KEY3MEDIA GROUP INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NUMBER: 001-16061

KEY3MEDIA GROUP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 95-4799962
(State or other jurisdiction of incorporation (I.R.S. employer identification no.)
or organization)
5700 WILSHIRE BLVD, SUITE 325
LOS ANGELES, CA 90036
(Address of principal executive offices) (Zip Code)

(323) 954-6000
(Registrant's telephone number, including area code)

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

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

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

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

As of March 18, 2002 there were 68,277,919 shares of the registrant's
common stock outstanding.

Based upon the March 18, 2002 New York Stock Exchange closing price of
$5.00 per share, the aggregate market value of the Registrant's outstanding
common stock held by non-affiliates is approximately $95.3 million. (If all the
Registrant's convertible preferred stock had been converted on such date, the
aggregate market value would be approximately $140.7 million.)

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's definitive proxy statement to be filed with
the Securities and Exchange Commission relative to its Annual Meeting of
Stockholders to be held on May 15, 2002, are incorporated by reference in this
Form 10-K in response to Part III, Items 10, 11, 12 and 13.
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KEY3MEDIA GROUP, INC.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001

FORWARD LOOKING STATEMENTS

Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements," including statements about Key3Media's future
results, plans and goals and other events which have not yet occurred. These
statements are intended to qualify for the safe harbors from liability provided
by the Private Securities Litigation Reform Act of 1995. You can find many (but
not all) of these statements by looking for words like "will", "may",
"believes", "expects", "anticipates", "plans" and "estimates" and for similar
expressions. Because forward-looking statements involve risks and uncertainties,
there are many factors that could cause Key3Media's actual results to differ
materially from those expressed or implied in this release. These include, but
are not limited to, economic conditions generally and in the information
technology industry in particular; the timing of Key3Media's events and their
popularity with exhibitors, sponsors and attendees; technological changes and
developments; intellectual property rights; competition; capital expenditures;
and factors impacting Key3Media's international operations. In addition, the
terrorist attacks on September 11, 2001 have adversely affected the economy
generally and significantly decreased air travel in particular. These
developments have and will continue to adversely affect participation and
attendance at Key3Media's events, although we are not able to quantify or
reliably estimate the future impact that these matters may have on our
businesses, results of operations or financial condition. We discuss some of
these and other factors that could cause actual results to differ from those
expressed or implied by forward looking statements in "Item
1 -- Business -- Certain Factors That May Affect Our Businesses". We do not plan
to update any forward-looking statements.

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PART I

ITEM 1. BUSINESS

Key3Media Group, Inc. was incorporated in 2000 to hold Ziff-Davis Inc.'s
portfolio of tradeshow businesses. We were spun off from Ziff-Davis in August
2000. Our principal executive offices are located at 5700 Wilshire Blvd., Suite
325, Los Angeles, CA 90036, and our telephone number is (323) 954-6000. When we
use the terms "Key3Media", "Registrant", "we" and "our", we mean, prior to the
spin-off, the portfolio of tradeshow and other event businesses formerly held by
Ziff-Davis Inc. and, after the spin-off, Key3Media Group, Inc., a Delaware
corporation, and its subsidiaries.

We produce, manage and promote a portfolio of tradeshows, conferences and
other events for the information technology, or IT, industry. Our events provide
community, content and commerce for vendors, resellers, large volume end-users
and others involved in the IT industry, including consultants and other
advisors. In 2001, we provided face-to-face marketplaces for
business-to-business marketing, sales and education in the IT industry for more
than 1.1 million participants at 29 owned and operated events, including
co-located events.

In 2001, our COMDEX and NetWorld+Interop events were the top two IT
industry tradeshow brands in the United States when measured by revenue from
exhibit space rentals based on statistical data obtained from Tradeshow Week, a
leading industry publication. We also produce customized events for specific IT
vendors and specific segments of the IT industry. At our events, we rent space
to exhibitors and receive commissions from third parties who provide services to
our exhibitors. We also charge fees for conferences and sell advertising and
sponsorships. In 2001, our revenue was $252.3 million, our net loss was $21.4
million and our earnings before interest, taxes, depreciation and amortization,
or EBITDA, were $64.0 million.

We have events which focus on the full spectrum of the IT industry and
others that target particular segments of the industry. We believe that we can
enhance our revenue by creating multiple revenue streams from a portfolio of
events with different targeted audiences and limited attendee overlap. Our
customized events allow us to build close relationships with individual IT
vendors and better understand their products and marketing needs. These
relationships also help us identify and keep current with emerging trends in the
IT industry.

Our COMDEX tradeshows cover the full spectrum of the IT industry. Our
COMDEX Fall 2001 tradeshow was the largest tradeshow in the United States for
any industry when measured by revenue from exhibit space rentals and attendance
(including exhibitor personnel). In 2001, we offered 16 COMDEX events in 13
countries and our owned and operated COMDEX events generated about 26% of our
revenue. Our NetWorld+Interop tradeshows focus on the networking, Internet and
telecommunications sectors of the IT industry, although our shows outside the
United States also address broader aspects of the IT industry. In 2001, we held
five NetWorld+Interop tradeshows in four countries and we owned and operated
four of them. These four NetWorld+Interop tradeshows generated approximately 40%
of our revenue in 2001.

We currently employ approximately 625 people, including sales, marketing,
operational and corporate service personnel. Of these, approximately 550 are in
the United States and the balance are in France, Sweden, Japan, Australia and
Canada. We also employ temporary personnel from time to time. None of our United
States employees are covered by a collective bargaining agreement. We believe
that we have good relations with our employees.

INDUSTRY OVERVIEW

Tradeshows, conferences and other business-to-business events provide
face-to-face interaction between buyers and sellers and offer educational and
networking opportunities for attendees. Tradeshow Week has estimated that there
are over 13,000 trade and consumer events held annually worldwide. The spectrum
of these events is fairly broad, with individual shows distinguishing themselves
by their style, the nature and level of sophistication of their content,
organizational efficiency and, most importantly, by their attendance record.

1

With the recent difficulties experienced in the IT industry, exhibitors
have become much more selective in choosing events and more sensitive to the
returns they can generate from their marketing investments. Exhibitors consider
not only exhibit space rental costs, but also other event-related costs such as
exhibit design and production, transportation, travel, lodging and entertainment
costs and event-related promotions. We believe that our revenues, net paid
square footage of exhibit space and conference participants have been adversely
affected by continuing difficulties in the IT industry and reductions in IT
marketing and travel budgets and the events that occurred on September 11, 2001.
See "Certain Factors That May Affect Our Businesses" and "Item 7 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations".

As an alternative to exhibiting at events, some IT vendors host private
events such as regional conferences, product demonstrations, user-group
meetings, road shows and educational demonstrations. While these allow vendors
to engage customers in a more controlled environment, they typically involve
much smaller audiences than attend larger industry events. We believe that our
larger industry leading events present better opportunities for our exhibitors
to launch new products and services, establish and enhance their brands with
customers and the media and maintain the face-to-face connection with their
buyers. We also believe that the "see and be seen" aspect of our events is very
important to exhibitors who are seeking to maximize the returns from their sales
and marketing efforts.

OUR COMPETITIVE STRENGTHS

We believe that our business has several competitive strengths:

WE BELIEVE WE ARE THE INDUSTRY LEADER IN IT EVENTS

We believe we are the largest producer of events for the IT industry in the
United States when measured by revenue from exhibit space rentals and we have
the leading brands in our industry. In 2001, our leading COMDEX and
NetWorld+Interop events were the top two IT industry tradeshows in the United
States in terms of revenue from exhibit space rentals. We believe our COMDEX and
NetWorld+Interop brands are among the most distinctive and recognizable brand
names in the IT event industry. We also have a portfolio of other events with
strong market and brand positions in specific segments of the IT industry. We
believe that our size and portfolio of leading brands help us consistently
attract the biggest names in the IT industry as exhibitors, conference
participants and keynote speakers.

ATTRACTIVE COST STRUCTURE

Our variable costs are low and our fixed costs are predictable. Due to our
cost structure, most of any incremental revenue that we can generate from a
profitable show will translate into increased cash flow, EBITDA and net income.
We seek to generate incremental revenues by renting more exhibit space,
increasing (if possible) our exhibitor space rental fees and/or selling more
advertising and sponsorships. In 2001, our operating margin, which is our EBITDA
as a percentage of our revenues, was 25.4%. Our exhibitors are contractually
required to pay for exhibit space rentals in advance in two or three
installments. The last installment is usually due six months prior to the event
or, if the contract is signed after this date, on the date of the contract.

COMPREHENSIVE PORTFOLIO OF IT BRANDS

We believe we have a broader and more extensive portfolio of IT brands than
any other events company. We have brands for horizontal events that cover the
full spectrum of the IT industry and for vertical events that target particular
segments of the industry. We believe that our portfolio of well known IT event
brands helps us attract and retain exhibitors and attendees. It also allows us
to provide for the needs of most participants in the IT industry in the United
States and to generate multiple revenue streams from the industry with limited
audience overlap. We believe that we have less than 15% attendee overlap between
our fall and spring COMDEX events and between our largest COMDEX and
NetWorld+Interop events.

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EXTENSIVE DATABASE OF EXHIBITORS AND ATTENDEES

We have an extensive database of participants in the IT industry which
contains approximately 2.9 million names in the United States and more than 1.3
million names outside the United States. Our database generally contains
important demographic information for each participant, including items like job
function, company size and type, product interests, purchasing habits and
installed operating systems. We use this database to identify and target both
exhibitors and attendees for our existing events.

OUR STRATEGY

We are seeking to increase our revenue, cash flow and earnings by pursuing
the following strategies:

FOCUS ON KEY REVENUE DRIVERS

We generate multiple streams of revenue from our events and will focus on
the following key revenue drivers:

Increase Exhibit Space Rentals. We seek to increase revenue from our
exhibit space rentals by increasing the amount of space we rent and, if
possible, the fees we charge to our exhibitors for such rentals. While we
have raised exhibit space rental fees in each of the last two years for
many of our continuing shows, we do not expect to do so in 2002 due to the
continuing difficulties in the IT industry and the economy in general.

Increase Advertising, Sponsorships and Promotions. One of our key
initiatives is to increase our advertising and sponsorships revenue and to
generate additional revenue by introducing promotional activities at our
events. We sold advertising and sponsorships outside the IT industry for
the first time at COMDEX Fall 2000 and have continued to focus on
increasing our advertising and sponsorship base since that time.

Emphasize Conferences and Content. We intend to continue to create,
organize and promote the conferences that we offer to attendees at our
events for an additional fee. In addition to generating additional revenue,
the content and educational opportunities offered by these programs help us
attract quality attendees to our events. We will also continue to use
leading executives and experts in the IT industry as keynote speakers at
our events in order to provide the most current and relevant information to
our attendees. By increasing quality attendance, we make our events more
attractive to exhibitors.

REDUCE EXPENSES

Our strategy is to reduce our expenses to the maximum extent that we can
without compromising the quality of the products and services we offer or our
potential for future growth. In 2001, we successfully implemented a program of
negotiating cost reductions from many of our third party suppliers and reduced
our number of employees. For additional information regarding our efforts to
reduce expenses, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Industry Developments in 2001 -- Expense
Reduction Programs."

MAINTAIN AND EXTEND OUR INDUSTRY LEADING POSITION

We believe we are the largest producer of events for the IT industry in the
United States when measured by revenue from exhibit space rentals and that
COMDEX and NetWorld+Interop are the leading brands in our industry. We believe
that we can maintain and extend our industry leading position by:

- focusing our events on the emerging and fastest growing sectors of the IT
industry served by our events;

- expanding our exhibitor and attendee base;

- increasing our advertising and sponsorships revenues and introducing
promotional activities; and

- increasing attendee participation in its conferences.

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LEVERAGE OUR CUSTOMIZED EVENTS

In our Studios division, we produce customized events for individual IT
vendors which enable them to reach audiences in a targeted and controlled
environment. We work closely with our clients at these events and we use these
events to demonstrate our marketing expertise and gain a better understanding of
our clients' business and marketing needs. We believe we can use the close
relationships we build with our clients and the information we gain about them
through these events to increase their use of our other product lines. These
events also help us identify and keep current with the most important emerging
trends in the IT industry.

PURSUE ACQUISITIONS SELECTIVELY

We may acquire other producers of events if we believe they can create
shareholder value and are available on reasonable terms. We may use such
acquisitions to strengthen and expand our existing event portfolio and/or to
expand outside the IT industry and business-to-business events. We believe that
we can create operating efficiencies by applying our expertise and experience.
In 2001, we made several strategic acquisitions in the IT industry, which are
described in "Item 7 -- Management's Discussion of Financial Conditions and
Results of Operations -- Recent Developments."

EXPAND INTERNATIONALLY

We have been able to extend our leading brands outside the United States
through a combination of events we own and operate and international contract
events in which we license our brand to other operators and typically receive
guaranteed minimum payments and a return based on the performance of the
licensed event. In 2001, we had 12 owned and operated and 11 contract events
outside the United States. We believe we have the potential to expand our
international operations further through acquisitions and by leveraging our U.S.
experience and reputation. In June 2001, we acquired SOFTBANK Forums Japan, Inc.
("SB Forums"), which owns and operates the NetWorld+Interop tradeshow in Tokyo,
one of the largest IT tradeshows in Japan, and several smaller custom events in
Japan. In January 2002, we acquired ExpoNova Events & Exhibitions, a
Sweden-based company that specializes in the IT tradeshow industry and produces
COMDEX Nordic and other technology-oriented exhibitions and conferences.

OUR EVENTS

In 2001, we produced 29 owned and operated events, including co-located
events. In 2001, these events were attended by a total of more than 1.1 million
participants. In addition to the events we own and operate, we license our
brands to foreign tradeshow operators for use in connection with 11 events held
outside of the United States. We refer to these as our international contract
events. Most of our international contract events are operated under the COMDEX
or NetWorld+Interop brands.

Generally, our events have three features in common, although the emphasis
may vary:

- an exposition floor on which exhibitors and attendees interact
face-to-face;

- conferences designed to inform and educate IT professionals; and

- keynote speakers and product launches.

We produce events under a number of different brand names, including
COMDEX, NetWorld+Interop, Seybold Seminars, JavaOne, VON and BCR/NGN. Our two
most important brands in terms of revenues are COMDEX and NetWorld+Interop. We
classify our events as "horizontal" events if they cover the full spectrum of
the IT industry and "vertical" events if they focus only on particular segments
of the IT industry. Our COMDEX tradeshows are horizontal events and all our
other events are vertical. NetWorld+Interop and Seybold Seminars are our largest
vertical events. Consistent with industry trends, our vertical events have grown
significantly and performed better than our horizontal events. Our JavaOne
conference is our largest customized event. VON, VoiceCon, Opticon, Next
Generation Networks and Next Generation Ventures are vertical events that focus
on the networking and Internet Protocol communication industries. In addition to
our branded events, we conduct a series of customized vertical events through
our Studios division.

4

The following table summarizes the scope and reach of our principal branded
and customized events:

COMDEX

Our COMDEX tradeshows cover the full spectrum of the IT industry. Our
COMDEX Fall 2001 tradeshow was the largest tradeshow in the United States when
measured by revenue from exhibitor space rentals and attendance (including
exhibitor personnel). In 2001, we offered 16 COMDEX tradeshows in 13 countries.
We plan to co-locate a new COMDEX event with our NetWorld+Interop show in
Atlanta in September 2002.

Our COMDEX tradeshows cover a broad range of new technologies at every
stage, from their development and introduction to commercial maturity. Many of
the most significant business technology, digital and computer products launched
over the past 20 years occurred at COMDEX tradeshows, including the launch of
the IBM PC, Lotus 1-2-3, Windows 3.1, Windows CE and DVD. Microsoft featured its
X-Box at our COMDEX Fall show in 2001.

IT and Internet technologies form an integral part of our COMDEX
tradeshows. While maintaining our coverage of the full spectrum of the IT
industry, we are currently highlighting nine key technology areas:

- Information Security -- Security will be a top spending priority for
companies throughout 2002 and 2003. COMDEX will focus on information
security, biometrics, anti-virus, firewalls, security services and
security management software.

- Digital Imaging and Document Management -- Whether outputting to paper or
the Web, enterprise publishing has gone digital, as has document
management and distribution. COMDEX will focus on the technologies and
solutions that drive efficiency, productivity and creativity for
businesses.

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- Digital Lifestyles -- The convergence of personal and professional life
is driving significant technology and services innovation. COMDEX will
focus on how the PC continues to emerge as the digital hub of the home,
becoming the center of creativity. With education and special programs
attendees will explore whether the PC is the most versatile device for
the transition from productivity to creativity.

- Software Platforms and Solutions -- Operating systems, utility
applications, analytics, collaborative software, supply chain management,
CRM, ERP, database, e-commerce, e-business -- there is no better
comparative platform than COMDEX, which also features, Key3Media's
Customer 360 event.

- Web Services -- The burgeoning set of technologies that allow software to
offer identical functions on multiple devices will be highlighted,
including XML, SOAP, WSDL and UDDI.

- Infrastructure -- This zone will focus on network infrastructure
equipment, integration, storage solutions including SANs, VPNs, managed
services, hosting, content delivery and more.

- Networking and communications -- Products that provide the broadband
infrastructure for the delivery of data, voice and video, while focusing
on such issues as network security and virtual private networking.

- eMobility and Wireless -- Businesses are going mobile at an ever
increasing pace. Data access, devices, applications, security and
connectivity solutions must be explored in great detail to ensure
business viability. WAP, HomeRF, WiFi, wireless Ethernet, broadband,
fixed wireless and more will be featured in this zone.

- OEM and International Components manufacturers -- Technology vendors and
channel members have been building relationships at COMDEX for 23 years.
As technologies converge and emerge, COMDEX will continue to be fertile
ground for new partnerships that will drive new solutions.

Our COMDEX Fall tradeshow is a five-day tradeshow we hold in Las Vegas in
November of each year. Although we offer other COMDEX shows, COMDEX Fall is the
single tradeshow that brings the entire IT industry together. COMDEX Fall has
international appeal. It includes a large number of country- and region-
sponsored pavilions designed to introduce attendees to the products and
technologies from their local regions. In 2001, it was attended by approximately
21,000 international attendees. In total, COMDEX Fall 2001 was attended by more
than 1,700 exhibitors occupying 630,000 square feet of exhibitor space and over
125,000 attendees. In 2001, exhibitors for COMDEX Fall included: Microsoft
Corporation, Toshiba Corporation, Intel Corporation, Electronic Data Systems
Corporation, Philips Electronics N.V., Matsushita Electric Industrial Co., Ltd.
(owner of the Panasonic brand), and Xerox Corporation.

Despite a recovery in 2000, our COMDEX Fall tradeshow experienced a decline
in revenues, exhibit space rentals and attendees in 2001, 1999 and 1998. We
believe that the declines in 1999 and 1998 were due primarily to the
consolidation of IT vendors, adverse economic conditions in Asia, the
commoditization of personal computers (which were a focus of COMDEX Fall in the
1990's) and the significant shift in the IT industry away from mainframe and
personal computing and towards networks, wireless communications and the
Internet. We believe that the declines in 2001 were due primarily to adverse
conditions in the IT industry and the events of September 11th and their effect
on travel.

NETWORLD+INTEROP

Our NetWorld+Interop tradeshows are our largest branded vertical events.
They focus on the rapidly growing and converging fields of computer networking,
the Internet and telecommunications, although our shows outside the United
States also address broader aspects of the IT industry.

Our largest NetWorld+Interop tradeshow is held each year in Las Vegas and,
in 2001, was the second largest IT tradeshow in the United States when measured
by revenue from exhibit space rentals. In 2001, our owned and operated
NetWorld+Interop events generated approximately 40% of our revenues. In 2001,
our NetWorld+Interop tradeshow in Las Vegas had approximately 850 exhibiting
companies occupying over 518,000 net square feet of exhibit rental space and
approximately 61,000 attendees.

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NetWorld+Interop has always focused on new and emerging networking
technologies. We are continuing this tradition by offering at our
NetWorld+Interop 2001 events conferences highlighting the construction of new
public networks with integrated voice/data/video delivery systems and the
emergence of new embedded networks with software that can be used to update the
network's circuits and chips remotely without physical upgrade.

Each NetWorld+Interop tradeshow in the United States features InteropNet, a
live, multi-platform, vendor-sponsored network that interconnects exhibitors and
attendees to one another and to the Internet. Exhibitors at our 2001
NetWorld+Interop tradeshows included: Novell, Inc., Lucent Technologies, Inc.,
Computer Associates International, Inc., Microsoft Corporation and Nortel
Networks Corporation.

SEYBOLD SEMINARS

Our Seybold Seminars are vertical events that target the latest
technologies and products, design tools and applications for web and desktop
print publishing. We hold our largest Seybold Seminars event each fall in San
Francisco. In 2001, our Seybold Seminars in San Francisco had approximately 200
exhibiting companies occupying over 95,000 net square feet of exhibit space and
approximately 22,000 attendees. In 2001, we added a one-day Seybold Summit to
Seybold San Francisco. The Summit is an educational program designed to help
professionals comprehend the future of information design production, delivery
and new tools to help them accomplish their goals and make money. We also hold a
Seybold Seminars event on the east coast in the first half of each year. In 2002
we moved this event to New York from Boston. Major exhibitors at the Seybold
Seminars events include Apple Computer, Inc., Adobe Systems Incorporated, Intel
Corporation and Macromedia, Inc.

JAVAONE

We believe our JavaOne event is the largest software developer conference
in the world and the premier source of technical education on the latest
developments for the Java technology platform. Attendees at JavaOne are
typically either independent or enterprise software developers. JavaOne is
unlike our other events in that exhibitors are invited by Sun Microsystems, Inc.
to participate in the conference. As a result, most of our revenue from JavaOne
is from conference fees, with over 20,000 attendees at our 2001 event. Our
secondary revenue is derived from sales of sponsorships and exhibitor space fees
with 332 exhibitors for 2001. Exhibitors at JavaOne 2001 included: Apple
Computer, Inc., Fujitsu Software Corporation, Hewlett-Packard Company-Network
Services, International Business Machines Corporation and Motorola. In November
2001, we held our first JavaOne conference outside the United States in
Yokohama, Japan.

We own and produce the JavaOne event under an exclusive license agreement
from Sun Microsystems, the inventor and developer of Java technology, which
expires in July 2004. See "-- Trademarks and Licenses".

STUDIOS

Our Studios division, Key3Studios, produces a wide range of events in the
United States and international markets. These events include technical, sales,
marketing and educational conferences, road shows, seminars, corporate meetings,
exhibitions, trade shows and executive forums. By working as a "strategic
marketing partner", Key3Studios helps its clients penetrate new markets, create
and develop community building activities, build brand recognition and educate
and build awareness among their most important customers and buying prospects.

In 2001, Studios clients included Intel Corporation, Sun Microsystems,
Bluetooth SIG, RealNetworks, Inc., Interwoven, Inc., Microsoft Corporation, Kana
Communications, Inc., Mobius (formerly Softbank Venture Forum), Foundry Networks
and WebCT.

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VON CONFERENCES AND SIP SUMMITS

In September 2001, we acquired two event brands from pulver.com: Voice on
the Net (VON) Conferences and Session Initiation Protocol (SIP) Summits.
pulver.com is considered one of the industry leaders in the networking and
initiation protocol communications sectors. There are six VON Conferences around
the world each year, which focus on the convergence of the telecom and Internet
industries. There are currently two SIP Summits each year. SIP is a signaling
protocol used for Internet conferencing, telephony, presence, events
notification and instant messaging.

NGN AND BCR

In September 2001, we acquired the Opticon, VoiceCon, Next Generation
Networks (NGN) and Next Generation Ventures conferences and tradeshows and
Business Communications Review (BCR) magazine from BCR Enterprises, Inc. and
McQuillan Ventures. The events focus on computer, optical, voice and other types
of networking technology. Business Communications Review magazine is a leading
magazine for enterprise network managers and other communications professionals
that provides analysis of networking technology, trends, management issues,
pricing, and regulation.

INTERNATIONAL EXPOSITIONS

Internationally, we have two primary methods of operation. We own and
operate some of our largest international events and operate the others as
international contract events. We own and operate the NetWorld+Interop events in
France and Japan and three COMDEX events in Canada. In addition, we owned, but
did not operate, a COMDEX event in Mexico in 2001 although we have terminated
our contracts for this event and another COMDEX event in Argentina in 2002. We
also own and operate the Technology in Government Week event in Ottawa, Canada.
We run our owned and operated international shows essentially in the same manner
as our U.S. shows, although we modify our offerings and procedures to fit the
local environment.

The arrangements for our international contract events differ by event, but
have some common characteristics. Typically, we have no equity interest in these
events, but instead receive a guaranteed minimum fee and a portion of the
profits above agreed benchmark amounts. We license the brands to the foreign
operator and provide it with branding, sales and marketing services, but we
usually do not have a direct management role. The contracts typically give each
party the right to terminate after one year's notice, and upon termination the
license is revoked and both parties are subject to a prohibition on competing
within the market for two years.

On June 15, 2001, our wholly owned subsidiary, Key3Media Events, completed
its acquisition of all of SOFTBANK America Inc.'s interest in SB Forums. SB
Forums owns and operates tradeshows and conferences in Japan, including the
NetWorld+Interop Tokyo tradeshow, one of the largest IT tradeshows in Japan,
which takes place in June each year, and several custom events scheduled
throughout the year. For more information about these events, refer to the
section entitled "Related Party Transactions -- Acquisition of SB Forums" in our
definitive proxy statement.

In late November 2001, we announced the acquisition of ExpoNova Events &
Exhibitions, Scandinavia's premier IT tradeshow organizer. Founded in 1996,
ExpoNova has grown rapidly to become a leading organizer throughout Scandinavia
for the IT, telecom and marketing sectors. ExpoNova currently produces events
including COMDEX Nordic, PubTech/Ondemand, Information Management, Business
Software, Nordic Telecom Week, and other technology-oriented exhibitions and
conferences. The transaction closed in January 2002. We have also agreed to
purchase IW Nordic Expo Ab, an affiliated Sweden-based company that will
continue to produce Internet World Sweden and Internet World Norway. There are
13 ExpoNova events currently produced in Scandinavia each year.

In November 2001, we announced we were working with the U.S. Department of
Commerce to develop several programs to assist U.S.-based IT companies
interested in doing business overseas. Since 1995, the U.S. Commercial Service
has brought thousands of international buyers representing more than 100
countries to

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our tradeshows all over the world. The U.S. Commercial Service matches our event
exhibitors with international buyers in a number of ways. Before the show,
exhibitors fill out detailed questionnaires about their business and potential
partners they are seeking. This information is then entered into an online
matchmaking system called COMDEX Connect, which organizes the data and pairs
companies as business objectives match.

MANAGEMENT OF EVENTS

We manage all of our owned and operated events on a decentralized basis. We
assign a general manager for each event who is responsible for all aspects of
the event including the profitability of the event. Each event has dedicated
employee teams consisting of both direct reports and shared centralized
resources in each of the following areas:

- sales;

- marketing communications and media; and

- operations.

The employee teams report directly to the general manager for the event as
well as to the heads of their respective departments.

SALES

Our events provide a face-to-face forum for business-to-business sales,
business marketing, and professional education for the IT industry. We maintain
three groups of sales professionals to maximize event revenue in each of these
areas.

Exhibit Space Rentals. We maintain a staff of dedicated sales
professionals who report directly to our event general managers. These
professionals attend their respective events to ensure client satisfaction and
to accept reservations for exhibit space at the following year's event by
participating exhibitors. Historically, between 60% and 70% of the ensuing
year's exhibit space is contracted at the current year's event, although in 2001
the percentages were lower due to the difficulties being experienced in the IT
industry and the events of September 11th. Throughout the year, our exhibition
sales staff is responsible for encouraging exhibitor upgrades, reducing
exhibitor churn and ensuring timely payment of remaining installments. Our
exhibition sales staff also prospects for new clients and sells remaining
exhibit space using telemarketing or, for larger customers, in-person sales
calls.

Advertising and Sponsorships. Our event marketing staff is responsible for
selling advertising and sponsorships to participating exhibitors at our events,
including banner advertising, brochure and program advertising, website
advertising, and keynote, luncheon and other event sponsorships. This group is
centralized and individual sales professionals are assigned to one or more
events.

Conferences. We also have a sales team that is responsible for selling the
special conferences we provide at our events directly to the attendees. A team
of conference sales professionals is dedicated to each event for the four months
preceding that event.

MARKETING COMMUNICATIONS AND MEDIA

Our marketing department oversees all aspects of creating and delivering
brand and product messaging including creative production, direct response
marketing, public relations and market research. This group works with all forms
of media presentation.

Direct Response Marketing Group. Our direct response marketing group's
goal is to maximize event attendance while ensuring attendee quality. Using
proprietary and other direct marketing lists, this group develops mailing and
telemarketing lists for our conference salespersons.

9

Conference Content Staff. Our content staff is responsible for developing
the themes and topics comprising conference programs at all of our events,
including the recruitment of all speakers and other panel participants.

Creative Production. Our creative production staff works with our event
general managers and content staff to create the layout of and produce all
event-related publications.

OPERATIONS

Our operations staff is responsible for all event logistics, including the
activities described below. Our operations group also handles exhibitor contract
administration with respect to our responsibilities in each of these areas.

Venue Management. Our venue management group contracts with hotels or
convention centers for exhibition space and meeting rooms. This group is
responsible for identifying appropriate venues, negotiating per-square-foot
rates and for ongoing contract maintenance. We have venues under contract for
COMDEX Fall and NetWorld+Interop Las Vegas for each of the next three years.

Vendor Management. We maintain agreements with several professional
vendors, including florists, booth architects and designers, travel agencies and
moving companies who assist our exhibitors in creating and transporting their
exhibits. We collect a commission each time an exhibitor uses one of our
preferred vendors. Our vendor management group is primarily responsible for
facilitating introductions between our vendors and exhibitors and collecting
fees from chosen vendors.

Housing. We collect commissions for rooms rented by event participants in
surrounding area hotels and also, to a far lesser extent, purchase local hotel
rooms in advance at discounts and resell them. Our housing group is responsible
for negotiating all housing rental and commission rates and guaranteeing room
availability for the length of the event.

Registration. Our registration group tracks the number and other
characteristics of exhibitors, attendees and paid conference attendees,
including tutorial participants.

Logistics. Our logistics staff runs the floor at all events, including
setting up, maintaining and closing down the event. They are present at every
event to handle floor space allocation issues and interface directly with
vendors, exhibitors and venue staff to ensure the smooth running of any event.

Media Specialists. We also maintain an audio-visual staff to set up
conference and other meeting rooms with appropriate media.

KEY VENDORS

We enter into contracts with our third party suppliers. Under these
contracts, we usually agree to promote the services offered by the suppliers to
our exhibitors in exchange for the suppliers' agreement to give us a certain
percentage of their revenue from our exhibitors. The size of the commissions we
receive varies between 10% and 25%.

In 2001, we used Freeman Decorating Co. ("Freeman") and Champion Exposition
Services, Inc. ("Champion") as our principal "decorators". In the tradeshow
industry, decorators offer to provide various services to us and to exhibitors
to assist them create, set up, maintain and remove their exhibits. We recommend
and promote our decorator's services to our exhibitors at most of our United
States and Canadian events. The services that our decorators provide to us and
to exhibitors include shipping, installation and dismantling of booth structures
and contents, furniture and fixture rental, trash removal and similar services.
Freeman was the decorator for our 2001 COMDEX events in North America and for
our "Government in Technology Week" in Canada, and Champion was the decorator in
2001 for our NetWorld+Interop, JavaOne, and Seybold Seminars events in the
United States.

10

We have recently entered into an agreement with GES Exposition Services,
Inc. under which it will be the decorator for our COMDEX events in the United
States and Canada for a two year period beginning with COMDEX Fall 2002.

TRADEMARKS AND LICENSES

Because we have developed strong brand awareness for our principal events,
we believe our trademarks and service marks are critical to our success. We rely
on trademark law, as well as licensing agreements, to protect our intellectual
property rights. We have registered our material trademarks in the United States
and in certain other key countries. For example, "COMDEX" is registered in the
United States and over 25 other countries. Effective trademark protection may
not be available in every country in which we operate.

As a result of an assignment made by Novell, Inc. in December 2001, we now
own the trademarks "NetWorld+Interop", "NetWorld" and "Interop". Prior to this
assignment, Novell owned the trademark "NetWorld", we owned the trademark
"Interop" and we shared with Novell the intellectual property rights to the
"NetWorld+Interop" trademark. In consideration for the assignment, we agreed to
pay Novell $500,000, half of which is payable in April and October of 2002. In
addition, we agreed to provide Novell with free booth and discounted overflow
space, marketing opportunities, and other benefits at a discount. Our agreement
with Novell expires on December 31, 2004, but we will retain ownership of the
"NetWorld+Interop" and "NetWorld" trademarks after any termination.

Sun Microsystems owns the trademarks "Java" and "JavaOne" and has licensed
them to us until July 2004. We own and operate the JavaOne conferences and are
entitled to all revenue from the conferences. Sun Microsystems occupies
substantial space at the conferences, helps secure sponsors, and is responsible
for the special conference content. We jointly own the attendee database. Our
current arrangement terminates after the conference in June 2004.

COMPETITION

The IT events industry is highly competitive and is characterized by low
barriers to entry. Although we believe we are the largest producer of events for
the IT industry in the United States when measured by revenue from exhibit space
rentals, we face competition from tradeshow management companies that operate in
other and more diverse industries, including the following companies:

- Deutsche Messe AG is one of the world's largest trade fair and exhibit
organizers. It owns and operates the CeBIT tradeshow held annually in
Hanover, Germany, which is the largest IT tradeshow in the world;

- CMP Media Inc., a subsidiary of United News & Media plc, publishes
Information Week, Internet Week and Computer Reseller News. Its
exhibition businesses include e-business expo and PC Expo;

- Advanstar Communications, Inc., publishes newspapers and magazines that
serve a variety of markets including the internet/e-business segment. It
manages 79 tradeshows and conferences in North America, Latin America,
Europe and Asia;

- IDG is a multi-national, multimedia publishing company focused on the
technology market. It produces more than 168 conferences and events in 35
countries;

- Reed Exhibit Companies, a subsidiary of Reed Elsevier plc, organizes over
470 tradeshows and consumer events in 29 countries;

- Penton Media, Inc., is a publishing company that produces more than 130
tradeshows and conferences throughout the world. It covers various
industries including IT and owns Internet World;

- DMG World Media, a wholly owned subsidiary of the Daily Mail and General
Trust plc, a FTSE 100 company, operates over 260 public and trade
exhibitions worldwide;

- VS&A Communications Partners is a private equity investor which owns
several trade show companies in a variety of industries;
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- VNU Expositions, Inc., a wholly owned subsidiary of VNU, operates more
than 50 trade shows around the world in a variety of industry segments;
and

- Other top show operators include PriMedia publishing and Hall-Erickson
Inc.

We also compete for advertising dollars with other forms of media,
including print publishing and the Internet. We must make our events more
attractive to exhibitors and attendees than the other alternatives available to
them or we will lose advertising dollars to our competitors.

CERTAIN FACTORS THAT MAY AFFECT OUR BUSINESSES

WE SERVE THE IT INDUSTRY, WHICH HAS RECENTLY EXPERIENCED DIFFICULTIES AND CAN
CHANGE RAPIDLY

All of our events currently serve vendors and customers in the IT industry.
Many participants in the IT industry have experienced declining revenues,
reduced or negative cash flows and declining share prices. Some industry
participants have announced lay-offs and other cost-cutting measures, and we
believe many others are implementing similar initiatives. If these or future
developments cause our exhibitors and attendees to reduce significantly their
tradeshow budgets and travel and entertainment expenses, our revenues and
results of operations will be affected adversely. The marketing decisions of
some of our larger exhibitors could also influence the decisions of other
exhibitors. Because most of our exhibitors are required to pay for their exhibit
space on a non-refundable basis six months before the event, exhibit space
rentals may not immediately reflect the full impact of a downturn. In addition
to its recent difficulties, the IT industry is a rapidly evolving industry in
which trends and preferences can shift quickly as new technologies and products
are introduced. If we fail in the future to identify and focus our events on the
most important emerging trends and preferences in the IT industry, it could
adversely affect our results of operations.

THE TERRORIST ATTACKS ON THE UNITED STATES HAVE NEGATIVELY AFFECTED OUR TRADE
SHOWS AND CONFERENCES AND ARE LIKELY TO CONTINUE TO DO SO IN THE FUTURE

On September 11, 2001, the United States was attacked by terrorists using
hijacked commercial airplanes. The United States and other countries have
responded with concerted action against the suspected terrorists. There have
been several cases of deliberate anthrax infection in the United States which
are also suspected to be terrorist attacks. These events and the ongoing
uncertainty they have created have adversely affected the economy in general and
the tradeshow and conference industry in particular. There has been a decline in
air travel and tradeshow and conference attendance due to, among other things,
the public's general reluctance to travel and fears concerning additional acts
of terrorism, as well as reduced operations by airlines due to, among other
things, decreased demands for air travel, new security directives and increased
costs. While we cannot predict how these events or any similar events that may
occur in the future will affect our business, results of operation or financial
condition, it is likely that our trade shows and conferences will be negatively
affected at least in the near future. Continued negative market conditions due
to acts of terrorism, any future occurrences of similar actions and potential
responsive actions by the United States and other countries that perpetuate or
aggravate the current climate of fear and uncertainty could cause more
disruption of our tradeshows and conferences.

THERE WAS A GENERAL DOWNTURN IN THE U.S. ECONOMY IN 2001

There was a general downturn in the U.S. economy in 2001, not only due in
part to the difficulties in the IT industry and the events of September 11th but
also due to other economic factors and conditions. If these trends continue or
become worse, they could adversely affect the ability and willingness of
exhibitors, attendees and advertisers to participate in our events and the
extent of that participation. This could materially and adversely affect our
business, results of operations and financial condition.

ALL OF OUR MAJOR DOMESTIC TRADESHOWS AND EVENTS HAD LOWER RESULTS IN 2001 THAN
IN 2000

Due in part to the adverse conditions and developments referred to above,
all of our major domestic tradeshows and events had lower revenues and
contributions to earnings in 2001 than in 2000. Exhibition

12

space rentals, conference participation, advertising and sponsorship,
commissions from third party service providers to our exhibitors, attendance and
resign rates were all generally down at these events in 2001. We expect these
trends to continue for an indeterminate time in the future. These trends
adversely affected our results of operations for 2001 and if they continue in
the future our business, results of operations and financial condition could be
adversely affected.

OUR REVENUES AND RESULTS DEPEND SIGNIFICANTLY ON A FEW IMPORTANT IT TRADESHOWS
THAT HAVE EXPERIENCED ADVERSE RESULTS IN RECENT YEARS

Historically, we have derived a significant portion of our revenues from a
few of our trade shows, and we expect that our reliance on these shows will
continue in the future. In 2001, we derived about 26% of our revenue from
tradeshows that we owned and operated under the COMDEX brand name and
approximately 22% from our COMDEX Fall tradeshow in particular. We also derived
approximately 40% of our revenue from our NetWorld+Interop tradeshows including
31% from our largest two tradeshows under this brand. Although we are seeking to
diversify our portfolio of tradeshows, our revenues and results of operations
depend substantially on the success of our COMDEX Fall and top two
NetWorld+Interop tradeshows. We had five major events that occurred during 2001:
JavaOne, COMDEX Spring, NetWorld+Interop Las Vegas, Seybold Seminars Boston and
COMDEX Fall. Compared to the prior year, paid attendance was down at JavaOne and
each of these events other than JavaOne experienced a decline in exhibit space
rentals, conference participation and attendees. Exhibit space rentals were down
slightly at NetWorld+Interop Las Vegas and Seybold Seminars Boston and by a
greater amount at COMDEX Spring and COMDEX Fall. Conference participation and
attendance fell more significantly at these five events. If these trends
continue in the future at our events, it will adversely affect our results of
operations.

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION

We have a significant amount of indebtedness. As of December 31, 2001, we
had $290.0 million of outstanding indebtedness represented by our 11.25% senior
subordinated notes, $80.0 million borrowed on a senior secured basis under our
senior bank revolving credit facility and the ability to borrow up to $38.2
million more under that facility, subject to certain conditions. This level of
indebtedness could have important consequences for our shareholders, including
the following:

- it may limit our ability to borrow money or sell stock for our working
capital, capital expenditures, debt service requirements or other
purposes;

- it may limit our flexibility in planning for, or reacting to, changes in
our business;

- we will be more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;

- it may make us more vulnerable to a downturn in our business or the
economy;

- the debt service requirements of our other indebtedness could make it
more difficult for us to make payments on our senior subordinated notes;

- a substantial portion of our cash flow from operations could be dedicated
to payments in respect of our indebtedness and would not be available for
other purposes; and

- there would be a material adverse effect on our business and financial
condition if we were unable to service our indebtedness or obtain
additional financing, as needed.

On November 15, 2001, Moody's Investor Service lowered the debt rating on
all of our outstanding debt and placed us under review for further possible
downgrades. Based on our discussions with Moody's, we expect that they will make
their decision with respect to any future downgrading before the end of the
second quarter of 2002. Moody's said this action reflected operational
underperformance and reduced forward guidance. Moody's said, among other things,
its review would focus on the impact of an increasingly weak advertising sector
and broader economic environment on our business. On September 27, 2001,
Standard & Poor's placed its rating on our Company on CreditWatch with negative
implications. Standard & Poor's said that this action
13

reflected their expectation that the operating environment for tradeshow and
event companies will worsen as a result of the September 11th attacks and will
exacerbate industry conditions that were already weak prior to the attacks.
These actions by Moody's and Standard & Poor's will adversely affect our ability
to borrow on favorable terms. Furthermore, this action may cause the share price
of our common stock to decrease.

RESTRICTIVE COVENANTS IN OUR SENIOR BANK REVOLVING CREDIT FACILITY AND THE
INDENTURE MAY RESTRICT OUR ABILITY TO PURSUE OUR BUSINESS STRATEGIES

Our senior bank revolving credit facility and the indenture under which our
senior subordinated notes were issued limit our ability, among other things, to:

- incur additional indebtedness or contingent obligations;

- pay dividends or make distributions to our stockholders;

- repurchase or redeem our stock;

- make investments;

- grant liens;

- make capital expenditures;

- enter into transactions with our stockholders and affiliates;

- sell assets; and

- acquire the assets of, or merge or consolidate with, other companies.

In the event we are unable to comply with the financial covenants in our
senior bank revolving credit facility and are unsuccessful in obtaining waivers
with respect to our noncompliance, our lenders would have the option to require
us to immediately repay all of our borrowings under the facility. We do not
currently have sufficient funds to make such a repayment. In addition, any
acceleration of the borrowings under our senior bank revolving credit facility
would be an event of default in respect of our senior subordinated notes and
could result in the acceleration of the maturity of those notes (although the
subordination provisions of the notes would require the prior payment of the
bank borrowings). We do not currently have sufficient funds to repay our senior
subordinated notes in full.

WE MAY ACQUIRE OTHER BUSINESSES AND THESE COULD PRESENT DIFFICULTIES THAT COULD
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

We may selectively acquire other businesses, which may or may not be
focused on the IT industry and business-to-business market. As a result of these
acquisitions, we may:

- have difficulty assimilating their customers and personnel, particularly
if the acquired events are not focused on the IT industry;

- face difficulties related to the significant strain on our financial,
management and operational resources, including the distraction of our
management team in identifying potential acquisition targets, conducting
due diligence and negotiating acquisition agreements;

- pay too much, especially if our industry consolidates and an active
bidding process develops; and

- borrow additional funds under our senior bank credit facility or
otherwise if we use cash to make acquisitions.

Some or all of the foregoing could adversely affect our results of
operations, financial condition and/or cash flows.

14

WE MAY EXPAND INTO NEW BUSINESSES IN WHICH WE HAVE NO EXPERIENCE AND OUR
INEXPERIENCE MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

We may expand our event portfolio to include events focusing on industries
other than the IT industry. In addition, we may enter into non-event businesses.
We have no recent experience in producing events outside the IT industry and no
experience in businesses other than events. If we decide to pursue these
opportunities, we may not be successful and our revenue and results of
operations may be adversely affected.

OUR HISTORICAL INFORMATION MAY NOT BE INDICATIVE OF OUR FUTURE RESULTS

We were a division of Ziff-Davis Inc. until August 18, 2000 and we have
operated as an independent public company only since that date. The historical
financial information included in this Annual Report does not reflect what our
results of operations, financial position and cash flows would have been if we
had been a separate stand-alone entity during the periods presented and may not
be indicative of our future results.

THE IT EVENTS INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY LOSE EXHIBITORS,
ATTENDEES AND ADVERTISING AND SPONSORSHIP REVENUE TO OUR COMPETITORS, WHICH
WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

The IT events industry is highly competitive and is characterized by low
barriers to entry. We compete with various established tradeshows, including
those produced by the Deutsche Messe AG, (CeBIT); CMP Media, Inc., a subsidiary
of United News and Media plc, produces PCExpo; Advanstar Communications, Inc.
(Telexpo Brazil); IDG World Expo, a division of International Data Group
(Comnet) Reed Exhibition Companies; and Penton Media, Inc. (Internet World).
Some of our competitors are larger and have greater financial resources than we
do. We also face competition from a growing number of new small and mid-sized
regional events and events focusing on particular segments of the IT industry.
At most tradeshows, participation by key exhibitors is important because it
helps attract other exhibitors and attendees. If we were to lose any of our key
exhibitors to our competitors, it could make our events less attractive to other
exhibitors and attendees. We also compete for advertising dollars with other
forms of media, including print publishing and the Internet. We must make our
events more attractive to exhibitors and attendees than the other alternatives
available to them or our business will suffer.

IF WE CANNOT RETAIN KEY PERSONNEL, IT MAY ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS

Our success depends to a significant extent on the continued service of key
management personnel including Fredric D. Rosen and Jason E. Chudnofsky. The
loss or interruption of the services of our senior management personnel or the
inability to attract and retain other qualified management, sales, marketing and
technical employees could also have an adverse effect on our financial condition
or results of operations. We do not have any key man insurance.

BECAUSE IT OWNS ALMOST A MAJORITY OF THE VOTING POWER OF OUR OUTSTANDING
SHARES, SOFTBANK MAY BE ABLE TO CONTROL THE ELECTION OF OUR DIRECTORS AND THE
OUTCOME OF ANY OTHER STOCKHOLDER VOTE

SOFTBANK owns almost a majority of the voting power of our outstanding
shares. As long as SOFTBANK owns almost a majority of the voting power of our
outstanding shares, other stockholders may be unable to affect the outcome of
stockholder voting. SOFTBANK may be able to elect our entire board of directors
and generally to determine the outcome of all corporate actions requiring
stockholder approval. As a result, SOFTBANK may be in a position to continue to
control all matters affecting us, including:

- a change of control, including a merger;

- the acquisition or disposition of assets by our company;

- further issuances by us of common stock or other securities;

- our incurrence of debt; and

- the payment of dividends on our common stock.

15

THE SEASONALITY OF OUR REVENUE MAY ADVERSELY AFFECT THE MARKET PRICES FOR OUR
SHARES

Although we receive the majority of fees we generate from our events in
advance, we record them as revenue only when the events occur. Because of the
timing of our largest tradeshows, our revenue is seasonal. Our revenue is
usually higher during the second and fourth quarters of each calendar year,
primarily because our largest NetWorld+Interop event occurs in the second
quarter and our largest COMDEX event occurs in the fourth quarter. This
seasonality causes our operating results to vary considerably from quarter to
quarter and these fluctuations could adversely affect the market price of our
common stock.

WE ARE SUBJECT TO RISKS RELATED TO INTERNATIONAL OPERATIONS

We operate a multinational business and, accordingly, we are subject to
risks inherent in international operations, including:

- the difficulty of enforcing agreements and collecting receivables through
some foreign legal systems;

- fluctuations in the exchange rates between the U.S. dollar and the
currencies of the foreign countries in which we operate;

- tax rates in some foreign countries may exceed those of the United States
and foreign earnings may be subject to withholding requirements or the
imposition of tariffs, exchange controls or other restrictions; and

- general economic and political conditions in the countries in which we
operate may have an adverse effect on our operations in those countries
or on our ability to generate exhibitors from those countries at our
domestic tradeshows and conferences.

We do not hedge our foreign currency exchange rate risk. As we continue to
expand our business globally, our success will depend, in part, on our ability
to anticipate and effectively manage these and other risks.

ITEM 2. PROPERTIES

Our headquarters are in Los Angeles, California. We also have office space
in Massachusetts, Northern California, Illinois, Japan, France, Australia,
Canada and Sweden. We lease all of our material offices. We believe that our
existing space is adequate to meet our needs for the immediate future and future
growth can be accommodated by leasing additional or alternate space.

ITEM 3. LEGAL PROCEEDINGS

In March 2000, our wholly owned subsidiary Key3Media Events, Inc.
("Key3Media Events") sued GES Exposition Services, Inc. ("GES") for breach of
contract in the United States District Court for the District of Massachusetts.
We previously used GES as the decorator for all of our major events. We believed
that GES was withholding commissions that it was required to pay to Key3Media
Events under its decorator contract. GES raised a number of counterclaims in
which it alleged that Key3Media Events owed it money and/or damages. The
litigation was settled in July 2001. As a result of this settlement, advance
payments previously received from GES that were recorded as deferred revenue
(included in other long-term liabilities) and a net receivable amount from GES
were eliminated from our balance sheet. In addition, the settlement resulted in
an increase in other income (expense), net for the second quarter of 2001 of
approximately $6.7 million. A stipulation of dismissal with prejudice evidencing
the companies' agreement to end the litigation was filed with the court on
October 19, 2001.

On August 31, 2001, Key3Media Events provided notice of termination of its
then existing leased office space in Needham, Massachusetts to the landlord of
the existing space. The annual rental payments (net of operating expenses) for
the prior space were approximately $1.4 million. We entered into a lease for new
office

16

space in Needham and relocated to our new offices on October 1, 2001. We
estimate that our total annual occupancy costs under the new lease will be
approximately $1.7 million greater than those under the prior lease. The
landlord of the prior office space has taken the position that Key3Media Events
is in breach of the lease agreement and that it did not have the right to
terminate the lease. On or about November 6, 2001, Interface
Group -- Massachusetts, LLC, the landlord under the prior lease, sued Key3Media
Events in the Superior Court, County of Norfolk, Commonwealth of Massachusetts
for breach of contract, breach of the implied covenant of good faith and fair
dealing and violations of Mass. Gen L. c. 93A (unfair and deceptive acts and
practices). The landlord has requested payment of rent for the remainder of the
term of the lease in an amount in excess of $6.5 million, treble damages,
attorneys' fees, costs and expenses, pre-judgment interest and costs of suit. In
December 2001, Key3Media Events filed an answer and counterclaim to the
Interface complaint and a motion to dismiss the Mass. Gen L. c. 93A claim. The
counterclaim included causes of action for (i) breach of contract, (ii) breach
of implied covenant of good faith and fair dealing, (iii) tortious interference
with business relationship, (iv) trespass, (v) breach of the covenant of quiet
enjoyment and constructive eviction, (vi) violation of Mass. Gen L. c. 93A,
(vii) a request for declaratory relief, (viii) civil conspiracy and (ix) fraud.
In February 2002, Interface filed an opposition to motion to dismiss and an
amended complaint alleging breach of contract, breach of implied covenant of
good faith and fair dealing and violations of Mass. Gen L. c. 93A. Also in
February 2002, Key3Media Events filed an answer and counterclaim to the amended
complaint and a motion to dismiss the Mass. Gen L. c. 93A claim and Interface
filed a motion to dismiss counts (iii), (v), (vi), (viii) and (ix) of the
counterclaim. The case is in discovery.

Key3Media Events is the plaintiff and counter-defendant in a case filed
October 18, 2000, in the Eighth Judicial District Court, Clark County, Nevada.
The suit arises out of a dispute between Key3Media Events on the one hand, and
the Venetian Casino Resort, LLC, and Interface Group-Nevada, Inc., on the other
hand, concerning COMDEX Fall. Key3Media Events initiated the action, seeking
damages and injunctive relief against defendants for their alleged actual and
threatened breaches of lease, meeting space, and credit extension agreements in
connection with the COMDEX Fall 2000 show. The Venetian and Interface Group-
Nevada counter sued for compensatory damages "in excess of $10,000" based on an
asserted breach of an alleged oral agreement to host keynote speeches at the
Venetian, asserted breach of an alleged agreement not to sublease certain
facilities, intentional misrepresentation, and breach of the implied covenant of
good faith and fair dealing. The counterclaims include a prayer for punitive
damages. On October 19, 2001, the counter-defendants specified their alleged
damages in their supplemental response to plaintiff's third request for
production of documents. The response alleged damages of over $3.0 million
arising from breaches related to Comdex Fall 2000 and over $2.0 million arising
from breaches related to Comdex Fall 2001. The case is in discovery.

On or about December 27, 2001, Key3Media Events filed a complaint against
Krause International, Inc., E.J. Krause & Associates (Argentina), Inc., and E.J.
Krause & Associates, Inc. (collectively, "Krause"), with respect to Krause's
management of COMDEX Argentina 2001. The complaint includes causes of action for
breach of contract, misrepresentation and fraud, fraudulent misrepresentation,
negligent misrepresentation, and tortious interference with business relations
and seeks actual damages, punitive damages, interest, attorneys' fees and costs.
On or about February 8, 2002, Krause answered the complaint, and filed a
counter-claim alleging breach of contract, unjust enrichment, and an additional
claim for breach of contract. The counter-claim seeks damages in the amount of
$451,983 plus interest, and reasonable attorneys' fees and costs. The parties
have subsequently filed various responsive documents including a reply to the
counterclaim by Key3Media Events and a motion to dismiss by Krause. On or about
March 27, 2002, counsel for Krause requested permission to amend its
counter-claim to add E.J. Krause y Asociados Argentina S.R. L., an Argentine
corporation owned in part by Reed Elsevier Overseas BV, as a third party, to add
additional counter-claims and to request compensatory damages of not less than
$10.5 million and punitive damages of $10.0 million.

On or about February 4, 2002, Key3Media Events filed a complaint against
Krause International, Inc., E.J. Krause and Associates, Inc. and E.J. Krause de
Mexico SA de CV (collectively, "Krause"), with respect to Krause's management of
COMDEX Mexico for the years 2001 and 2002. The complaint alleges breach of oral
contract, breach of written contract, declaratory relief, breach of covenant of
good faith and fair dealing,

17

breach of fiduciary duty, fraud, negligent misrepresentation, and violation of
California Business and Professions Code Section 17200 and seeks actual damages,
punitive and exemplary damages in an amount of at least $10.0 million,
attorneys' fees and costs, disgorgement and interest. On or about March 12,
2002, Krause filed a motion to dismiss the complaint on the grounds of improper
venue or, alternately, to change venue to the United States District Court for
the District of Maryland.

In connection with its spin-off from Ziff-Davis, we and our subsidiaries
have received an indemnification from Ziff-Davis against all liabilities not
related to our businesses, including the class actions and derivative litigation
filed against Ziff-Davis discussed in our Registration Statement on Form S-1
(No. 333-36828).

We and our subsidiaries are subject to various other claims and legal
proceedings arising in the normal course of business. Our management believes
that the ultimate liability, if any, in the aggregate will not be material to
our financial position, results of operations or cash flows.

ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 2001.

EXECUTIVE OFFICERS OF KEY3MEDIA GROUP, INC.

Set forth below are the name, age, present title, principal occupation, and
certain biographical information for the past five years for our executive
officers, all of whom have been appointed by and serve at the pleasure of our
board of directors.

FREDRIC D. ROSEN, 58

Fredric D. Rosen was hired by Ziff-Davis in March 2000 to become our
Chairman and Chief Executive Officer. In the 18 months preceding his employment
by Ziff-Davis, he was a consultant and private investor. Mr. Rosen was
previously President & Chief Executive Officer of Ticketmaster Group, Inc., a
position he held for more than 16 years, from 1982 to 1998. Mr. Rosen is also a
member of the board of directors of Playboy.com, Inc., a private company.

JASON E. CHUDNOFSKY, 58

Jason E. Chudnofsky is the Vice Chairman and Chief Operating Officer of
Key3Media Group, Inc. and serves as the Vice Chairman, President and the Chief
Executive Officer of Key3Media Events. Mr. Chudnofsky has worked at Key3Media
Events since 1998. He has been a director of Ziff-Davis since 1998. From 1988 to
1997, Mr. Chudnofsky was President of the Trade Show Division of The Interface
Group which was renamed SOFTBANK COMDEX when that division was acquired by
SOFTBANK in 1995. In addition, Mr. Chudnofsky served as President and Chief
Executive Officer of the Sands Expo and Convention Center Division from 1990 to
1995. Mr. Chudnofsky has over 15 years of experience in the events, tradeshow
and conference industry. Mr. Chudnofsky is a member of the board of directors of
Tech Corporation, Folio Exhibits, Inc., and Quantum Clicks, Inc.

PETER B. KNEPPER, 53

Peter B. Knepper was hired by Ziff-Davis in March 2000 to be our Executive
Vice President and Chief Financial Officer. In the year preceding his employment
by Ziff-Davis, he was a private investor and consultant providing strategic
planning and financial management services. Mr. Knepper was previously Senior
Vice President and Chief Financial Officer of Ticketmaster Group, Inc., a
position he held for more than ten years, from 1988 to 1998.

18

NED S. GOLDSTEIN, 46

Ned S. Goldstein was hired by Ziff-Davis in March 2000 to be our Executive
Vice President and General Counsel. In 1998, Mr. Goldstein co-founded The
Etechnology Companies, L.L.C. ("Etech"), a consulting, investment and lobbying
firm specializing in new economy companies and issues. Before co-founding Etech,
Mr. Goldstein was previously Senior Vice President and General Counsel of
Ticketmaster Group, Inc., a position he held for more than 11 years, from 1987
to 1998. Mr. Goldstein is a member of the board of directors of M.Cam, Inc. a
private company specializing in intellectual property valuation.

ROBERT PRIEST-HECK, 35

Robert Priest-Heck is the Chief Operating Officer of our subsidiary,
Key3Media Events, Inc., formerly ZD Events. Mr. Priest-Heck has worked at
Key3Media Events, Inc. since 1998 and has served in a variety of positions,
including Executive Vice President of Operations and Director of International
Operations. Prior to joining Key3Media Events, Mr. Priest-Heck held a variety of
positions at Ziff-Davis and its subsidiaries and held management positions with
Hyatt Hotels.

EUGENE L. COBUZZI, 45

Eugene L. Cobuzzi was named as our Executive Vice-President of Operations
and Strategic Planning in January of 2002. Mr. Cobuzzi had been a Senior
Vice-President of Key3Media Events, Inc., focused on company operations, major
vendor relationships, and mergers and acquisitions since January of 2001. Before
joining our company, Mr. Cobuzzi developed new business opportunities in the
digital music distribution space for Real Networks. Prior to that, Mr. Cobuzzi
spent 15 years at Ticketmaster Corporation in a variety of executive positions
including Chief Operating Officer and director.

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

Information relating to the principal market in which our common stock is
traded and the high and low sales prices per share for each full quarterly
period since the common stock commenced trading on the New York Stock Exchange
on August 21, 2000 is set forth below. As of March 18, 2002, there were
approximately 349 holders of record of our common stock.

Our common stock commenced trading on the New York Stock Exchange under the
symbol "KME" on August 21, 2000. Prior to that date, there was no public market
for our common stock. The following table sets forth, for the periods indicated,
the high and low closing prices per share for our common stock as reported by
the Consolidated Tape Association:

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

(1) From August 21 to September 30, 2000

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During 2000 and 2001, no dividends were declared. Our board of directors
does not intend to pay any dividends in the foreseeable future. Instead, we will
retain any future earnings to finance the operation and expansion of our
business. In addition, our ability to pay dividends in the future is restricted
by the terms of our credit facility and senior subordinated notes.

CONVERTIBLE PREFERRED STOCK TRANSACTIONS

On November 27, 2001, we sold 1,000,000 shares of our Series A 5.5%
Convertible Redeemable Preferred Stock to the Invemed Catalyst Fund, L.P. for
$25.00 per share. On the same day we also sold 1,080,000 shares of our Series B
5.5% Convertible Redeemable Preferred Stock to ValueAct Capital Partners, L.P.,
ValueAct Capital Partners II, L.P., ValueAct Capital International, Ltd. and
William M. Sams for $25.00 per share. On December 11, 2001, we sold an
additional 300,000 shares of our Series B preferred stock to Trinity Fund, Ltd.
and the Spirit Fund, Ltd., in exchange for $10.0 million aggregate principal
amount of our 11.25% senior subordinated notes due 2011. For purposes of this
exchange, the senior subordinated notes were valued at $7.5 million and the
Series B preferred stock was issued for $25.00 per share. On December 19, 2001,
we sold an additional 600,000 shares of our Series B preferred stock, using
Allen & Company as placement agent, for $25.00 per share to the following
purchasers: Levco Alternative Fund, Ltd., Purchase Associates, L.P., Cascade
Investment, L.L.C., Trinity Fund, Ltd., Spirit Fund, Ltd., Bedford Oak Partners,
LP, Chilton QP Investment Partners, L.P., Chilton International, L.P., Chilton
Opportunity International, L.P., Chilton New Era Partners, L.P., Chilton New Era
International, L.P., and The Gabelli Convertible Securities Fund, Inc.

In the aggregate, we raised $67.0 million in cash from the sales of our
convertible preferred stock and exchanged $10.0 million aggregate principal
amount (valued at $7.5 million for purposes of the exchange) of our senior
subordinated notes for shares of our convertible preferred stock. All of the
sales of our convertible preferred stock and the exchange were accomplished in
private placements exempt from registration requirement of the Securities Act of
1933 pursuant to section 4(2). The terms for Series A and Series B preferred
stock are identical. The liquidation preference is $25.00 per share plus accrued
but unpaid dividends, which accrues at the rate of 5.39% per annum prior to
November 27, 2002 and at a rate of 5.5% after November 27, 2002, payable
quarterly commencing on February 27, 2002 when, as and if declared by our board
of directors. However, if all or any portion of any quarterly dividends is not
paid, then the liquidation preference will increase by the amount of such unpaid
dividend per share. In addition to the quarterly dividend, the holders of
preferred stock will share equally in any dividends declared or paid to holders
of our common stock and are entitled to vote on all matters on which holders of
our common stock are entitled to vote on an as converted basis. Unless
previously redeemed, both the Series A and Series B preferred stock are
convertible into shares of our common stock at the option of the holder of
convertible preferred stock at any time. Each share of convertible preferred
stock will be convertible into the number of shares of common stock equal to the
adjusted liquidation preference divided by the conversion price, in each case
determined as of the conversion date. The adjusted liquidation preference is the
sum of (i) the liquidation preference determined as of the conversion date plus
(ii) (A) the unpaid dividends accrued to such convertible preferred stock, if
not already added to the liquidation preference, multiplied by (B) a fraction
the numerator of which is the conversion price determined as of such conversion
date and the denominator of which is the last closing price for the common stock
on the last trading day before the conversion date; provided, however, that in
the case of any mandatory conversion on or prior to November 27, 2002, for
purposes of the foregoing, the liquidation preference shall be deemed to be
$26.375 per share and there shall be deemed to be no accrued dividends.
Initially, the conversion price is $5.55, per share but subject to anti-dilution
adjustments.

AUTOMATIC CONVERSION

On November 27, 2011, each share of Series A and Series B convertible
preferred stock will automatically convert into the number of shares of common
stock equal to the adjusted liquidation preference divided by the lesser of the
then current conversion price or the current market price of our common stock,
in each case determined as of such date.

20

MANDATORY CONVERSION

At any time after the volume-weighted average closing price of the common
stock trades at or above 150% of the then current conversion price for 60
consecutive trading days, we may mandatorily convert each share of Series A or
Series B convertible preferred stock into the number of shares of common stock
equal to the adjusted liquidation preference divided by the conversion price, in
each case determined as of the conversion date.

Except as provided in "Mandatory Conversion" above, we may not redeem the
Series A or Series B convertible preferred stock at our option prior to November
27, 2004. Thereafter, we may redeem the Series A and Series B convertible
preferred stock at our option, in whole or in part and from time to time, at the
declining redemption prices set forth in the applicable certificate of
designations, together with any accrued but unpaid dividends for the quarterly
dividend period in which the redemption date occurs.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with,
and are qualified by reference to, our audited consolidated and audited combined
financial statements and the notes thereto contained elsewhere in this Annual
Report. The selected financial data presented is for the five-year period ended
December 31, 2001. The consolidated statement of operations data for the years
ended December 31, 2001 and 2000 and the consolidated balance sheet data as of
such dates are derived from our consolidated audited financial statements for
such years, which have been audited by Ernst & Young LLP, independent auditors
and are included herein. The combined statement of operations data for the year
ended December 31, 1999 are derived from our audited combined financial
statements for such year, which has been audited by PricewaterhouseCoopers LLP,
our previous independent accountants, and are included herein. The combined
statement of operations data for the years ended December 31, 1998 and 1997 and
the combined balance sheet data as of December 31, 1999 and 1998 are derived
from our audited combined financial statements for those years, which have been
audited by PricewaterhouseCoopers LLP, but which are not included herein. The
balance sheet information as of December 31, 1997 is derived from our unaudited
combined financial statements, which are not included herein.

Our historical financial information may not be indicative of our future
performance as an independent company.

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

(1) Interest expense related to debts payable to Ziff-Davis and SOFTBANK for
fiscal year 1997 through August 2000. For the period September 2000 to June
26, 2001, interest expense related to our credit facility and debentures.
After June 26, 2001, interest expense related to our senior bank credit
facility and our unsecured senior subordinated notes.

(2) Represents gain on sale of Expo Comm.

(3) EBITDA represents income before taxes plus depreciation and amortization,
interest expense net of interest income and excluding any gain on the sale
of joint venture interest. EBITDA should not be considered as an alternative
to, or more meaningful than, operating income as determined in accordance
with GAAP, cash flows from operating activities as determined in accordance
with GAAP, or as a measure of liquidity. Our management believes EBITDA
provides meaningful additional information on our operating results and on
our ability to service our long-term debt and other obligations and to fund
our operations. Because EBITDA is not calculated in the same manner by all
companies, the representation herein may not be comparable to other
similarly titled measured of other companies.

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

The discussion below should be read in conjunction with our historical
audited consolidated and audited combined financial statements, the notes
thereto and the comparative summary of selected historical financial data
contained elsewhere herein. Certain reclassifications have been made to prior
period data to conform to current year presentations. Our historical results may
not be indicative of future results and we may engage in new or different
business activities and practices in the future. In addition to historical
information, the following discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors including those set forth under "Item 1 -- Business -- Certain Factors
that May Affect our Business" and elsewhere herein.

We utilize the term EBITDA in the following discussion. EBITDA represents
income before interest expense, net of interest income, taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to, or more
meaningful than, operating income as determined in accordance with GAAP, cash
flows from operating activities as determined in accordance with GAAP, or as a
measure of liquidity. Our management believes EBITDA provides meaningful
additional information on its operating results and on its ability to service
its long-term debt and other obligations and to fund its operations. Because
EBITDA is not

23

calculated in the same manner by all companies, the representation herein may
not be comparable to other similarly titled measures of other companies.

DEVELOPMENTS IN 2001

INDUSTRY DEVELOPMENTS

During 2001, our results of operations were adversely affected by the
continuing difficulties being experienced by participants in the IT Industry and
related reductions in IT marketing and travel budgets. In addition, on September
11, 2001, the United States was attacked by terrorists using hijacked commercial
airplanes. The United States and other countries responded with concerted action
against the suspected terrorists. There have also been several cases of anthrax
infection in the United States which are suspected to be acts of terrorism.
These events and the ongoing uncertainty they have created have adversely
affected the economy in general and the trade show and conference industry in
particular. There has been a decline in air travel and trade show and conference
participation and attendance due to, among other things, the public's general
reluctance to travel and fears concerning additional acts of terrorism and
reduced operations by airlines due to, among other things, decreased demand for
air travel, new security directives and increased costs. While we cannot predict
how the downturn in the IT industry, the terrorist attacks, any similar events
that may occur in the future or their consequences will affect our future
businesses, results of operations or financial condition, it is likely that our
events and results of operations will continue to be negatively affected by
these developments.

EXPENSE REDUCTION PROGRAMS

In response to the adverse impacts on our business described above, during
the second half of 2001 we initiated several cost reduction and expense
containment programs that will reduce our temporary employment costs, travel and
entertainment expenses and, most significantly, our total employment costs
through staff reductions. We may reduce our staff further as we complete the
restructuring and consolidation of our internal business information management
systems. We also reviewed and renegotiated significant service agreements with
vendors who provide production assistance at our events in areas such as
decoration, audiovisual and other production equipment. We believe our expense
reduction efforts to date will result in future annual savings in the range of
approximately $10 million to $15 million.

ACQUISITIONS

On June 1, 2001, our wholly owned subsidiary, Key3Media Events acquired
from SOFTBANK America, Inc. all the outstanding equity shares of SB Forums. SB
Forums owns the N+I Tokyo event, which is one of the largest IT events in Japan.
We acquired SB Forums to strengthen our presence in international markets.

On September 10, 2001, in three separate transactions, we acquired: (i) the
Next Generation Networks and Next Generation Ventures tradeshows and conferences
(the "NGN Assets"), (ii) the Opticon and VoiceCon tradeshows and conferences and
the Business Communications Review magazine (the "BCR" Assets") and (iii) the
Voice on the Net (VON) Conferences and Session Initiation Protocol Summits
(collectively, the "Pulver Assets"). The BCR Assets and NGN Assets relate to
events that target the networking industry, while the Pulver Assets relate to
events that target the networking and Internet Protocol communication
industries. We acquired these assets to strengthen our presence in the
networking trade show and conference business. A description of the terms and
conditions of these purchase transactions is included in footnotes to the
consolidated financial statements appearing elsewhere in this Form 10-K.

FINANCING TRANSACTIONS

On June 26, 2001, we issued $300.0 million of unsecured senior subordinated
notes that mature on June 15, 2011. The senior subordinated notes bear interest
at a rate of 11.25% per annum, payable semi-annually on June 15 and December 15
of each year. The net proceeds from the offering of the senior subordinated
notes were approximately $292.0 million, after deducting the underwriting
discount and other sale expenses. We used these net proceeds and cash on hand to
repay our existing term loan bank borrowings
24

of $300.0 million and to repurchase and retire zero coupon debentures issued in
August 2000 in connection with the spin-off from ZDI for $83.6 million.

Concurrent with the issuance of the senior subordinated notes and repayment
of existing term loan bank borrowings, we amended and restated the bank credit
facility we had entered into on August 3, 2000 by eliminating the term loan
facility and increasing the revolving credit facility. Under the revolving
credit facility our syndicate of banks committed to lend up to $150.0 million
for general corporate purposes, which could include acquisitions. We may borrow,
repay and re-borrow under the increased revolving loan facility until June 26,
2004, at which time we must repay any outstanding amounts. Loans under the
Amended and Restated Credit Facility are guaranteed by our wholly owned
subsidiaries (other than foreign and unrestricted subsidiaries, as defined) and
are secured by substantially all of their assets.

On November 27, 2001, we raised $52.0 million through the private placement
of 1,000,000 shares of Series A preferred stock and 1,080,000 shares of Series B
preferred stock, in each case for $25.00 per share. We utilized $30.0 million of
the proceeds to repay borrowings under our revolving credit facility. Concurrent
with this transaction, we further amended our senior bank credit facility. On
December 12, 2001, we sold an additional 300,000 shares of our Series B
preferred stock in exchange for $10.0 million aggregate principal amount of our
11.25% senior subordinated notes due 2011. For purposes of this exchange, the
senior subordinated notes were valued at $7.5 million and the Series B preferred
stock was issued for $25.00 per share. On December 20, 2001, we sold an
additional 600,000 shares of our Series B preferred stock for $25.00 per share
to the various purchasers.

A further description of the terms and conditions of these debt and equity
transactions is included in the "Liquidity and Capital Resources" section of
this Item 7 and in the footnotes to the consolidated financial statements
appearing elsewhere in this Form 10-K.

REVENUE

To date, our revenue has been derived principally from:

- exhibitor services revenue, which consists of the fees we receive from IT
vendors to rent exhibit space at our events and the commissions and
discounts we receive from third parties who provide services to our
exhibitors;

- fees paid by attendees to participate in conferences that we offer at our
events; and

- advertising and sponsorship fees.

Historically, exhibitor services revenue has ranged from 68% to 73% of our
total revenue. Exhibit space rental revenue accounts for a substantial majority
of exhibitor services revenue and fluctuates as a result of changes in the
amount of net square feet of exhibit space rentals and our rental rates. The
balance of exhibitor services revenue depends upon the demand for and pricing of
the third-party services that we promote to our exhibitors. At most of our
annual events, we generally rent a majority of the exhibit space for the next
year's event. Exhibitors are contractually required to pay for exhibit space
rentals in advance in two or three installments. The last installment is usually
due six months from the contract date or, if the contract is signed after this
date, the date of the contract. We recognize exhibitor services revenue when the
related event occurs. As a result, a significant portion of our cash and cash
equivalents and accounts receivable represent deferred revenues for events to
occur at a later date. Historically we maintained insurance on our three largest
events in amounts sufficient to cover a substantial portion of lost exhibit
space rental revenue for certain event cancellations covered by the policy in
question. The events of September 11th have significantly affected the market
for this type of insurance. The only event in 2002 for which we had taken out
such a policy prior to September 11th, 2001 was our NetWorld+Interop Las Vegas
tradeshow. We are currently negotiating the terms of policies for our COMDEX
Fall, NetWorld+Interop Atlanta and certain other events in 2002. While we
believe we will be able to reach agreement on these policies, it seems clear
from our negotiations that the cost of this insurance will be greater than in
past years and that the policies will contain an exclusion for event
cancellations due to terrorist actions.

25

Conference fees have ranged from 15% to 20% of our total revenue and
consist of the fees we charge attendees to participate in the conferences we
offer at our events and, to a very minor extent, the fees paid by attendees to
attend our events. While attendees must obtain tickets for our events, these
tickets are usually distributed on a complimentary basis and only permit
attendees to visit the exhibit floor and other generally available portions of
the events.

Advertising and sponsorship fees paid by our exhibitors generate
approximately 10% to 12% of our total revenue. This revenue comes primarily from
the following sources:

- advertising in Preview, a newspaper distributed before some of our larger
events to pre-registrants and certain prior year attendees;

- advertising in Program Exhibits Guide, a guide to the exhibitors
distributed before and during our events;

- advertising in Show Daily, a daily newspaper we distribute during some of
our larger events;

- advertising on billboards and banners at and around our event venues; and

- sponsorships of key areas and promotional materials throughout our event
venues.

We currently sell advertising and sponsorships almost exclusively to our
exhibitors on an event-by-event basis. We believe that with the strength of our
brands and audiences, we have opportunities to expand these sales beyond our
exhibitor base and the IT industry. We also believe we have significant
opportunities to generate additional revenue by selling advertising and
sponsorships across multiple events and brands and by introducing promotional
activities at our events.

We market our events under a limited number of brands. The table below
presents revenue for our principal brands over the last three years, excluding
international contract events discussed below under "Description of
Business -- International Expositions."

The table below presents the total net square feet of exhibit space
rentals, the number of exhibitors, the number of conference participants and the
estimated number of attendees for our largest events within each of our
principal brands over the last three years.

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(1) Unlike our tradeshows, JavaOne is a conference from which we derive most of
our revenue from the fees attendees pay to attend the conference. Although
we do derive secondary revenue from exhibit space rental fees, it is not
material and, accordingly, exhibitor information has been omitted from this
table.

OPERATING COSTS

COST OF PRODUCTION

We record as cost of production all costs we pay to third parties that are
directly associated with an event. The largest components of these costs are
event-specific advertising and attendee marketing, venue rental, costs of
temporary personnel, conference content and other costs related to event
production, including hospitality and lodging. In the case of COMDEX Fall, we
currently have the Las Vegas Convention Center and The Sands Expo under contract
through 2005. In the case of our events, contractual rights with venues vary.
Although we do not have a contractual right to use the venues beyond the
contract period, we believe that venue owners will generally give us the first
chance to rent the space in the ensuing years. While we have experienced recent
increases in the venue rental rates, we have been generally able to pass these
increased costs on to our exhibitors. Costs incurred prior to the occurrence of
an event are recorded as prepaid event costs and expensed as events occur;
thereby matching event costs with event revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A consists of payroll and benefit costs for our employees, office rental
expenses, legal, accounting and all other expenses not directly associated with
an event (other than depreciation and amortization). For part of 2000 and prior,
SG&A has included charges from Ziff-Davis for administrative services, including
legal, tax and financial accounting, management information, telecommunications,
and human resources services. In general, Ziff-Davis charged us for these
services based upon our utilization; however, where measuring utilization was
impractical, Ziff-Davis apportioned these charges among the businesses in its ZD
division based upon relative headcount or revenue. In addition, Ziff-Davis
managed most of our treasury activities. Since the spin-off, we no longer rely
on Ziff-Davis for these services and provide them ourselves. In addition, we
have new expenses as an independent public company that we did not have in the
past. We may also incur new or different expenses as our business changes over
time.

DEPRECIATION AND AMORTIZATION