-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bbg+W9RuyhB8Ar/ag3fEEqyuMgxCVMqso8SsM9XabhviW3iEYNMHV/ZOuSuQLovU vIpC2g02x6GoRIiRXKFGAA== /in/edgar/work/0001095811-00-004798/0001095811-00-004798.txt : 20001116 0001095811-00-004798.hdr.sgml : 20001116 ACCESSION NUMBER: 0001095811-00-004798 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TICKETS COM INC CENTRAL INDEX KEY: 0001038083 STANDARD INDUSTRIAL CLASSIFICATION: [7900 ] IRS NUMBER: 061424841 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27893 FILM NUMBER: 769002 BUSINESS ADDRESS: STREET 1: 555 ANTON BLVD 12TH FL STREET 2: 714-862-5400 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 9498625400 MAIL ADDRESS: STREET 1: 4675 MACARTHUR CT STREET 2: SUITE 1400 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: ADVANTIX INC DATE OF NAME CHANGE: 19990202 10-Q 1 a67148e10-q.txt FORM 10-Q FOR QUARTERLY PERIOD ENDED SEPT.30, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000. or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ---------- Commission File Number 000-21949 TICKETS.COM, INC. (Exact name of registrant as specified in its charter) Delaware 06-1424841 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number)
555 Anton Boulevard, 12th Floor, Costa Mesa, California 92626 (Address of principal executive offices, including zip code) (Registrant's telephone number, including area code) (714) 327-5400 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 [ ] As of October 31, 2000, there were 59, 277,808 shares of the Registrant's Common Stock, par value $0.000225 per share, outstanding. 2 Part I: Financial Information Item 1: Financial Statements TICKETS.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
SEPTEMBER 30, DECEMBER 31, 2000 1999 --------- --------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 37,310 $ 94,173 Accounts receivables, net of allowances of $839 and $439, respectively 11,398 7,780 Prepaid expenses and other current assets 19,695 20,506 --------- --------- Total current assets 68,403 122,459 Property and equipment, net 14,314 11,163 Goodwill and intangible assets, net 50,600 86,838 Other assets 18,740 15,320 --------- --------- Total assets $ 152,057 $ 235,780 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 14,982 $ 18,250 Accrued liabilities 11,733 5,358 Current portion of long-term debt and capital lease obligations 2,491 2,115 Deferred revenue and other current liabilities 3,406 4,418 --------- --------- Total current liabilities 32,612 30,141 Long-term debt and capital lease obligations, net of current portion 1,472 2,117 Other liabilities 1,789 2,128 Minority interest 383 317 Stockholders' equity: Common stock, $.000225 par value; 270,000 shares authorized; 59,275 and 57,082 shares issued and outstanding, respectively 13 13 Additional paid-in capital 324,197 317,378 Deferred compensation (302) (350) Accumulated deficit (207,896) (115,944) Cumulative other comprehensive loss (211) (20) --------- --------- Total stockholders' equity 115,801 201,077 --------- --------- Total liabilities and stockholders' equity $ 152,057 $ 235,780 ========= =========
The accompanying notes are an integral part of these condensed consolidated balance sheets. 2 3 TICKETS.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ----------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- (UNAUDITED) (UNAUDITED) Revenues: Ticketing services $ 7,609 $ 8,014 $ 24,485 $ 21,060 Software services and other 6,936 5,794 18,891 12,026 --------- --------- --------- --------- Total revenues 14,545 13,808 43,376 33,086 --------- --------- --------- --------- Cost of services: Ticketing services 5,390 5,775 19,167 14,747 Software services and other 3,763 2,955 10,075 6,525 --------- --------- --------- --------- Total cost of services 9,153 8,730 29,242 21,272 --------- --------- --------- --------- Gross profit 5,392 5,078 14,134 11,814 Operating expenses: Sales and marketing 7,327 9,099 30,314 18,167 Technology development 3,049 3,337 11,636 8,130 General and administrative 8,245 5,006 22,434 11,833 Amortization of goodwill and intangibles 2,542 2,275 7,441 4,851 Abandoned acquisition costs -- -- 995 -- Restructuring charges -- -- 35,124 -- Purchased in-process research and development -- -- -- 5,340 --------- --------- --------- --------- Total operating expenses 21,163 19,717 107,944 48,321 --------- --------- --------- --------- Loss from operations (15,771) (14,639) (93,810) (36,507) Other (income) expense: Other (income) expense (430) 136 (2,084) 1,438 Minority interest 33 33 67 179 --------- --------- --------- --------- Total other (income) expense (397) 169 (2,017) 1,617 --------- --------- --------- --------- Loss before provision for income taxes (15,374) (14,808) (91,793) (38,124) Provision for income taxes -- 12 110 29 --------- --------- --------- --------- Net loss $ (15,374) $ (14,820) $ (91,903) $ (38,153) ========= ========= ========= ========= Basic and diluted net loss per share $ (0.26) $ (0.96) $ (1.57) $ (3.46) ========= ========= ========= ========= Weighted average common shares outstanding 59,144 15,413 58,399 11,031 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 TICKETS.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 2000 1999 -------- -------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(91,903) $(38,153) Adjustments to reconcile net loss to net cash used in operating activities: Restructuring charges 35,124 -- Purchased in-process research and development -- 5,340 Depreciation 4,328 2,754 Amortization of goodwill and intangibles 7,441 4,851 Noncash interest expense -- 237 Noncash marketing expense(1) 3,934 -- Noncash compensation expense 48 54 Noncash consulting expense -- 1,418 Minority interest 67 179 Changes in operating assets and liabilities: Accounts receivable (3,630) (3,202) Prepaid expenses and other assets (2,424) (4,796) Accounts payable (3,416) 7,328 Accrued liabilities 1,964 (352) Deferred revenue and other liabilities (1,432) 604 -------- -------- Net cash used in operating activities (49,899) (23,738) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (4,960) (1,982) Equity investments in strategic partners (1,500) (754) Change in restricted cash (7) 168 Acquisitions, net of cash acquired (1,429) (7,348) -------- -------- Net cash used in investing activities (7,896) (9,916) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in line of credit -- 250 Principal payments on long-term debt (1,940) (4,293) Net proceeds from issuance of preferred stock -- 59,908 Proceeds from issuance of common stock 2,872 1,004 -------- -------- Net cash provided by financing activities 932 56,869 -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (56,863) 23,215 CASH AND CASH EQUIVALENTS, beginning of period 94,173 11,956 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 37,310 $ 35,171 ======== ========
4 5 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 260 $2,131 ========= ====== Income taxes paid $ -- $ 5 ========= ====== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Accretion on redeemable common stock and warrants $ -- $ 884 ========= ====== Capital lease obligations entered into for equipment $ 1,752 $ 396 ========= ====== Warrant issued in connection with the Major League Baseball agreement $ 4,100 $ -- ========= ======
- ---------- (1) Non-cash marketing expenses represent marketing expenses prepaid in 1999 to Excite@Home and certain affiliates for advertising, promotional and related products and services to be provided over a three-year period. The total prepaid amount was $25 million and is expected to be used through December 2002. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 TICKETS.COM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. DESCRIPTION OF BUSINESS Tickets.com, Inc. (formerly, Advantix, Inc.) and its wholly-owned subsidiaries Bay Area Seating Service, Inc. ("BASS"), ProTix, Inc. ("ProTix"), TicketsLive Corporation ("TicketsLive"), dataCulture, Ltd. ("dataCulture") and Lasergate Systems, Inc. ("Lasergate"), collectively ("we", "us" or "Tickets.com"), is a leading provider of entertainment ticket sales, event information, and related products and services. We sell tickets and provide these services through the Internet, telephone sales centers, interactive voice response systems, and retail outlets. We provide automated ticketing solutions to entertainment organizations such as stadiums, performing arts centers, museums and professional sports franchises. The www.tickets.com web site enables consumers to obtain information on entertainment organizations, sports and entertainment events and performances and purchase tickets from multiple sources. We also develop, license and support proprietary ticketing software. We were originally organized as The Entertainment Express, Inc. under the laws of the State of Delaware on January 25, 1995. We commenced operations in May 1996 with the acquisition of Hill Arts and Entertainment Systems, Inc. which had developed a proprietary ticketing software system utilized primarily by performing arts centers, theater groups and regional ticketing service providers. In December 1996, we acquired the call center and ticketing operations of an Ohio-based performing arts center and ticketing services provider, at which time we changed our name to Advantix, Inc. In August 1997, we acquired the assets of Fantastix Ticketing Company, LLC, a regional ticketing services provider located in Buffalo, New York, and in September 1997 we completed the acquisition of all of the outstanding stock of BASS, a ticketing services provider in Northern California and Nevada. In October 1998, we acquired all the outstanding common stock of ProTix, a ticketing services provider and ticketing software developer based in Madison, Wisconsin. In April 1999, we acquired all the outstanding capital stock of California Tickets.com, Inc. ("CA Tickets.com"), a web-based ticketing service provider, and TicketsLive, a ticketing software developer based in Syracuse, New York. We then changed our name to Tickets.com, Inc. These acquisitions were followed by the purchase, in August 1999, of all the outstanding common stock of dataCulture, a ticketing software developer located in the United Kingdom and in December 1999, we completed our acquisition of all the outstanding capital stock of Lasergate, a ticketing software developer located in Clearwater, Florida. 2. RESTRUCTURE CHARGES At the end of the second quarter of fiscal 2000, we redirected our business strategy to focus on our core ticketing business. The strategy entails taking advantage of the efficiencies of the Internet while emphasizing the relationship with our clients rather than with consumers. The plan included an exit from the Internet portal strategy and related Internet products. In conjunction with the new strategy, we recorded restructuring charges of $35.1 million in the second quarter. The restructuring charges represented a write-off of certain intangible assets of $30.7 million and accruals of $2.8 million related to the consolidation of facilities, $1.2 million of involuntary termination benefits and $400,000 related to the termination of existing contracts. In addition, as a result of our new business strategy and structure, our current operating segments may change. As of September 30, 2000, we have paid out approximately $700,000 in connection with involuntary termination benefits and approximately $400,000 for the termination of existing contracts. 3. RECENT ACCOUNTING PRONOUNCEMENTS On December 3, 1999, the Securities Exchange Commission ("SEC") staff released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition", as amended by SAB Nos. 101A and 101B, to provide guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 explains the SEC staff's general framework for revenue recognition, stating that certain criteria need to be met in order to recognize revenue. SAB No. 101 also addresses general disclosures of revenues at gross compared to net presentations as well as financial statement and Management's Discussion & Analysis ("MD&A") disclosures related to revenue recognition practices. Accounting under the provisions of SAB No. 101 is required to be adopted in the fourth quarter of this year. We believe the impact of adopting SAB No. 101 will be to net certain revenue sharing costs against revenue and will not have a material impact on our results of operations, cash flows or financial position. 6 7 4. BASIS OF PRESENTATION The unaudited consolidated financial statements have been prepared in accordance with United States' generally accepted accounting principles for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by the United States' generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these condensed consolidated financial statements. Operating results for the quarter are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in Tickets.com's Annual Report on Form 10-K for the year ended December 31, 1999. 5. USE OF ESTIMATES The preparation of financial statements in conformity with the United States' generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 6. NET LOSS PER SHARE Basic net loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or result in the issuance of common stock that would then share in Tickets.com's earnings. Potentially dilutive securities are excluded from our calculation of diluted loss per share since their inclusion would be antidilutive. 7. LITIGATION On July 23, 1999, Ticketmaster Corporation and Ticketmaster Online-CitySearch filed a lawsuit against us in the United States District Court for the Central District of California seeking unspecified damages and a court order to prohibit us from, among other things, linking Internet consumers to internal pages within Ticketmaster's web site. In addition, the suit alleges that we have engaged in other wrongful acts, such as breach of contract, trespass, providing false and misleading information on our web site regarding the availability of tickets and related information on the Ticketmaster web site and taking copyrighted information from the Ticketmaster web site for use on the Tickets.com web site. The suit seeks an injunction to prohibit us from further engaging in any alleged unlawful activity, treble damages, attorneys' fees and other unspecified damages. Ticketmaster Corporation and Ticketmaster Online-CitySearch have also filed a motion for preliminary injunction seeking an order precluding us from, among other things, providing links to Ticketmaster pages. On August 10, 2000 the Court denied this motion. In May 2000 we filed a counterclaim against Ticketmaster Corporation and Ticketmaster Online-CitySearch alleging that they have engaged in certain acts and practices that are an unlawful restraint of trade, unlawful monopolization and attempted monopolization in violation of federal and state antitrust laws and violation of state unfair competition law and interference with economic advantage. Our claim seeks treble damages, punitive damages and declaratory and injunctive relief. Ticketmaster and Ticketmaster Online have filed a motion to dismiss our counterclaim and on September 25, 2000, the Court denied this motion. 8. STOCKHOLDERS' EQUITY In 1997, we entered into an agreement with our senior lender to issue a warrant for the purchase of our common stock at $0.0225 per share. In accordance with the agreement, a warrant to purchase 177,778 shares was issued. The warrant was subject to certain antidilution provisions and as a result of this provision 436,648 additional shares became issuable over the term of the agreement. In 1999, the senior lender sold its warrant to a third party. In November 1999, concurrent with the completion of our initial public offering ("IPO"), the holder of the warrant notified us of their intent to exercise the warrant subject to the approval by both parties of the calculation of the number of shares to be issued. On January 21, 2000, 614,426 shares of Tickets.com common stock were issued to the holder of the warrant. In conjunction with our Employee Stock Purchase Plan, we issued 34,089 shares in January 2000, which represented $362,000 in participant contributions, and issued 100,153 shares in July 2000, representing $202,000 in participant contributions. Additionally, 7 8 through September 30, 2000, 1,109,640 shares of common stock were issued, excluding those warrants discussed above, to employee and non-employee holders of options and warrants. In June 2000, we signed an agreement with Major League Baseball ("MLB") to provide ticketing e-commerce infrastructure and back-end systems to all MLB clubs, as their current online ticketing agreements expire, through the 2003 MLB season. In connection with this agreement we issued MLB a warrant to purchase 2 million shares of Tickets.com common stock at an exercise price equal to $3.806 per share. The warrant is fully vested and is first exercisable one year after the date of issuance or within six months from date of issuance if certain conditions are met. The warrant was valued at $4.1 million and is being amortized on a straight-line basis over the three-year life of the contract. 9. SEGMENT INFORMATION The operating segments below reflect the segmentation of our business under which management evaluates financial data internally to make operating decisions and assess performance. We have sales to external customers only. There have been no intersegment sales. We evaluate the performance of our operating segments and allocate resources based on gross profit and therefore, segment information has been provided at that level. Additionally, assets are not allocated to specific products and accordingly cannot be reported by segment. (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 ---------------------------------------------------------------------------- TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL ------------------ ----------------- ------------ ---------- Revenues $ 7,609 $ 6,580 $ 356 $14,545 Gross profit 2,219 2,924 249 5,392
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 ---------------------------------------------------------------------------- TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL ------------------ ----------------- ------------ ---------- Revenues $ 8,014 $ 5,497 $ 297 $13,808 Gross profit 2,238 3,033 (193) 5,078
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 ---------------------------------------------------------------------------- TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL ------------------ ----------------- ------------ ---------- Revenues $24,485 $16,995 $ 1,896 $43,376 Gross profit 5,318 7,409 1,407 14,134
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 ---------------------------------------------------------------------------- TICKETING SERVICES SOFTWARE SERVICES OTHER TOTAL ------------------ ----------------- ------------ ---------- Revenues $21,060 $11,499 $ 527 $33,086 Gross profit 6,313 5,403 98 11,814
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q, including information incorporated herein by reference, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward looking statements include risks and uncertainties and relate to expectations concerning matters that are not historical facts. Words such as "projects," "believes," "anticipates," "plans," "expects," "intends," and similar words and expressions are intended to identify forward-looking statements. Although Tickets.com believes that such forward-looking statements are reasonable, it cannot assure you that such expectations will prove to be correct. Important language regarding factors that could cause actual results to differ materially from such expectations are disclosed herein. All forward-looking statements are expressly qualified in their entirety by such language. Tickets.com does not undertake any obligation to update any forward-looking statements. You are also urged to carefully review and consider the various disclosures made by Tickets.com which describe certain factors which affect Tickets.com's business, including the risk factors that follow. OVERVIEW Tickets.com is a leading business-to-business ticketing solutions provider for live events. The company facilitates the sale of tickets by enabling venues and entertainment organizations with proprietary and cutting edge software, retail outlets, call centers and 8 9 interactive voice response ("IVR") systems. Tickets.com builds private label Ticketing Gateways ("SM") to enable live entertainment organizations with e-commerce distribution platforms. The company also sells tickets directly to consumers at www.tickets.com, providing tickets and information on virtually all events and entertainment organizations, as well as offering related products and services. Tickets.com's automated ticketing solutions are used by thousands of entertainment organizations such as leading performing arts centers, professional sports organizations and various stadiums and arenas in the United States., Canada, Europe, Australia and Latin America. Tickets.com, Inc. is headquartered in Costa Mesa, California. Our general-purpose financial statements reflect two reporting segments: (1) ticketing services and (2) software services and other. SOURCES OF REVENUE Ticketing Services We primarily generate ticketing services revenue from per ticket service fees charged directly to consumers who purchase tickets through the Internet, telephone sales centers, interactive voice response systems and retail stores. In addition, we charge a per order handling fee to consumers for all tickets which we package and ship to the consumer. This typically includes all sales other than through retail stores. The sale of tickets for an event often commences several months prior to the scheduled date of the event. Ticketing service revenues relating to these sales are recognized when the tickets are sold. The amount of the service fees we charge varies from client to client, depending upon a number of factors, including the nature of the services to be rendered to the client, the amount and cost of equipment to be installed in the client's box office, the amount of advertising and promotional allowances provided, the type of event and the distribution channels used. The service fee for each client is determined by us and our clients through arms-length negotiations during the contract process. We generally do not purchase these tickets from our clients for resale to the public. In the event that we do purchase the tickets for resale, or guarantee the sale of a certain amount of tickets, we recognize the entire sales price of those tickets we purchased and sold or guaranteed as revenue. In 1999 we began to enable several of our software licensees to sell tickets over the Internet. This technology allows our licensees to sell their tickets on either their own web site or the www.tickets.com web site. We generate revenues on the sale of tickets to events for these Internet enabled licensees from service fees on a per ticket basis, similar to our traditional ticketing services clients. We generally are not involved in the delivery of these tickets and therefore we do not generate revenue from handling fees for these ticket sales. Our ticketing services clients determine all face values for tickets sold through our services. These clients also generally determine when tickets for their events will be sold to the public and the number and type of tickets that will be available for sale through us. We usually sell only a portion of our clients' total tickets. The number of tickets that our clients sell in-house varies from client to client and varies as to any single client from year to year. Tickets allocated by our clients to us are sold to the public directly through our distribution network. For outsourcing services clients and software licensees who are enabled to sell tickets on the Internet, their entire ticket inventory is generally available on the clients' web site and the www.tickets.com web site. If an event is cancelled, we will refund the per ticket convenience fee directly to consumers. However, our outsourcing services clients are responsible for funding all refunds of ticket prices for a cancelled event. To the extent that the funds we are holding on behalf of a client are insufficient to cover all refunds, the client is contractually required to provide us with additional funds within a specified period of time, typically within 24 to 72 hours, of cancellation. Historically, our clients have fulfilled these obligations. We have also generated ticketing services revenues through the auction of tickets on our web site. In 1999 we entered into arrangements with several performers to provide online ticket auctions for their live concerts. Under these arrangements, the performer's tickets were allocated to us for auction on our web site and certain amounts collected above face value were donated to a charity of the performer's choice. Under these types of arrangements, we had agreed generally to purchase, at face value, any unsold tickets that were allocated to us for auction. If we were unable to sell tickets that we had agreed to purchase, or sell them at less than face value, we would incur losses on the tickets purchased. The gross value of the sale of these tickets was recorded as revenues. The amount paid for the tickets, the amount donated to charity and the cost of delivering the tickets to the consumers were recognized as cost of services for the related auction ticketing services. As of May 2000, we no longer offer auctions of performer tickets for charity. Software Services and Other We generate a portion of our revenue from license and support fees charged to licensees of our in-house systems products. We recognize these revenues in accordance with the contracts we enter into with our licensees when they license our in-house systems and purchase maintenance and other support services. We generally recognize our license revenues when our software is installed and 9 10 accepted by our licensees. Support and maintenance are recognized over the term of the contract. Our support and maintenance contracts have terms ranging from one to five years with automatic one-year renewals. Our licensees generally pay a one-time license fee for the right to use our software and annual fees for support and maintenance. We also provide custom programming for certain clients with special ticketing needs. The revenue and costs associated with these long-term custom programming contracts are generally recognized on the percentage of completion method. We also generate revenues from advertising on our web site, consumer-to-consumer auctions and travel and package sales, which may include travel, hotel, tickets to an event and related merchandise. Revenues for advertising are recognized when the ads are placed on our web site. Consumer-to-consumer auction revenues are derived from a fee paid by the seller and are recognized when the transactions are complete. The majority of our travel revenues are commissions received from our travel services provider. Packages are purchased for sale in advance or are sold through our travel service provider. Sales of packages purchased in advance or packages which we retain full risk of return, are recognized at the gross sales value of the package when the package is sold; therefore, if a package is left unsold or sells for less than the aggregate cost of the package, we incur losses on those packages. We receive commissions for packages sold through our travel service provider. As of August 2000 we no longer offer consumer-to-consumer auctions, travel or packages through our travel service provider on our website, www.tickets.com. During December 1999 we entered into a long-term barter transaction whereby we provide various products and services in exchange for a cash payment and sponsorship. Revenues and expenses from this barter transaction are valued at the fair market value based on the amount that would be charged on a cash basis for similar products and services. Revenues and expenses from barter transactions are recognized in accordance with the established guidelines related to the type of the underlying revenue or expense. COST STRUCTURE Cost of Services. Cost of services associated with ticketing services primarily includes expenses related to the distribution and delivery of tickets. These expenses include primarily telephone sales center and distribution payroll, telecommunications and data communications, commissions paid on tickets distributed through outlets and our clients' share of service fees. In the event that we purchase tickets for sale or guarantee the sale of a certain amount of tickets, the face value of those tickets purchased or guaranteed are recorded as a cost of ticketing services revenues. Ticket auction costs of services are comprised of the face value of the ticket and the cost of processing the orders and delivery of the ticket. In addition, under arrangements with performers, the costs of ticket auctions also include certain amounts, above the face value of the tickets, that are donated to a charity of the performer's choice. As of May 2000, we no longer offer ticket auctions on our website. Cost of services associated with software services and other primarily includes costs related to the installation and support of our in-house systems mainly consisting of payroll and travel services related costs and the cost of hardware and software that we resell to our licensees. Also included is the cost of packages purchased for resale which may include hotel costs, merchandise costs and the face value of the event tickets. Operating Expenses. Our operating expenses are comprised of three primary categories: sales and marketing, technology development and general and administrative expenses and are generally expensed as incurred. Sales and marketing expenses consist principally of personnel expenses, consulting fees, advertising, trade shows and conventions, and promotional expenditures. Technology development expenditures consist primarily of personnel and related compensation costs, contract labor to support software development, configuration and implementation of our ticketing systems, telecommunications, web site and connectivity and support system infrastructure. General and administrative expenses consist of personnel expenses for management, accounting and administrative personnel, recruiting, professional services, facilities and other administrative expenses. Amortization of goodwill and intangibles is recorded on a straight-line basis over various estimated useful lives primarily ranging from three to 25 years. Covenants not to compete are amortized on a straight-line basis over the corresponding contract period. Our corresponding intangibles consist primarily of the portion of the purchase price of businesses acquired allocated to existing technology, client relationships, tradenames, assembled workforce and covenants not to compete. Goodwill represents the excess of cost over the fair value of identified net assets acquired in business combinations accounted for under the purchase method. SEASONALITY Our operations and revenues from ticketing services are largely seasonal in nature, with second and third quarter revenues generally being higher than first and fourth quarter revenues. Several of our largest clients are outdoor venues or promoters of musical concerts, which schedule a significant number of events during the summer months and typically do not generate substantial activities in the late fall, winter and early spring. Therefore, the seasonality of our business causes a significant variation in our quarterly operating results. To the extent we do not broaden our revenue base to offset seasonality, we expect that this seasonality will continue to cause significant variations in our future quarterly operating results. 10 11 RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1999 Revenues Ticketing Services. Revenues from ticketing services decreased 5% to $7.6 million for the three months ended September 30, 2000 from $8.0 million for the three months ended September 30, 1999. The decrease in revenues was due to a client who terminated its contract with us effective December 31, 1999. The termination resulted in a loss of approximately $1.1 million in revenues for the third quarter of 2000 compared to the same period in the prior year. The decline in revenues was partially offset by an increase in revenues related to single-ticket sales for the Sydney 2000 Olympic Games and to new clients, including Internet enabled software licensees. The number of tickets sold remained constant at 1.7 million. We expect ticketing services revenues to grow as we acquire new clients and increase the number of Internet enabled licensees. Growth in these clients will be driven by our exclusive on-line ticketing agreement with Major League Baseball. Software Services and Other. Revenues from software services and other increased 20% to $6.9 million for the three months ended September 30, 2000 from $5.8 million for the three months ended September 30, 1999. Revenues from acquisitions occurring subsequent to the second quarter of 1999 contributed approximately $800,000 of the increase. The remaining increase was driven by growth of our core software business, including services for the Salt Lake 2002 Olympic Winter Games and the completion of contracts related to our Access Control 2100's electronic turnstile system. We expect software services revenue to increase driven by the Salt Lake 2002 Olympic Winter Games and growth in our software product licensees. Cost of Services Ticketing Services. Costs of ticketing services decreased 7% to $5.4 million for the three months ended September 30, 2000 from $5.8 million for the three months ended September 30, 1999. The decrease was consistent with the decline in ticket revenue due to the client who terminated its contract with us effective December 31, 1999. As a percentage of ticketing services revenues, total cost of ticketing services decreased slightly to 71% from 72%, resulting in a slight increase in the gross profit margin to 29% from 28%. We expect gross profit margin to grow as we move away from high cost of service ticketing products and concentrate on migrating our core ticketing business to lower cost distribution channels. Also, as we expand into new regions we will be able to leverage the infrastructure created through this expansion to reduce our cost structure. Software Services and Other. Costs of software services and other increased 27% to $3.8 million for the three months ended September 30, 2000 from $3.0 million for the three months ended September 30, 1999. The increase was driven by costs of sales from our acquired subsidiaries of approximately $400,000 and costs of services related to the growth of our core software business. As a percentage of software services and other revenues, costs of software services and other increased to 54% from 51% for the same quarter in the prior year. The increase is primarily attributable to the high cost of services related to our Access Control 2100's electric turnstile system. As we focus on consolidating our support infrastructure, we expect the gross profit margin for software services and other to grow. Operating Expenses Sales and Marketing. Sales and marketing expenses decreased 19% to $7.3 million for the three months ended September 30, 2000 from $9.1 million for the three months ended September 30, 1999. As a percentage of total revenues, sales and marketing expenses decreased to 50% from 66%. The decrease is mainly attributable to a decline in professional services of $1.8 million, reflecting the issuance of warrants to performers in the prior year as well as the termination of our relationship with an advertising agency. The decrease also reflects a reduction in advertising expenses as we continue to focus our efforts on our clients instead of consumers. We expect our sales and marketing expenses to continue to decrease as we further direct our effort from high cost branding to combined client-driven advertising and promotions, a strategy that emphasizes our client relationships rather than that with the consumer. Technology Development. Technology development expenses decreased 9% to $3.0 million for the three months ended September 30, 2000 from $3.3 million for the three months ended September 30, 1999. As a percentage of total revenues, technology development expenses decreased to 21% from 24%. The decrease reflects our efforts to consolidate software code lines. The consolidation enables us to reduce costs as we support the development of fewer software products. As we 11 12 focus our efforts on improving and expanding our core ticketing system, we expect a stabilization of our expenses and subsequently a reduction as we are able to reduce our development efforts to a support function for a single ticketing system. General and Administrative. General and administrative expenses increased 65% to $8.2 million for the three months ended September 30, 2000 from $5.0 million for the three months ended September 30, 1999. As a percentage of revenues, general and administrative expenses increased to 57% from 36%. The increase was primarily due to an increase in professional services expenses of $1.2 million, driven by legal costs associated with our litigation with Ticketmaster, and in bad debt expense of $700,000. The remainder of the increase was driven by payroll and related expenses, including travel, supplies and equipment of $500,000 representing investments in our managerial and administrative infrastructure to facilitate our growth, an increase in depreciation of $300,000, resulting from capital expenditures during 1999 and 2000, and an increase in advertising and promotional expenses of $300,000. We anticipate general and administrative expenses to decline as we continue to integrate the back-end operations of previous acquisitions, including consolidation of administration functions and reduction in office space. Amortization of Goodwill and Intangibles. Amortization of goodwill and intangibles increased 12% to $2.5 million for the three months ended September 30, 2000 from $2.3 million for the three month ended September 30, 1999. The increase was primarily due to acquisitions that occurred after the third quarter of 1999. We expect amortization expense to continue at current levels. Other (Income) Expense Other (Income) Expense. Other (income) expense consists principally of interest income and interest expense. Interest income is generated primarily from cash and cash equivalents held in interest bearing accounts. Interest income decreased 15% to $592,000 for the three months ended September 30, 2000 from $695,000 for the three months ended September 30, 1999. The decrease is mainly due to a decrease of cash held in interest bearing accounts. Interest expense decreased 81% to $162,000 for the three months ended September 30, 2000 from $832,000 for the three months ended September 30, 1999, reflecting the reduction of our long-term debt in connection with our initial public offering in November 1999. Net Loss For the three months ended September 30, 2000, our net loss was $15.4 million or $0.26 per share. For the three months ended September 30, 1999, our net loss was $14.8 million or $0.96 per share. The increase in the net loss was primarily due to: - Increased operating expenses, most significantly: - Bad debt expense of $693,000; - Depreciation expense of $444,000; - Personnel and related expenses of $389,000, and - Advertising and promotional expenses of $231,000. - Offset by: - Increased net benefit of $567,000 in other (income) expense; and - Decreased operating expense related to professional services of $502,000. The decrease in the net loss per share reflects an increase in our basic and diluted weighted average shares of 43.7 million. This increase is due primarily to the conversion of our preferred shares to 29.6 million shares of common stock, the issuance of 8.4 million common shares related to 1999 acquisitions and our initial public offering totaling 7.6 million common shares that was completed in November 1999. Potentially dilutive securities (including stock options) were antidilutive and therefore were excluded from the calculation of diluted loss per share. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999 Revenues 12 13 Ticketing Services. Revenues from ticketing services increased 16% to $24.5 million for the nine months ended September 30, 2000 from $21.1 million for the nine months ended September 30, 1999. The increase in revenues was driven by the success of the Wango Tango event in Los Angeles in the second quarter, revenues related to our performer charity ticket auctions as well as to new clients, including Internet enabled software licensees. The increase in revenues is partially offset by lost revenue related to a client who terminated its contract with us effective December 31, 1999. The termination resulted in a loss of approximately $3.1 million in revenues for the nine months ended September 30, 2000, compared to the nine months ended September 30, 1999. The number of tickets sold increased 2% to 4.4 million for the nine months ended September 30, 2000 from 4.3 million for the nine months ended September 30, 1999. The decrease in ticket volume due to the client termination was more than offset by new clients and single-ticket sales for the Sydney 2000 Olympics Games. Software Services and Other. Revenues from software services and other increased 57% to $18.9 million for the nine months ended September 30, 2000 from $12.0 million for the nine months ended September 30, 1999. The revenues from our 1999 acquisitions contributed approximately $5.3 million of the increase. The remaining increase was driven by an increase in Internet product revenues, including web advertising sales and packages, as well as growth in our core software business. Growth in our core software business reflects services for the Salt Lake 2002 Olympic Winter Games and the completion of contracts related to our Access Control 2100's electronic turnstile system. Cost of Services Ticketing Services. Costs of ticketing services increased 30% to $19.2 million for the nine months ended September 30, 2000, from $14.7 million for the nine months ended September 30, 1999. As a percentage of ticketing services revenues, total cost of ticketing services increased to 78% from 70%, primarily due to the high cost of services related to the tickets for the Wango Tango event and our performer charity ticket auctions. These costs are partially offset by a decline in our clients' share of service fees consistent with the decline of ticket volume related to the lost client. Software Services and Other. Costs of software services and other increased 54% to $10.1 million for the nine months ended September 30, 2000 from $6.5 for the nine months ended September 30, 1999. The increase was primarily caused by costs of sales from our acquired subsidiaries of $2.8 million. The current year also includes cost of services related to the growth of our core software business, including services for the Salt Lake 2002 Olympic Winter Games and the completion of contracts related to our Access Control 2100's electronic turnstile system. As a percentage of software services and other revenues, costs of software services and other decreased slightly to 53% from 54%. Operating Expenses Sales and Marketing. Sales and marketing expenses increased 67% to $30.3 million for the nine months ended September 30, 2000 from $18.2 million for the nine months ended September 30, 1999. Sales and marketing expenses attributable to acquired companies accounted for $1.4 million of the increase. As a percentage of total revenues, sales and marketing expenses increased to 70% from 55%. The increase is primarily attributable to our efforts to expand our sales and marketing infrastructure to develop the Tickets.com brand in support of our growth plans and to increase consumer awareness through the second quarter of the current year. The increase is partially offset by a decrease in the current quarter as we focus on our clients instead of consumers and redirect our effort from high cost branding to combined client-driven advertising and promotions. Technology Development. Technology development expenses increased 43% to $11.6 million for the nine months ended September 30, 2000 from $8.1 million for the nine months ended September 30, 1999. Of this increase, $839,000 was related to technology development costs from our acquired subsidiaries. As a percentage of total revenues, technology development expenses increased to 27% from 25%. The increase is primarily due to approximately $3.0 million invested through the second quarter to develop and enhance our web site, as well as expand the scalability of our infrastructure. The increase is partially offset by a decline in the current quarter as we consolidate software code lines enabling us to reduce our development costs by focusing our efforts on improving and expanding a single ticketing system. General and Administrative. General and administrative expenses increased 90% to $22.4 million for the nine months ended September 30, 2000 from $11.8 million for the nine months ended September 30, 1999. General and administrative expenses associated with acquired companies accounted for $1.8 million of the increase. As a percentage of revenues, general and administrative expenses increased to 52% from 36%. Excluding acquisitions, the increase was primarily due to increased payroll and related expenses, including facilities, travel and supplies of $3.3 million due to the continued investment in our managerial and 13 14 administrative infrastructure to facilitate our growth. This investment is expected to decline as we consolidate administrative functions as part of our restructure strategy. In addition, professional services increased by $3.6 million related primarily to legal and consulting fees including $1.0 million of abandoned acquisition costs a result of our decision not to proceed with the merger of First Call International, Ltd. Amortization of Goodwill and Intangibles. Amortization of goodwill and intangibles increased 53% to $7.4 million for the nine months ended September 30, 2000 from $4.9 million for the nine months ended September 30, 1999. The increase was due to goodwill and intangibles related to our acquisitions that occurred after the first quarter of 1999. Other (Income) Expense Interest (Income) Expense. Other (income) expense consists principally of interest income and interest expense. Interest income is generated primarily from cash and cash equivalents held in interest bearing accounts. Interest income increased 129% to $2.5 million for the nine months ended September 30, 2000 from $1.1 million for the nine months ended September 30, 1999. The increase is mainly due to higher cash balances that resulted from our financing activities. Interest expense decreased 85% to $379,000 for the nine months ended September 30, 2000 from $2.5 million for the nine months ended September 30, 1999, reflecting the reduction of our long-term debt in connection with our initial public offering in November 1999. Net Loss For the nine months ended September 30, 2000, our net loss excluding the non-recurring items of $35.1 million in restructuring charges and $1.0 million of abandoned-acquisition costs was $55.8 million or $0.96 per share. For the nine months ended September 30, 1999, our net loss excluding a non-recurring charge for purchased in-process research and development was $32.8 million or $2.97 per share. For the nine months ended September 30, 2000, our net loss was $91.9 million or $1.57 per share. For the nine months ended September 30, 1999, our net loss was $38.1 million or $3.46 per share. The increase in the net loss was primarily due to: - Restructuring charges of $35.1 million; - Increased amortization expense of $2.6 million; - Increased operating expenses net of acquisitions. These increases reflect an investment consistent with our initial growth strategy for the first two quarters of the current year partially offset by a reduction in these expenses for the third quarter of the current year consistent with the redirection of our business as discussed in Note 2 of the financial statements. The most significant increases are as follows: - Personnel and related expenses of $9.2 million; - Advertising, public relations and trade show expenses of $8.5 million related to increased promotions and the development of our brand; and - Professional service expenses of $4.4 million, including $1.0 million of abandoned-acquisition costs; - Losses from acquired subsidiaries of $2.0 million; - Offset by: - $5.3 million of purchased in-process research and development recorded in the prior year period; - Increased net benefit of $3.5 million in other (income)/expense. The decrease in the net loss per share reflects an increase in our basic and diluted weighted average shares of 47.4 million. This increase is due primarily to the conversion of our preferred shares to 29.6 million shares of common stock, the issuance of 8.4 million common shares related to 1999 acquisitions and our initial public offering totaling 7.6 million common shares that was completed in November 1999. Potentially dilutive securities (including stock options) were antidilutive and therefore were excluded from the calculation of diluted loss per share. 14 15 LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 2000 our cash and cash equivalents decreased by $56.9 million to $37.3 million from December 31, 1999. The decrease resulted primarily from net cash used in operating activities of $49.9 million, purchases of property and equipment of $5.0 million, equity investments in strategic partners of $1.5 million, acquisitions of $1.4 million and payments on long-term debt and leases of $1.9 million. These uses were partially offset by proceeds from issuance of common stock of $2.9 million. Cash used in operating activities was primarily for the funding of losses before depreciation, amortization, restructuring charges and certain non-cash marketing expenses of $41.1 million and decreases in accounts payable of $3.4 million and deferred revenue and other liabilities of $1.4 million and increases in accounts receivable of $3.6 million and prepaid expenses and other assets of $2.4 million. From December 31, 1998 to September 30, 1999, cash and cash equivalents increased by $23.2 million. The increase mainly resulted from $59.9 million in proceeds from the issuance of 13,333,335 and 3,333,332 shares of Series D and Series E convertible preferred stock, respectively, net of issuance costs. The increase in cash was primarily offset by cash used in operating activities of $23.7 million, acquisitions net of cash acquired of $7.3 million, principal payments on long term debt of $4.3 million and purchases of property and equipment of $2.0 million. Cash used in operating activities was primarily for funding of losses before depreciation, amortization and purchased in-process research and development of $25.2 million. We are currently pursuing and negotiating alternatives for additional financing to fund our expanding operations and to meet other obligations. We believe we will have a firm commitment for additional financing by mid-December 2000. If we are unable to secure such financing, we may not have sufficient cash to fund our expansion and to meet other obligations past the third quarter of 2001. This could have a material adverse effect on our business, financial condition and results of operations. RISK FACTORS Before deciding to invest in our company or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information in this report and our other filings with the SEC, including our annual report on form 10-K and subsequent reports on forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business operations. If any of these risks actually occur, there could be serious harm to our business, financial condition or results of operations. In that event, the market price for our common stock could decline and you may lose all or part of your investment. We Expect To Continue To Incur Significant Net Operating Losses. We incurred net operating losses of approximately $91.9 million for the nine months ended September 30, 2000. At September 30, 2000, we had an accumulated deficit of approximately $207.9 million. We expect to continue to incur significant losses on a quarterly and annual basis at least for the next 12 months, and we cannot be certain that we will achieve or sustain profitability. To the extent that our expenses grow faster than our revenues, our operating results will be adversely affected and anticipated net losses in a given quarter may be greater than expected. If this occurs, the market price of our common stock is likely to decline. We have experienced negative cash flow from operations since our inception. We expect to continue to experience significant negative cash flow from consolidated operations. If we are unable to secure additional financing we will not have sufficient cash to fund our expansion and to meet other obligations. We cannot be certain that additional financing will be available on acceptable terms when we need it. If additional funds are raised through the issuance of equity securities, our stockholders may experience significant dilution. If we cannot obtain additional financing on satisfactory terms when we need it, our results of operations could be materially and adversely affected. Because Of Our Limited Operating History And Limited Internet Experience, Our Revenues Are Unpredictable, Which May Cause Significant Fluctuations In Our Operating Results. Our limited operating history makes it difficult for us to predict future results of operations and difficult for you to evaluate us or our prospects. We believe that period-to-period comparisons of our operating results are not meaningful and that the results for any period should not be relied upon as an indication of future performance. Our operating results may fall below the expectations of market analysts or investors in some future quarter. If this occurs, the price of our common stock would likely decrease. The emerging nature of the markets in which we compete makes forecasting more difficult and potentially unreliable. Our current and future expense levels are based predominantly on our operating plans and estimates of future revenues, and are to a large extent fixed. We may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenues. Accordingly, if our revenues in any particular quarter are lower than anticipated, our operating results would likely fall short of market expectations. 15 16 The Seasonality Of The Live Entertainment Industry Could Cause Our Quarterly Operating Results To Fall Below The Expectations Of Market Analysts And Investors, Which Could Adversely Affect The Market Price Of Our Common Stock. Many popular live entertainment events are held during the warm weather months. In addition, ticket sales for such events generally commence several months prior to the event date. Because of these factors, our business generally has lower revenues in the first and fourth fiscal quarters. These seasonality issues could cause our quarterly operating results to fall below market expectations, and adversely affect the market price of our common stock. Other related seasonality issues that could cause our quarterly operating results to fluctuate in the future include: - the dates event tickets are released for sale by our clients; - the decisions of one or more clients to cancel or postpone events; - the timing of large, nonrecurring events; and - the concentration of events in any given quarter. If We Fail To Retain Clients, We May Experience A Loss Of Revenue. In order to achieve our intended growth and market presence, we must satisfy our current clients' needs, as well as the needs of clients of acquired companies. If we fail to do so, we may lose significant clients and the revenue we generate from those clients. We May Lose Key Personnel, Which Could Adversely Affect Our Relationships With Major Clients Or Strategic Partners And Impair The Effectiveness Of Our Operations. Key personnel may choose not to continue their employment with us for reasons including compensation, location, and the perception of career opportunities with us, our competitors, or in other industries. If we lose key personnel, our relationships with major clients or strategic partners who had close relationships with these personnel may be impaired. In addition, if we are unable to replace any key personnel that we may lose, we may suffer a disruption of operations and a decline in revenue. Because We Have A Limited Operating History As A Consolidated Business, We Have An Unproven Business Model That Requires A Substantial Move Into E-Commerce. Since 1996, we have completed eleven acquisitions of companies with diverse backgrounds in the ticketing industry. We have a limited history operating as a consolidated business, and accordingly, an unproven business model that is substantially dependent on the growth of revenues from increased ticket sales on the Internet. Internet related revenues comprised 21.3% of total revenues for the nine months ended September 30, 2000. We cannot be certain that we will be successful in increasing our Internet sales in future periods. If we are not, our revenues will not grow in accordance with our business model and may fall short of expectations of market analysts and investors, which could negatively affect the price of our common stock. We Have Limited Experience In Offering E-Commerce Services To Consumers And May Not Be Able To Generate Substantial Revenues From Internet Sales. We began online ticket sales in the third quarter of 1997. Historically, we have sold tickets primarily through retail stores and telephone sales centers. In order to generate substantial revenues from online ticket sales, we must significantly increase the number of clients who use our online ticketing services. We cannot be certain that a substantial number of our clients will be able or choose to use our online ticketing services. The majority of our clients license our in-house systems for internal use and do not use any of our other outsourcing services. These clients generally use software systems that do not enable ticket sales over the Internet without a specific software upgrade. To date, only a portion of our clients are able to use our Internet ticketing services. As More Of Our Clients Use Our Online Services, We May Encounter Technological Difficulties That Could Impair Our Ability To Increase Online Revenues. In order for most of our clients to use our online ticketing capabilities, we must develop and install additional software to make their systems compatible with ours. This process can be a difficult one and we may encounter technological difficulties that may inhibit us from servicing our clients online, which may cause one or more of our clients to terminate or fail to renew its contract with us. Because we have a broad portfolio of in-house systems products, we must either create separate Internet interfaces for each of these products or consolidate our in-house systems products. We may experience difficulties in consolidating our portfolio of in-house systems products into a few comprehensive in-house systems and in developing links from our clients' various software and hardware systems to our ticketing systems and databases. Due to these potential technological difficulties, some clients may be averse to change and may require a lengthy sales cycle before they will upgrade to Internet ticketing on our system. 16 17 Ticketmaster Corporation And Ticketmaster Online-CitySearch Have Filed A Lawsuit Against Us Which Could Impair Our Ability To Implement Our Business Model And Result In Substantial Payments To Them. The Ticketmaster suit could result in limitations on how we implement our e-commerce strategy, delays and costs associated with payments to Ticketmaster Corporation and Ticketmaster Online-CitySearch. In addition, the litigation could result in significant expenses and diversion of our management's time and other resources (see Note 6 in Item 1 "Financial Statements"). Infringement Or Other Claims Could Adversely Affect Our Ability To Market Our Products, Limit Our Rights To Certain Technology And Harm Our Results Of Operations. Although we believe we have valid proprietary rights to all of our intellectual property, we could be subject to claims of alleged trademark, patent or other infringement as a result of our actions or the actions of our licensees. For example, as in the Ticketmaster claim, we may in the future be sued because we link consumers directly to an internal page within other ticket sellers' web sites and have included the trademarks of these ticket sellers on our web site. Any litigation over intellectual property rights or business practices could result in: - payment by us of substantial damages; - injunctive or other equitable relief that could block our ability to market or license our products; and - the loss of rights to technologies necessary to operate portions of our business. Any litigation, regardless of the outcome, could result in substantial costs and diversion of managerial and other resources. Our Proprietary Technology And Intellectual Property May Be Inadequately Protected, Which Could Harm Our Competitive Position. We regard our proprietary technology and other intellectual property as critical to our success. We rely on trademark, trade secret and copyright law to protect our technology and our brand. We also rely on confidentiality and/or license and other agreements with employees, customers, and others to protect our proprietary rights. We have no patents. Despite our efforts to control access to our proprietary information, it may be possible for a third party to copy or otherwise obtain and use our products, technologies or other intellectual property without authorization. In addition, effective copyright, trademark, trade secret and patent protection may be unavailable or limited in foreign countries that do not offer protection comparable to that provided by United States laws. Internet technologies are evolving rapidly, and third parties may also develop similar or superior technologies independently. Any unauthorized use of our proprietary information could result in costly and time-consuming litigation to enforce our proprietary rights. In addition, any third party development of similar or superior technologies could impede our ability to compete effectively in the ticketing industry. Ineffective Protection Of Our Trademarks And Service Marks Could Reduce The Value Of Our Brands. We rely on our ability to utilize our brand names "Tickets.com" and "1-800-TICKETS". We cannot be certain that the steps we have taken and will take to protect our brands will be adequate, and such steps may require considerable expenditures. Nor can we be certain that third parties will not infringe upon or misappropriate the copyrights, trademarks, trade dress and similar proprietary rights that currently protect our brands. Ineffective protection of these rights could reduce the value of our brands. We have applied to register the tradename "Tickets.com" and the stylized trademark "1.800.TICKETS" and we have registered the service mark "Advantix" and other trademarks in the United States. We have also applied to register the tradenames "Tickets.com" in various foreign countries. Effective trademark, service mark, copyright and trade secret protection will not be available or sought in every country in which our products and services are available online or by telephone. We may not be able to obtain effective trademark or service mark registration until the prolonged use of our marks has generated secondary meaning for purposes of trademark and service mark law. In addition, there are other parties who have corporate names or brand names very similar to ours, and whose names may also include the term "tickets," and who may, as a result, bring claims against us for trademark infringement or challenge our rights to register the tradename "Tickets.com," the stylized trademark "1.800.TICKETS," or both. Our Licensees Could Diminish The Quality Of Our Brands And Adversely Affect Our Reputation. We have licensed in the past, and expect to license in the future, proprietary rights such as trademarks or copyrighted material to third parties. While we attempt to ensure that the quality of our brands is maintained by these licensees, we cannot be certain that these licensees will not take actions that might materially and adversely affect the value of our proprietary rights or reputation. If We Are Not Able To Preserve Our Domain Names We May Not Be Able To Compete Effectively On The Internet. We currently hold the Internet domain names "tickets.com," "ProTix.com," "bass-tix.com," "basstickets.com," "fantastix.com" and others. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. Any such inability could impair our ability to compete effectively on the Internet. 17 18 The acquisition and maintenance of domain names generally is regulated by governmental agencies and their designees. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, there can be no assurance that we will be able to acquire or maintain relevant domain names in all countries in which we conduct or intend to conduct business. In addition, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. Online Security Breaches Could Result In A Loss Of Consumer Confidence In E-Commerce, Which Could Impair Our Ability To Implement Our Business Model. The secure transmission of confidential information over the Internet is essential in maintaining consumer and supplier confidence in our services. Any publicized security problems affecting us or other e-commerce companies could inhibit the growth of e-commerce and, accordingly, the growth of our Internet sales revenue as contemplated in our business model. We rely on licensed encryption and authentication technology to effect secure transmission of confidential information, including credit card numbers. We cannot be certain that our security measures will prevent security breaches, including break-ins, viruses or disruptions by consumers or others. A party that is able to circumvent our security systems could steal proprietary information, damage our database or communications lines or otherwise cause interruptions in our operations. Security breaches also could damage our reputation and expose us to a risk of loss or litigation and possible liability. Our insurance policies carry coverage limits that may not be adequate to reimburse us for losses caused by security breaches. System Failures Could Damage Our Reputation And Result In The Loss Of Customers And Clients. Our business is almost entirely dependent on our telephone sales centers, computer systems and telecommunications systems. Heavy stress placed on our systems during peak periods could cause our systems to operate at unacceptably low speeds or fail altogether. Any significant degradation or failure of our systems or any other systems in the ticketing process, including telephone or telecommunications services, even for a short time, could cause consumers to suffer delays in ticket purchases. The resulting inconvenience to consumers could damage our reputation with the public, cause consumers to purchase tickets from other sources and deter repeat customers. Delays in services could also cause substantial losses for clients, which could result in claims against us. These delays could also result in the termination or non-renewal of our existing service agreements. In the future, increased volume due to growth, if any, may require us to expend substantial funds to expand and further upgrade our technology, transaction processing systems and network infrastructure. Any inability to add additional software and hardware on a timely basis to accommodate increased traffic on our web site may cause unanticipated system disruptions and result in slower response times. In addition, substantially all of our server equipment is currently located in California in areas that are susceptible to earthquakes. We do not presently have fully redundant systems, a formal disaster recovery plan or alternative providers of hosting services, nor do we carry sufficient business interruption insurance to compensate us for all of the possible losses that we may incur. In addition, our clients' in-house systems also may be subject to failures and degradations that could interrupt ticket sales both through clients' systems and on our web site. Unanticipated problems may cause a significant system outage or data loss, and result in the loss of clients. The Process Of Integrating Technologies From Our Current and Future Acquisitions Could Disrupt Our Ticketing Systems And Damage Our Relationships With Our Clients. The process of integrating the various technologies of acquired companies into one interactive system has caused, and may in the future cause, system downtime and other system disruptions. We expect to integrate and consolidate several of our in-house systems over the next several years. We may experience system failures in the future as a result of this integration, which could impair our relationships with our clients. Any system failures could cause one or more of our clients to terminate its contract or fail to renew its contract with us. We May Not Be Able To Maintain Or Improve Our Competitive Position Because Of The Intense Competition In The Ticketing Industry. Intense competition in the ticketing industry presents significant challenges to management, marketing and technical personnel. We believe competition will become more challenging as the market for tickets expands and technology advances. Our primary competitors on a national level are Ticketmaster Corporation and Ticketmaster Online-CitySearch, Inc., which have operations in multiple locations throughout the United States. Ticketmaster Online-CitySearch has an exclusive license to do all of the online ticketing for Ticketmaster Corporation. Ticketmaster Corporation has a widely recognized brand name in the live event ticketing business, a longer operating history in the ticketing industry generally and in Internet ticketing specifically, more extensive ticketing inventory and greater financial and other resources than we do. We commenced our operations in May 1996 and did not begin to sell tickets on the Internet until October 1997. Because of our limited operating history, we have not yet gained the same level of brand recognition or accumulated as broad a ticketing inventory as Ticketmaster Corporation and Ticketmaster Online-CitySearch. In addition, because we have developed through the acquisition of smaller, regional outsourcing services providers and in-house systems developers, we are still in the early stages of developing a strong national presence. 18 19 Our competitors also include: - a number of smaller, regional outsourcing services providers; - international and national in-house systems providers; - entertainment organizations that handle their own ticket sales and distribution through online and other distribution channels; - international, national and local outsourcing services providers, which may or may not currently offer online transactional capabilities. Many of these competitors have greater brand recognition, longer operating histories and a greater number of well-established client relationships than we do in the geographic regions in which they operate. Because of our relatively short operating history and presence in a limited number of geographic regions prior to our move into e-commerce, we have not yet established a significant competitive position in a number of geographic areas. In Order To Maintain Our Competitive Position In The Ticketing Industry, We Must Be Able To Attract New Clients And Ticket Inventory, And We Cannot Be Certain That We Will Be Able To Do So. If we cannot attract new clients and ticket inventory, or if we lose clients to other outsourcing services providers or otherwise, we may not be able to maintain our competitive position in the ticketing industry. In recent years, the live entertainment industry has been moving toward consolidation. As a result, contracts for outsourcing services are often negotiated on a multi-venue basis, and large ticket inventories are concentrated in the hands of a few entertainment conglomerates. Because outsourcing services contracts are often multi-year contracts and there are fewer potential new clients, competition for their business is especially intense. Historically, we have grown our business primarily through acquisitions. Industry consolidation has reduced the number of viable acquisition candidates and, accordingly, limited future acquisition opportunities. In order to increase our client base and ticket inventory, we may need to attract clients who currently have relationships with other outsourcing services providers. At the same time, other outsourcing services providers will likely attempt to attract our current clients to use their outsourcing services. In addition, our clients may terminate their contracts for a variety of reasons, or may not renew their contracts at the end of their terms. Our Reliance On Third Party Software And Hardware Makes Us Vulnerable To Changes In Our Suppliers' Products And Services, Which Could Adversely Affect Our Ability To Service Our Clients In A Timely Manner. Our automated ticketing solutions incorporate software products and use computer hardware and equipment developed by other entities. Our reliance on third party software and hardware makes us vulnerable to changes in our suppliers' products and services and any such changes may impair our ability to provide adequate outsourcing services and in-house systems to our clients in a timely manner. For example, we cannot be certain that all of our suppliers will remain in business or will continue to support the product lines that we use. Nor can we be certain that their product lines will remain viable or will otherwise continue to be available to us. Our current suppliers could significantly alter their pricing in a manner adverse to us. If any of these entities ceases to do business, abandons or fails to enhance a particular product line, or significantly raises its prices, we may need to seek other suppliers. We cannot be certain that other suppliers will be able to provide us with necessary products at favorable prices, or at all. We Depend On Retail Stores To Reach Consumers, And If We Cannot Maintain These Relationships And Establish New Relationships, Our Ticket Sales Would Be Adversely Affected. A significant portion of our ticket sales are generated through arrangements with retail stores. Our contracts with these retail stores are generally for a one-year term, and subject to periodic negotiations regarding sales commissions, customer service and other matters. These stores cater to consumers who are likely to purchase tickets for sporting and entertainment events, and are attractive to other ticketing services. If we cannot maintain good retail relationships and continue to establish new relationships, our ability to reach consumers and generate sufficient ticket sales could be materially and adversely affected. We May Become Subject To More Restrictive E-Commerce Regulation That Could Adversely Affect Our Ability To Increase Internet Sales. We are subject to regulations applicable to businesses generally and laws or regulations applicable to e-commerce directly. Currently we believe that there are few laws and regulations directly applicable to the Internet and online ticketing services. It is likely, however, that a number of laws and regulations may be adopted with respect to the Internet or commercial online services that could affect our online ticketing services. Any new legislation or regulation, or the application of existing laws and regulations to the Internet and commercial online services could restrict our ability to grow our business according to our plan. 19 20 Laws regulating e-commerce might cover matters such as, among other things, user privacy and the use of our consumer database for email marketing purposes, limitations on ticket service fees, the content of our web site, taxation by states where we sell tickets, copyright protection for us and competing ticketing services, distribution, direct linking, antitrust and consumer protection laws. In addition, the applicability of a variety of existing laws in various jurisdictions to the Internet and commercial online services may take years to resolve. These issues may include property ownership, sales and other taxes, libel and personal privacy, among others. For example, tax authorities in a number of states currently are reviewing the appropriate tax treatment of companies engaged in e-commerce. New state tax regulations may subject us to additional state sales and income taxes. We May Be Affected By Changes In Laws And Standards Relating To Data Collection And Use Practices And The Privacy Of Internet Users. Recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal and state scrutiny and legislative and regulatory activity concerning data collection and use practices. Various federal and state governments and agencies have recently proposed limitations on the collection and use of information regarding Internet users. In October 1998, the European Union adopted a directive that limits the collection and use of information regarding Internet users in Europe. In addition to government activity, a number of industry and privacy advocacy groups are considering various new, additional or different self-regulatory standards. This focus, and any legislation, regulations or standards promulgated, may impact us. Although our compliance with applicable federal and state laws, regulations and industry guidelines has not had a material adverse effect on us, governments, trade associations and industry self-regulatory groups may enact more burdensome laws, regulations and guidelines, including consumer privacy laws, affecting us and our customers. Since many of the proposed laws or regulations are just being developed, and a consensus on privacy and data usage has not been reached, we cannot yet determine the impact these regulations may have on our business. However, these regulations and guidelines could adversely affect our business. Factors which may inhibit us from meeting our expectations related to decreased costs of services are outlined below. We May Become Subject To State Regulation Of Ticket Sales, Which Could Impose Restrictions On The Manner And Pricing Of Our Ticket Sales. Many states and municipalities have adopted statutes regulating ticketing transactions within their jurisdictions. We cannot be certain whether any of these laws and regulations may be determined to be applicable to our business or whether new laws and regulations potentially adverse to our business will be adopted. If we become subject to additional laws and regulations, the manner and pricing of our ticket sales may be restricted, which could have an adverse effect on our revenues. Some states and municipalities require that ticket sellers obtain a resellers license. One or more states or municipalities could take the position that a telephonic or electronic ticket sale to one of their residents is a sufficient basis for application of that jurisdiction's reseller statute. Because we believe these statutes to be inapplicable to our activities, we may not be in compliance with these statutes. Governmental agencies or authorities could also argue that other state or local licensing or "ticket scalping" statutes apply to our activities. These statutes, among other things, limit the amount of service charges and other fees that may be charged in connection with ticket sales. Other state and local regulations establish maximum service fees on tickets for certain sporting and other events. Risks that may impede our ability to stabilize and decrease our operating costs are outlined below. If We Cannot Effectively Integrate Our Numerous Recent Acquisitions, We May Experience Increased Costs, Operating Inefficiencies, System Disruptions And The Loss Of Clients. The integration of acquired companies into a cohesive business requires the combination of different business models, financial, accounting and other internal systems, varied technologies and personnel who have dissimilar expertise and backgrounds. It also requires the management of companies or operating units that are geographically dispersed throughout the United States and internationally. We cannot be certain that we will be able to successfully integrate the operations, personnel or systems of these acquired companies in a timely fashion, if at all. If we fail to integrate operations and personnel effectively, we will experience duplication of costs and operating inefficiencies. If we are unable to integrate technologies successfully, we may experience system disruptions or failures that could result in the dissatisfaction or loss of clients. We also cannot be certain that we will achieve value from our acquisitions commensurate with the consideration paid. If we are unable to generate sufficient revenue from any acquired companies, we will experience an unanticipated shortfall in revenue and may fail to meet the expectations of investors. If this occurs, the market price of our common stock would likely decline. The process of integrating our recent acquisitions has placed and will continue to place a significant burden on our management team. Integration is complex, and presents numerous risks and uncertainties in addition to those set forth above, including the following: 20 21 If We Cannot Attract And Retain Qualified Personnel In A Cost Effective And Timely Manner, We May Not Be Able To Execute Our Growth Strategy. The significant growth of our business over the past two years due to our acquisition of eight companies has placed substantial demands on our management and other personnel. Our future growth, if any, will depend in part on our ability to attract, motivate and retain skilled technical, sales and management personnel. Competition for these personnel is intense, and we expect it to increase as e-commerce expands. We cannot be certain that we will be able to retain our existing personnel or attract additional qualified personnel in the future. In addition, a significant portion of our workforce is comprised of telephone sales representatives. We compete with telemarketing firms, among others, for telephone sales personnel and sometimes must pay premium hourly wages to attract and retain them. In addition, their high turnover rate increases our recruiting and training costs. We cannot be certain that we will be able to continue to hire and retain qualified personnel to support our planned growth in a cost effective or timely manner. If we cannot, our ability to execute our growth strategy could be impaired. The Loss Of Personnel Could Require Us To Provide Costly Severance Packages, Which Could Adversely Affect Our Operating Results. Although we have employment agreements with several of our executive officers, including our Chief Executive Officer and our President, our executive officers and key employees may terminate their employment at any time for any reason. In some circumstances, termination of their employment could result in substantial payments by us for severance benefits under these employment agreements. In June 2000, in conjunction with the refocus of our strategy, we recorded restructuring charges which included $1.2 million of involuntary termination benefits. Acquisitions Will Create Charges To Earnings That Could Adversely Affect Our Operating Results And, Accordingly, The Market Price Of Our Common Stock. As a result of past acquisitions, we have recorded a significant amount of goodwill that will adversely affect our operating results for the foreseeable future. As of September 30, 2000, we had goodwill and other intangible assets of $50.6 million, which must be amortized in the future and will result in a reduction of our earnings. If the amount of recorded goodwill or other intangible assets is increased or we have future losses and are unable to demonstrate our ability to recover the amount of goodwill, the amount of amortization could be increased or the period of amortization could be shortened. This would increase annual amortization charges or result in a write-off of goodwill in a one-time non-cash charge, which could be significant based on our acquisitions to date. We May Face Liability For Online Content That May Not Be Covered By Our Insurance. Because we are disseminating information, we may face liability for the nature and content of the materials on our web site or on sites to which we have links. These liability claims could include, among others, claims for defamation, negligence, indecency, fraud from secondary sales, and copyright, patent and trademark infringement. These claims have been brought, and sometimes successfully pressed, against online services. Although we intend to maintain general liability insurance coverage, it may not cover claims of these types. It also may not be adequate to indemnify us for any liability that may be imposed. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could have a material adverse effect on our reputation and our ability to effectively operate our web site. Further factors which put our liquidity and capital resources at risk are as follows: Our Stock Price Has Been And May Continue To Be Very Volatile, Which May Make Us A Target Of Securities Class Action Litigation. The market price of our common stock has been and is likely to continue to be highly volatile and could be subject to wide fluctuations. In the past, securities class action litigation often has been brought against companies following periods of volatility in 21 22 the market price of their securities. In the future we may be the target of similar litigation. Securities litigation could result in substantial costs and divert our management's attention and other resources. Other factors, some of which are beyond our control, that could cause the market price of our common stock to fluctuate include: - operating results that vary from the expectations of securities analysts and investors; - changes in securities analysts' and investors' expectations as to our future financial performance; - changes in market valuations of other Internet or online services companies; - announcements by us or our competitors of technological innovations, new services, significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; - loss of a major venue or client; - announcements by third parties of significant claims or proceedings against us or developments in those proceedings; and - future sales of our common stock. We Face Risks From International Operations That Could Adversely Affect Our Cash Flow And Licensing Revenues. We have only recently commenced operations in a number of international markets and a key component of our strategy is to expand our business internationally. Our plans to expand internationally are subject to inherent risks, including: - Adverse Fluctuations In Currency Exchange Rates Could Expose Us To Losses Because Some Of Our Contracts And Liabilities Are Payable In Foreign Currencies. Payments due to our acquisition of dataCulture Ltd. are payable in pounds sterling over 12 equal quarterly installments. In addition, we are also exposed to foreign currency exchange rate risks inherent in our assets and liabilities denominated in currencies other than the United States dollar. If the United States dollar becomes weaker against foreign currencies these payments will be greater in dollar terms and our cash flow would be adversely affected. - If We Cannot Adequately Enforce Our Intellectual Property Rights Internationally, We May Lose Licensing Revenues. Many of our foreign business relationships involve the licensing of our software products. If we are unable to enforce our intellectual property rights because they are not recognized under foreign laws, our customers could duplicate or modify our software products without our consent and deprive us of licensing revenues. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are not exposed to material market risks related to fluctuations in interest rates on our fixed and variable rate debt. Currently, we do not utilize interest rate swaps, forward or option contracts on foreign currencies or commodities, or other types of derivative financial instruments. Some of our contracts and liabilities are payable in foreign currencies. Accordingly, we are subject to exposure from adverse movement in foreign currency exchange rates. This exposure is primarily related to revenue and operating expenses in the United Kingdom and denominated in the respective local currency. PART II. OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS On July 23, 1999, Ticketmaster Corporation and Ticketmaster Online-CitySearch filed a lawsuit against us in the United States District Court for the Central District of California seeking unspecified damages and a court order to prohibit us from, among other things, linking Internet consumers to internal pages within Ticketmaster's web site. In addition, the suit alleges that we have engaged in other wrongful acts, such as breach of contract, trespass, providing false and misleading information on our web site regarding the availability of tickets and related information on the Ticketmaster web site and taking copyrighted information from the Ticketmaster web site for use on the Tickets.com web site. The suit seeks an injunction to prohibit us from further engaging in any alleged unlawful activity, treble damages, attorneys' fees and other unspecified damages. Ticketmaster Corporation and Ticketmaster Online- 22 23 CitySearch have also filed a motion for preliminary injunction seeking an order precluding us from, among other things, providing links to Ticketmaster pages. On August 10, 2000 the Court denied this motion. In May 2000 we filed a counterclaim against Ticketmaster Corporation and Ticketmaster Online-CitySearch alleging that they have engaged in certain acts and practices that are an unlawful restraint of trade, unlawful monopolization and attempted monopolization in violation of federal and state antitrust laws and violation of state unfair competition law and interference with economic advantage. Our claim seeks treble damages, punitive damages and declaratory and injunctive relief. Ticketmaster and Ticketmaster Online have filed a motion to dismiss our counterclaim and on September 25, 2000, the Court denied this motion. ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS As of September 30, 2000 Tickets.com had remaining proceeds of $17.4 million from its initial public offering of shares of common stock registered under the Securities Act of 1933, as amended, pursuant to its Registration Statement on Form S-1 (Reg. No. 333-79709), declared effective by the SEC on November 3, 1999. Subsequent to August 14, 2000, $3.0 million of proceeds were paid to a major ticketing services client as an exclusivity fee in connection with a new long-term ticketing services agreement. The remaining proceeds were used for working capital and general corporate purposes. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit 27.1 -- Financial Data Schedule (filed electronically); b) No reports on Form 8-K were filed during quarter ended September 30, 2000. 23 24 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TICKETS.COM, INC. (Registrant) Date: November 14, 2000 By: /s/ W. Thomas Gimple -------------------------------------- W. Thomas Gimple Co-Chairman of the Board and Chief Executive Officer Date: November 14, 2000 By: /s/ Eric P. Bauer -------------------------------------- Eric P. Bauer Executive Vice President and Chief Financial Officer 24 25 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----------- ----------- 27.1 Financial Data Schedule (filed electronically)
25 EX-27.1 2 a67148ex27-1.txt FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-2000 SEP-30-2000 37,310,000 0 11,398,000 0 0 68,403,000 14,314,000 0 152,057,000 32,612,000 0 0 0 13,000 0 152,057,000 0 43,376,000 0 29,242,000 0 0 379,000 (91,793,000) 110,000 0 0 0 0 (91,903,000) 1.57 1.57
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