER'S (DEFICIT) EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID IN ACCUMULATED TOTAL (DEFICIT)
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996..... 10,000 $100 $172,578 $(213,710) $(41,032)
Net income for the year ended
December 31, 1997................ -- -- -- 54,061 54,061
------ ---- -------- --------- --------
Balance at December 31, 1997..... 10,000 100 172,578 (159,649) 13,029
Net loss for the period ended
April 1, 1998.................. -- -- -- (6,564) (6,564)
------ ---- -------- --------- --------
Balance at April 1, 1998......... 10,000 $100 $172,578 $(166,213) $ 6,465
====== ==== ======== ========= ========
</TABLE>

See accompanying notes.

F-27
<PAGE> 113

CASENHISER CLOTHING COMPANY, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, APRIL 1, APRIL 1,
1997 1997 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................... $ 54,061 $(8,051) $(6,564)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation expense..................... 4,311 1,078 677
Changes in operating assets and
liabilities:
Inventories........................... (2,480) -- 160
Other current assets.................. (1,750) -- 900
Accounts payable and accrued
expenses............................ (51,820) 6,973 5,743
-------- ------- -------
Net cash provided by operating
activities............................... 2,322 -- 916
Increase in cash........................... 2,322 -- 916
Cash at beginning of period................ 11 11 2,333
-------- ------- -------
Cash at end of period...................... $ 2,333 $ 11 $ 3,249
======== ======= =======
</TABLE>

See accompanying notes.

F-28
<PAGE> 114

CASENHISER CLOTHING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
APRIL 1, 1998

1. ORGANIZATION AND NATURE OF OPERATIONS

Casenhiser Clothing Company, Inc. d/b/a Bridal Search built and maintained
an online database of wedding gowns, gown descriptions and photographs. This
database was licensed exclusively to The Knot, Inc. On April 2, 1998, The Knot,
Inc. acquired all of the assets of Bridal Search for $50,000 in cash and 162,540
shares of The Knot, Inc.'s common stock, and the licensing agreement was
terminated. In addition, The Knot, Inc. was required to issue up to 356,046
additional shares to Bridal Search upon the achievement of future performance
criteria, of which 178,031 shares were issued in November 1998. The remaining
178,015 shares were issuable upon the attainment of certain revenue based goals.
In August 1999, The Knot, Inc. entered into a Settlement and Release Agreement
whereby Bridal Search agreed to forego its rights to receive the remaining
178,015 shares related to revenue based goals in exchange for a payment of
$150,000.

Under the agreement, former management of Bridal Search are also entitled
to receive an additional 178,015 shares of The Knot, Inc.'s common stock,
contingent upon their employment by The Knot, Inc. which vest over four years.
As of June 30, 1999, 44,504 shares had vested pursuant to the agreement.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and accounts payable approximate fair value
due to the short-term nature of these instruments.

INVENTORY

Inventory consists of finished goods. Inventory costs are determined
principally by using the first-in, first-out (FIFO) method, and are stated at
the lower of such cost or realizable value.

PROPERTY AND EQUIPMENT

Property and equipment is comprised primarily of office and computer
equipment and is stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
related assets, five years.

F-29
<PAGE> 115
CASENHISER CLOTHING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances such as significant declines in revenues, earnings or
cash flows or material adverse changes in the business climate, indicate that
the carrying amount of an asset may be impaired. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of the assets
to future estimated undiscounted net cash flows expected to be generated by the
assets. If the assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. To date, no impairment has incurred.

INCOME TAXES

The Company accounts for income taxes on the liability method as required
by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Under this method, deferred tax assets and liabilities are
recognized for the future tax consequence attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.

The Company has elected to be taxed as an S Corporation for federal income
tax purposes. As such, the Company has not been subject to federal income tax
since the shareholder has included the corporation's taxable income or loss in
their individual income tax returns.

NET REVENUES BY TYPE

Net revenues by type are as follows:

<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED APRIL 1,
DECEMBER 31, ----------------------
TYPE 1997 1997 1998
- ---- ------------ ----------- -------
(UNAUDITED)
<S> <C> <C> <C>
Licensing................................. $107,317 $ -- $37,157
Merchandise............................... 19,773 1,908 6,868
Advertising............................... 10,500 10,000 --
-------- ------- -------
Total..................................... $137,590 $11,908 $44,025
======== ======= =======
</TABLE>

REVENUE RECOGNITION

Licensing

Licensing revenue is recognized on a monthly basis in accordance with a
licensing agreement with The Knot, Inc.

F-30
<PAGE> 116
CASENHISER CLOTHING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Merchandise

Merchandise revenues are derived from the sale of wedding supply and
novelty items and are recognized when the products are shipped to customers.
Such revenues include outbound shipping and handling charges. The Company
provides an allowance for estimated sales returns.

Advertising

Advertising revenues are derived principally from short-term advertising
contracts and recognized on a straight-line basis over the duration of the
contract.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising expense
approximated $3,400, $100, and $2,800 (unaudited) for the year ended December
31, 1997 and the periods ended April 1, 1998 and 1997, respectively.

CONCENTRATION OF CREDIT RISK

For the year ended December 31, 1997 and the period ended April 1, 1998,
one customer (The Knot, Inc.) accounted for 78% and 84% of net revenues,
respectively.

COMPREHENSIVE INCOME

As of January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income". This statement establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general purpose financial statements. The adoption of this standard has had
no impact on the Company's financial statements. Accordingly, the Company's
comprehensive net loss is equal to its net loss for all periods presented.

3. COMMITMENTS

OPERATING LEASES

The Company leased office space in California on a month to month basis.
Rent expense for the years ended December 31, 1997 and the periods ended April
1, 1998 and 1997 amounted to $1,000, $2,000 and $0 (unaudited), respectively.

4. YEAR 2000 (UNAUDITED)

The Company currently operates numerous date-sensitive computer
applications and systems throughout its business. As the century change
approaches, it will be essential for the Company to ensure that these systems
properly recognize the year 2000 and continue to process critical operation and
financial information. The Company has established processes for evaluating and
managing the risks and costs associated with preparing the Company's systems and
applications for the year 2000 change. The Company has substantially completed
these modifications and costs to allow thorough testing before the year 2000.

F-31
<PAGE> 117

BACK INSIDE COVER:

- Center of page contains four photos from various weddings.

- Bottom of page contains The Knot's Web site address and lists The Knot's
AOL keyword ("weddings").
<PAGE> 118

[THE KNOT LOGO]